Jobs Bill or Stimulus Redux?

Last week President Obama proposed a new "job creation" bill and is now on the road trying to sell it and himself to the American people. According to numerous news outlets the proposal has a price tag of about $450 Billion. So maybe this is stimulus light after the $700+ billion already spent in the name of boosting the economy. The "new" plan includes extension of the payroll tax cut, "targeted" tax cuts for hiring workers, billions for infrastructure construction, billions for remodeling schools, further extension of unemployment benefits, money to local governments to keep government employees from being fired as well as litany of other piecemeal proposals.

First off, much of this ought to sound very familiar. More money for "shovel ready" infrastructure projects, an umpteenth extension of unemployment benefits, a temporary payroll tax cut that is already in place and some targeted tax breaks for hiring. Not much new there. We all know the lackluster results created by the last round of these sorts of measures, which probably gives us a pretty good idea of the results this round will bring. So why are these alleged economic stimuli unlikely to produce significant results? Never fear, we here at the New Invisible Hand have a theory:

The first reason that Obama's "new" plan will fail even if enacted is the plan itself. The small piecemeal tax cuts for hiring are awash in red tape. The effort it takes for an employer to document how long a new employee has been unemployed and comply with all the criteria required to get the tax break eats away much of the benefit of the tax break. Second, the extension of unemployment benefits will act to keep unemployment high. Whenever you subsidize something, you will get more of it. Unemployment is no different. Some people will choose to remain unemployed and collect a check from Uncle Sam.

The overarching reason that Obama's "new" stimulus package will fail just as the last one did is Obama himself. Fairly or unfairly (We happen to believe fairly), Obama is viewed by the business community (the actual job creators) as anti-capitalist and therefore anti-business. So even when Obama proposes "pro-business" items such as tax breaks for hiring, there is a sense that he is only doing this out of desperation and does not fundamentally believe in these sorts of policies. And further, once there is some improvement in the economy, he will go back to his actual agenda that focuses on more taxes, more government spending, more redistribution of wealth and more regulation.

So long as Obama is in office, it will be difficult to convince job creators that they should take risks to expand, hire, start new businesses and otherwise engage in job creating activity because they don't believe that they will be rewarded for taking those risks. In fact with the anti-business Obama in office, taking such risks is a lose lose proposition for business. Either such risks will fail and their business will be damaged or they will succeed and then be faced with higher taxes and more regulation.

If we want job creation we need to elect a President that wants business to succeed and prosper. Voting Obama out of office in 2012 will do far more to spark job creation than any stimulus plan proposed in the interim.

Thanks for reading

-Hand

"I am for doing good to the poor, but I differ in opinion of the means. I think the best way of doing good to the poor, is not making them easy in poverty, but leading or driving them out of it."

-- Benjamin Franklin