I agree with Congressman Gerry Connolly (D - VA) when he says, “it’s time we focused on proven policies, rather than political posturing.”
The only problem is that President Obama’s "jobs" speech last night did the opposite – it rehashed failed ideas from the tragically ineffective “Stimulus Bill” and trotted them out as new in a political campaign speech to a joint session of Congress.
After two and a half years of the Obama-Connolly experiment, we now have solid proof of the failure of their policies. They claimed their original stimulus would reduce unemployment and keep it below 8%. But after adding $4 trillion to the debt, the unemployment rate now exceeds 9%. It also resulted in the historic downgrade of our national credit rating, which has led to the downgrade of many communities across the country. These downgrades are now causing the unemployment rate to rise even further.
It is clear that these policies do not work. In fact, we are following the exact same pattern that was experienced during the Great Depression, which was the last time we saw government intervention of this magnitude in our economy. So here's my message to Mr. Connolly: Let’s put political posturing aside and look to history for proven policies that work.
History has repeatedly shown that when government cuts spending and regulations, the private sector quickly begins to recover, typically within 30 months.
And yet, Obama and Connolly are proposing even more over-spending. So let’s consider the effects of each specific proposal:
- A $175 billion extension and expansion of the payroll tax cut. This simply steals $1,500 from the typical family’s retirement account so that they can feel like they have more money in the lead-up to Obama’s re-election campaign. It makes people feel better, but only postpones the economic pain and encourages continuation of the inefficiencies in our economy. It is also another temporary policy, and businesses and individuals need more economic stability, not less.
- A $140 billion “infrastructure” program that once again is largely used for things other than infrastructure. It will fund teachers and first responders, along with local infrastructure projects. While these are valid government functions and can provide a nominal benefit to the economy, the funding for these programs is best handled by local governments, not the inefficient bureaucracy that is Washington, D.C. Local governments know their communities and can best balance local needs against local costs. When a local government is given “free” money, it will naturally spend more than it would otherwise, creating less efficient government overall.
- A $70 billion incentive to small businesses to hire new workers. As a small business owner, I can assure you that small businesses do not hire workers to get tax benefits – they only hire workers when they’re confident they’ll have a need for those workers. During an economic boom, this type of tax cut could potentially help some firms gain access to more investment capital, but currently the marketplace has an excess of investment capital (as much as $3 trillion). Investors are concerned about the economy and the stability of the dollar, so they're storing their money in treasury bonds and gold rather than investing in businesses (which creates jobs). This proposal will do little to increase hiring; instead, it will merely provide a benefit to firms that are hiring anyway (and may lead to abusive practices and/or fraudulent claims). The end result is less efficiency in the marketplace.
- An additional $62 billion in unemployment insurance. Extending unemployment insurance (beyond the current policy of 99 months!) is an amazingly corrosive proposal. It leads individuals to believe that they can wait even longer to find work while failing to give them any purpose. At least the infrastructure proposal gives people jobs while providing a purportedly tangible benefit. Once again, this proposal results in a less efficient government.
In summary, the only proposal that has any potential merit is the infrastructure proposal. And it only has merit if the specific projects are needed (high-speed rail does not fall into this category). But all of the proposals add inefficiencies to our economy. And just like the original stimulus, these proposals will result in little near-term benefit and destructive long-term side effects.
Finally, I recognize that President Obama has said he will disclose his plan to pay for these programs a week from Monday. It would appear that his plan will be to “tax the rich” over the next 10 years. But this ignores reality. To use an updated version of Dave Ramsey’s analogy, this proposal is comparable to a family that:
- Has an income of $55,000 a year,
- Is spending $85,500 a year,
- Has a debt of $350,000
- Is now proposing to spend an additional $10,700 next year
- Is promising to pay off the extra $10,700 over the next decade
Any reasonable person would say that the extra $10,700 is additional debt. Further, any reasonable analysis would point out that the family needs get its debt under control before increasing spending for any reason.
As my last e-mail pointed out, we can restore our economy while paying off the debt by reforming our tax and regulatory systems. Obama’s proposal only offers to prop up our economy at the expense of making out debt even more unsustainable. As conditions in Europe show, prolonged economic instability typically leads to social unrest. We are already seeing outrageous acts of union violence, advocated by a union boss who spoke at a rally before President Obama gave a speech. How long will we wait before we elect new leadership?