Political-Media Establishment Ignores Ominous Economic News

If the economy falls in America but the President and the media don’t mention it, will The People still suffer?

Last week the Commerce Department published a revised GDP report showing that the economy contracted by 1% during the first quarter of 2014.

8-recoveries-2014-Q1As the chart shows, even before the first quarter contraction we were suffering through the worst of the eleven post-recession economies or “recoveries” since World War II.

Perhaps because of competing news about the VA there was little mention of this ominous economic contraction in the establishment media.  Obama Administration officials blew off the news as insignificant, a temporary blip due to worse than usual winter weather.  Move along, nothing to see here.   

Hopefully, the commentators and Administration spokesmen are right.  But, considering the economic statistics below they seem to be a bit overconfident.

Exactly 265 quarters have passed since the Commerce Department began tracking and reporting quarterly GDP in 1947.

  • 225 or 85% of those quarterly reports showed positive growth or economic expansion.
  • 11 negative (economic contraction) quarters turned out to be the first of several during recessions
  • 19 negative quarters were the second, third or fourth in continuing recessions;
  • only 4 negative quarters in 66 years came and went as isolated phenomenon, not followed by a recession.  Three of those were before 1960.

So, a negative quarter is unusual, not a routine event.  A negative quarter that isn’t part of a recession is extremely unusual.  Eleven out of eleven recessions were signaled by the first of several negative GDP quarters.  Yet we’ve seen no sense of concern over this ominous economic indicator from the Administration or the media. 

The President has not altered his agenda in any way to head off a possible recession.  Employers must prepare for a spike in costs due to the Obamacare employer mandate, scheduled to begin at the end of the year after being postponed twice.  Today, the President announced he would “fight climate change” with sweeping new restrictions on the coal fired power plants that supply nearly half of the nation’s electricity.  The resulting spike in energy costs will function as a sweeping new penalty on American industry.  The only possible result is shrinking GDP and fewer jobs.

If the first quarter of 2014 turns out to be the beginning of a new recession – and based on history the odds strongly favor such an outcome – the President will likely claim, as he has during each of his Administration’s crises and scandals, that he had no warning and learned about the recession from the news.  But the truth will be that his big government initiatives will be to blame both for the anemic, nearly jobless recovery we’ve seen since the end of the 2008-09 recession, and for the new 2014 recession.

Delay Obamacare Until VA is World’s Best

How ironic that just as we begin year five of chaotic, stop-and-start Obamacare implementation, a scandal over malfeasance in the Veterans Administration health care system bursts into the headlines.   The VA’s own Inspector General announced that as a result of whistle-blower reports, 26 facilities are now under investigation, accused of maintaining off-the-books waiting lists, designed to hide unconscionable wait times of up to a year or more, for doctor appointments, lab tests and other services and procedures.  Upwards of 30 deaths are blamed on service delays

Spending-vs-patientAs the scandal mushroomed the usual political-media suspects stampeded to the cameras to blame “budget cuts” forced upon the VA by Republicans.  They reached back a decade to blame President Bush for going to war without budgeting for enough VA healthcare to serve returning veterans. 

Let’s knock down the “budget cut” excuse first. 

As the chart above shows VA health care spending has soared way past the increase in patients since the Afghanistan spending-per-patientand Iraq wars started. The chart to the right shows a per patient funding increase of 74% over the same period. 

Only politicians and commentators who routinely blame “budget cuts” for every government failure, without ever checking the facts, believe – or want you to believe – the VA scandal is a money problem.

To sell his health care law, President Obama gave dozens of speeches fulminating against health insurance companies.  Even though health insurance was already under intense regulation by federal and state governments, the President’s case rested on the implicit assumption that too little government involvement was the problem, and a lot more federal intrusion would  solve the problem and, the President promised, “save the average family $2,500 a year.”

Obama never offered any evidence of government’s ability to deliver greater efficiency and value at lower cost than the private sector, maybe because the best example of government controlled health care was the Veterans Administration.   The VA network of hospitals and clinics, is entirely owned and operated by the federal government.  Everyone, from top executives to physicians and nurses to the guy who mows the lawn, is a federal employee.  Thus, by the more-government-is-better theory that justified ObamaCare, VA health care should be nearly perfect.

But the modern Veterans health care system, set up during World War II, has never been in the same universe as perfection.  Fir six decades the VA has been notorious for bureaucratic ineptitude and poor quality.  While every politician claims full, unqualified support for veterans, a dozen Presidential Administrations have been unable to organize the post-World War II VA into a competent organization.

The questions that should have been asked back in 2009 when the President and the Democrats wrote the 2,500 page health care law:

  • If politicians and bureaucrats claim they are able to better manage health care for everyone with even more controls, regulations, subsidies, fines, rewards and punishments, shouldn’t they have to prove themselves?
  • Before passing Obamacare, a massive upheaval that empowers dozens of new bureaucracies to change American health insurance and medical services in hundreds of ways, shouldn’t Congress and the President have had to demonstrate their skills and abilities in a smaller, demonstration project?

The VA was already there.  Virtually all voters appreciate and support veterans and want to do whatever it takes to meet their needs.  The President, Congress and the bureaucrats would have had a free hand, unencumbered by resistance from so-called “special interests,” such as employers, employees, small business, big business, insurance companies, hospitals and physicians.  We the people should have demanded that before dismantling and reassembling the nation’s entire health care infrastructure they prove their theories by transforming the VA into the world’s best health care system, second to none.

Unfortunately, nobody in the media or the opposition GOP thought to challenge the brash new President who, with no relevant experience to prepare him for the challenge, decided to upend the nation’s health care ecosystem.  Nobody demanded that he clean government’s own house before expanding government’s power to control the private sector.

A modest proposal

The Administration has postponed major components of ObamaCare to defer the political consequences of health insurance disruptions and cost increases until after this year’s election.  We propose a Republican campaign promise to use control of the Senate and House to force the President to keep those components on hold until he proves government’s ability by first turning the VA into a world class health care organization. 

The President’s liberal/progressive supporters would strenuously object because in their hearts they know the he doesn’t begin to have the management skills or determination to meet that challenge.  Progressives are thrilled by enacting their vision which is always new government powers and programs.  They’re incapable of – and bored by the thought of – the tedious work of rehabilitating vast, dysfunctional government agencies and programs devised by previous progressive visionaries.

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Faltering Economy Staggers To a Standstill

If we’ve learned nothing else from the Obama economic experiment we should have learned that the core doctrine of progressive economics, that prosperity results from activist government intervention in the private economy, is a fallacy.

In late April the Democrats’ leading pollsters Stan Greenberg and James Carville advised the party’s candidates to:

…bury any mention of [economic] “recovery.”  That message was tested in the bipartisan poll we conducted for NPR and it lost to the Republican message…The Democratic [“recovery”] message missed how much trouble people are in, and doesn’t convince them that policymakers really understand or are even focusing on the problems they continue to face.

This proved to be prescient advice advice a few days later when the Commerce Department’s Quarterly GDP report was published.

In the first quarter of 2014 the US economy grew 0.1%. 

It was the weakest quarter in three years and the second weakest since the technical end of the recession, June 2009.  As the chart shows we’re suffering through the worst post-recession economy or “recovery” since World War II.GDP-through-2014Q1Two recoveries in the chart, 1949-54 and 1970-75 were interrupted by a second recession.  The lines turn downward for three quarters, marking a brief recession, then resume their upward progress.  Even those two recoveries were stronger than our current, lifeless economy.

When allowed to operate without excessive government interference the American economy has always been a spectacular prosperity machine, unequaled in all of human history.  But under President Obama and the so-called “progressives” he leads, government seems to have mounted enough intervention into the private sector to throw sand in the gears.

It doesn’t have to be this way.  Based on the lessons of history we know what government can do to help stimulates economic growth.

Like President Obama, President Reagan inherited a severe recession. The 1981-82 recession was caused by a monetary crisis and was in some ways worse than the 2008-09 recession.  Unemployment spiked higher, interest rates soared into double digits and home and stock prices crashed.  Yet as the chart shows the economy grew more than twice as rapidly as our current “recovery.”

Reagan’s economic program, based on his commitment to liberty, was the opposite of Obama’s:

  • Sweeping tax cuts that left wealth in the hands of those who had created it and were best equipped to reinvest in the American economy;
  • Release the creative and productive energies of The People by eliminating the restraints of excessive government regulation.

Unfortunately, President Obama and the Democrats simply ignore history, adhering to the seductive, “progressive” promise of prosperity through expanded central government power and intervention.  Obama’s program includes:

  • Record high deficits;
  • A government take-over of health insurance;
  • tax increases, especially on small businesses the primary job creators;
  • An aggressive regulatory agenda.

The results speak for themselves.  It now appears likely that in November voters will elect a Republican majority to the United States Senate.  While the Republican economic record is far from perfect the party does seem to be grooming an emerging generation of realists who are not seduced by progressive promises of miracles delivered by a more activist and powerful federal government.

Unprecedented Jobs Crisis

Government policies that facilitate job creation and prosperity are well known and understood.  Yet the President and the political movement he leads obstinately pursue opposite policies.

The March jobs report is out and it’s more of the same, a net increase of 192,000 jobs, about average for the past few months.  The unemployment rate was unchanged at 6.7%.   There was little reaction from the political-media establishment.  After years of the same dreary, disappointing reports what can they say?

But America is suffering through what is probably its worst employment crisis ever, and certainly the worst since government began publishing monthly job counts in 1939.  This chart puts the jobs crisis in context:graphfailure-april-14

The recession ended almost five years ago, yet we’re still a half million jobs short of the pre-recession job count.

Nothing like this has happened before.  The American economy has always produced enough new jobs each year to keep up with population growth except for relatively brief recessionary setbacks.  Post recession job markets have always recovered quickly, again catching up with population growth.

The next chart shows what a successful recovery from recession looks like.  graph-success-april-14Like President Obama, President Reagan inherited a severe recession. The 1981-82 recession was caused by a monetary crisis and was in some ways worse than the 2008-09 recession.  The initial unemployment rate was higher.  Interest rates soared into double digits and home prices crashed.  Yet the job market recovered more, not less rapidly than population growth. 

Reagan’s governing strategy was based on history’s proven prosperity formula:

reagan-formula

Reagan’s economic program, based on his commitment to liberty, was the opposite of Obama’s:

  • Implement sweeping tax cuts that were phased in over three years, beginning 1982.  Each of the 16 income tax bracket rates was reduced by at least 25%.  Tax cuts left capital in the hands of those who had created it and were best equipped to reinvest in job creating enterprises;
  • Release the creative and productive energies of The People by eliminating the restraints of excessive government regulation.

Unfortunately, 2014 is unfolding as year six of America’s worst ever jobs crisis with no end in sight because President Obama and the Democrats simply ignore history, adhering to the seductive, “progressive” promise of prosperity through expanded central government power and intervention.  Obama’s program includes:

  • Record high deficits;
  • A government take-over of health insurance;
  • tax increases, especially on small businesses the primary job creators;
  • An aggressive regulatory agenda.

The Obama strategies have delivered entirely predictable consequences: a crisis level jobs shortage and widespread economic misery.

A Principled Candidate For Congress

Igor-photoI recently had the privilege of  interviewing Mr. Igor Birman, candidate for Congress from the Seventh District of California.  Mr. Birman believes as we do, that more liberty rather than more government is the proven strategy to achieve prosperity and promote the general welfare. He is exactly what America needs to sweep the failed government excesses of the Obama era into the dustbin of history.

Igor is an enthusiastic, positive and gracious man who is profoundly grateful to be an American.  While we were in his campaign office he interrupted his activities to humbly thank a group of volunteers who were working the phones on his behalf.  He tells everyone that his life story is “something that could only happen in America.”

Igor was born in the Soviet Union and experienced life without freedom, under constant fear of the ruthless, Russian secret police.  When he was 13 Igor, his parents, his grand parents and his brother immigrated to the United States as refugees.  For this blessing he thanks President Ronald Reagan and “the programs that he sponsored to bring Soviet Jews to America.” 

Igor says the proudest moment of his life was when, at the age of 19, he and his 88 year old grandmother stood together, and took the oath of US Citizenship.  He has earned a BA in Political Science, a law degree, is a member of the California Bar and an instrument rated pilot.  Since 2009 he has served his adopted country as Chief of Staff to Congressman Tom McClintock who represents the adjacent, 4th Congressional District.House-oath-of-office

To become a naturalized citizen Igor swore an oath to support and defend the Constitution.  His campaign platform is inspired by a similar oath of allegiance Congressmen take, not to the President or even to constituents back home, but to the Constitution. 

Even though Congress has enacted countless laws and appropriations that are not authorized by the Constitution, Birman promises to take his oath seriously.  When any bill comes before the House of Representatives that includes functions or spending not authorized by the Constitution he will offer an amendment to strip out the Unconstitutional portions, generating a debate within the House of Representatives and hopefully across the nation as well.  Igor believes it is his responsibility as a Congressman to be able to articulate and teach the people the reasons why it is in their best interest for the government to obey rather than disregard the Constitution.  And he does just that with inspiring enthusiasm.

Igor’s  positions on the issues are on his website but two issues we discussed at length would be of particular interest to Liberty Works readers:

Health Care

No other law threatens such a large sector of the economy as Obamacare with it’s new taxes, new spending and maniacally complex regulation of medical service providers and health insurance.  Igor would repeal Obamacare and implement steps to make medical care more available and affordable including:

  • Allow Americans to purchase health insurance across state lines.  It isn’t allowed now because regulations, and therefore costs, vary from state to state.  A state can’t impose expensive regulations on its citizens if they have the freedom to choose a policy with less onerous regulation from another state.  Igor points out that allowing interstate sale of health insurance would force state regulatory regimes to compete with each other for customer acceptance, forcing the political class to serve rather than command the people.
  • Expand health savings accounts (HSAs).  ObamaCare restricts the amounts that consumers may deposit into HSAs and forbids using HSA funds to buy non-prescription drugs.  Igor would allow unlimited deposits into HSAs and remove the drug restriction.
  • Give individuals the same tax advantages as employers and employees.  Employers pay no income tax or payroll tax on health insurance expenditures.  Employees receive health insurance free of income tax and payroll tax.  Individuals who buy their own insurance should, but do not get the same treatment.
  • Allow people to form groups outside of employment to buy group health insurance.  Religious groups, trade associations and other entities should be able to purchase the same group insurance that current law restricts to employers.  Because these policies would cover large groups they could accept people with preexisting conditions who have been unable to purchase individual health plans.
  • Reduce the costs of unnecessary litigation born by health care providers through tort reform.

Taxes

The only legitimate purpose of taxation is to raise money to fund the Constitutionally authorized functions of government.  Yet the US individual and corporate tax codes are both riddled with thousands of special provisions that are designed to manage the behavior of taxpayers, often for the benefit of politically connected special interests.

One of Igor’s arguments for tax reform is that the current tax code distorts price signals. Natural, or undistorted price signals influence the behavior of both consumers and producers.  Prices that are too high soften consumer demand and motivate additional producers and additional production.  Thus, prices eventually decline.  When prices are too low the least efficient producers, making the smallest profit or suffering losses redeploy their capital to different markets, where price signals call for more production.  The result is continuous, market driven adjustments in production.

But government interferes with and distorts natural price signals with tax penalties and tax subsidies designed to alter behavior or benefit those with political connections, making the overall economy less efficient and reducing economic opportunity.

Igor would dismantle the current tax code and replace it with either a consumption tax or a flat income tax with no deductions.

Liberty Works strongly urges readers to support the Igor Birman for Congress campaign

 

Using the IRS to Bully and Intimidate

Update: The House Oversight and Government Reform Committee has voted to hold former IRS official Lois Lerner in Contempt of Congress for refusing to answer questions at committee hearings.  The full House will vote next week.

The undisputed facts overwhelm denials and diversions from the Democrats and the media.URS-timeline-top

In an effort to identify the person or persons responsible for IRS harassment of conservative organizations the House Committee on Oversight and Government Reform has investigated and held hearings since May of last year.  Last week the committee held another hearing and recalled former IRS official Lois Lerner to answer questions.  But, invoking her 5th Amendment right against self-incrimination, she refused to testify for a second time.

After Ms. Lerner refused to answer several of his questions Chairman Darrell Issa abruptly adjourned the hearing over the shouted objections of Ranking Member (most senior Democrat) Elijah Cummings, who wanted to voice complaints about the committee’s investigation.  Cummings continued bellowing as Issa tried without success to turn off the microphones and then walked out of the room.IRS-timeline-bottom

Predictably, the “news” was mostly about Issa Vs Cummings.  The shameful spectacle of Ms Lerner, a senior government official, refusing to answer questions from The People’s representatives was treated by most of the media as an insignificant detail. 

In defending itself the Obama Administation has used the same diversion as many of its predecessors, claiming to be unfairly persecuted by a thuggish investigator.  Thus, Chairman Issa has suffered character assassination and baseless, presposterous allegations. 

Issa’s questions and requests for documents have been brushed off by the Administration for nearly a year now and he can be forgiven for being fed up.  But his actions fed the persecution narrative, enabling the media herd to target him with 48 hours of sanctimonious indignation.

But the Administration and the media can not overcome the undisputed facts, starting with the timeline to the right.

The scandal is rooted in IRS’s Exempt Organizations (EO) unit.  Non-profit organizations apply to EO for “determinations” that they qualify for tax exempt status.

So far the investigations and committee hearings have confirmed, beyond any doubt, that after the IRS was scolded by high ranking Democrats for not silencing tea party activists, scores of Conservative or Tea Party non-profits suffered…

Two Unconstitutional Abuses of Power

  1. After they sent in their applications, 25-40 page questionnaires that can take weeks of an organization’s leadership and staff time to complete, EO officials sent back lists of additional questions that were outrageously invasive and inappropriate, and required hundreds of pages to answer.   Since the answers to the questions were not relevant to the EO’s determination function the only plausible reason for demanding them was to harass and intimidate Conservative applicants.
  2. Their applications were held in limbo for periods of 18 to 36 months or more without action.  They received neither approvals nor denials.  Had their applications been denied the organizations had the right to appeal.  Or, they could have made changes to their operations to bring them into compliance with IRS regulations and reapplied. But no action at all from the IRS became a de facto denial without any recourse.

Some in the media say this was not an attempt to silence conservatives because liberal groups were also “scrutinized.”  But, there are four reasons we know that Conservative or Tea Party groups suffered the two abuses of power above and that liberal groups did not:

  1. The targeting of Tea Party groups was first announced by Lois Lerner (the same Lois Lerner who now refuses to answer questions) who was at the time in charge of EO.  She disclosed the existence of be-on-the-lookout or BOLO lists of key words such as “tea party” and “patriot” that staff used as a guide to flag applications for the two abuses of power.  From her May 10 announcement came the initial headlines that conservative groups had been mistreated.
  2. A few days after Ms. Lerner’s announcement the Treasury Department Inspector General for Tax Administration (TIGTA) published the report of his audit, confirming that Conservative organizations had suffered abuses 1 & 2 above.  TIGTA conducted scores of interviews and reviewed thousands of documents and found no indication that any left-leaning or “progressive” groups had suffered the same two abuses of power.
  3. Some of the Tea Party groups came forward and testified at one or more of the Congressional hearings.  Their attorneys, who have filed lawsuits against the IRS, publicly released examples of the inappropriate questions.  Some of those questions are here.  Even though they were invited to testify no leftist or “progressive” groups reported having had their applications delayed or having to respond to long lists of invasive questions.
  4. The interim head of the IRS, appointed by the President in May, acknowledged that the abuses took place and submitted to Congress his plan to “clear the backlog” of Conservative/tea party groups who were still waiting for determinations, some for three years or more.

Since the Obama 2012 reelection campaign was the obvious beneficiary of sidelining Tea Party activists, suspicions have been roused and it has become imperative for Democrats to develop and plant in the media misleading scenarios like these:

  • IRS was only doing its job.  It gave “extra scrutiny” to groups with political agendas.  But the abused groups aren’t complaining about “extra scrutiny” which would normally add a few weeks to the application review process.  Their primary complaints are the two abuses of power: They had to answer invasive, inappropriate and irrelevant questions and no decision was made on their applications.  They waited up to three years, with their activities on hold, without receiving either approvals or denials.
  • There have been vague reports of additional BOLO lists that included  the key word “progressive.”  It’s possible that some progressive applications were given “extra scrutiny” which could mean anything from a second pair of eyes going over the forms to a couple of clarifying questions being sent out.  But so far however, there are no examples of any left-leaning groups who suffered two abuses of power.  The Inspector General did not find any, and none have come forward to complain, even though the Congressional committees put out an open invitation.
  • From the beginning Democrats had tried to insulate the Administration from the scandal by pinning all the blame on a few low-level IRS employees in the Cincinnati office, where much of EO operation was located.  Even White House Spokesman Jay Carney weighed in, telling reporters on May 20, 2013 that “there were line employees at the IRS who improperly targeted conservative groups.”

But Cincinnati-outpost deception was shattered by direct testimony in Congressional hearings. The under-reported headlines:  One of the “line employees” in Cincinnati, Elizabeth Hofacre testified that she was not permitted to process what were internally called “tea party cases” in the normal manner.  She was ordered to wait for instructions from Carter Hull, an IRS attorney in Washington D.C.  Eventually she requested a transfer to a different job out of frustration with Mr. Hull and the restrictive process.

Carter Hull testified that he also was told not to process the applications – to not to issue approvals or denials.  He was instructed to wait for further instructions from Lois Lerner, and the IRS Chief Counsel, William Wilkins who is a Presidential appointee.

Thus, through their sworn testimony these two IRS employees have placed accountability for the two abuses of power at the very top of the IRS chain of command in Washington.
The IRS scandal highlights fundamental problems with our massive, federal government run largely by unaccountable bureaucrats:

  • the IRS EO unit is empowered to apply an opaque screening process that facilitates inconsistent, and even capricious treatment of applicant organizations.   Bureaucrats can, at will, harm some groups while giving a boost to others.
  • Lack of accountability.  Chairman Issa’s committee has tried since May to learn who is responsible for the two abuses of power.  But the IRS, like many federal bureaucracies protects itself by making it nearly impossible for Congress to perform it’s Constitutionally mandated duties of oversight.  Many people have many ambiguous roles in overseeing the application review process making it difficult to identify a decision maker.

Congressional Democrats are not interested in solving these fundamental problems.  Unaccountable bureaucracies with unchecked power are the intended result of the laws they have enacted for decades, especially their two most recent triumphs: ObamaCare and the Dodd-Frank Financial regulation law that placed virtually limitless power in the hands of bureaucrats.

Some Republicans seem to believe they must tie this scandal directly to President Obama in order to maintain even minimal media attention.  But this strategy has backfired because it set a bar too high. The media have reacted as if there is no story until Republicans can produce video of the President whispering to Lois Lerner or handing off a bag of cash.

Obviously, it is a scandal if the President is involved.  But even if he is not involved this scandal should be treated as an alarm bell, another indicator that the raw power of unaccountable bureaucracies must be curtailed. 

Government bullying and intimidation of The People is dangerous and unacceptable whether or not the President is involved. Even if the President knew nothing the IRS still acted in favor of one side and against the other in a political contest between competing ideologies.  This is dangerous and unacceptable.  The Republican’s main goal should be a reformed IRS without the power to infringe on the First Amendment rights of The People, even if they can never prove the President was personally involved.

Five Years of Stimulus Debunks Keynesian Theory

The American Recovery and Reinvestment Act is now five years old.  Known affectionately as his “stimulus” it was President Obama’s first legislative triumph, attracting high praise and hosannas from the media.

But today, stimulus advocates are on defense, trying to justify an additional trillion dollars in federal debt.  During a campaign style media event to announce a new round of infrastructure grants the President said:

These are competitive grants that we created as part of the Recovery Act, also known as the stimulus, which actually worked despite what everybody claims.

One has to wonder, what’s Obama’s definition of “worked”? For five years we’ve endured the results of this audacious experiment, testing the Keynesian Economic theory that:

  1. The government can generate prosperity by spending mountains of borrowed money on the priorities of the governing elite, and,
  2. the resulting debt doesn’t matter.

At the beginning of 2009 America was in the depths of a severe recession, and the new Obama Presidency invoked theEmanuel-Doctrine Emanuel Doctrine.  The new President and his supporters in Congress launched a frenzied P.R. campaign promoting an urgent, “stimulus,” a trillion in extra spending on top of the already bloated federal budget to create millions of jobs.  The obsequious Washington Press Corps hailed the new President’s “bold action.”  A parade of “experts” regaled us with claims of “shovel ready pr0jects” that would ramp up and start hiring within days if the stimulus became law.

The Stimulus was rammed through Congress on a straight party line vote on the 20th day of the new Administration, before it’s final version was written.  Obviously, no Congressman or Senator read its thousand pages before voting.

To help sell the stimulus the President’s economic team published a report, “The Job Impact of the American Recovery and Reinvestment Plan,” with optimistic predictions for employment and GDP growth if the stimulus was enacted.  This chart compares their core jobs prediction with what actually happened.job-predictionsIn January 2009, the month the Job Impact report was published, there were 134 million jobs in America.  The report predicted that without a stimulus there would be 133.9 million jobs at the end of 2010, or, with the stimulus 137.5 million jobs at the end of 2010. 

As the chart shows the stimulus utterly failed to deliver the surge of jobs they predicted.  As the chart shows there were seven million fewer jobs at the end of 2010 than the report predicted.  There were 3 million fewer jobs than the no-stimulus prediction!

The Job Impact report included several job creation projections by sector including:

“…30% [1 million] of the jobs created will be in construction and manufacturing, even though these industries employ only 15% of all workers”

 The next chart compares their prediction with what actually happened to the construction and manufacturing sectors.Construction-manufacturingInstead of growing by a million new jobs as the Obama team promised, Construction and manufacturing had lost two million jobs by the end of 2010.  As of January 2014 there are still 1.1 million fewer construction and manufacturing jobs than there were when the stimulus was enacted at the beginning of 2009.

The Bottom Line

The Keynesian fallacy is based in part on the assumption that economic activity that is visible and readily quantifiable, especially government spending, is the only activity that matters.  What are not visible and quantifiable are the losses to the economy when government uses its power to divert resources from investments that would have been chosen by entrepreneurs, small businesses and corporations to government projects chosen by politicians and the politically connected.

The economy is hobbled by additional invisible, non-quantifiable barriers. In anticipation of yet to be clarified ObamaCare costs and regulations, small businesses (fewer than fifty employees) are reluctant to expand even if they have the capital.  No government agency tracks and counts private decisions to not invest or expand.  But that doesn’t mean those decisions aren’t being made.  In fact the charts above proves they’ve been made for five years.

Astoundingly, many on the left, including progressive hero Paul Krugman, hold that the economy is weak because Obama’s record-shattering escalation in borrowing and spending wasn’t enough!  They simply ignore the record of previous recessions when, without government intervention, there was robust private sector recovery and job creation.

ObamaCare’s Miserly Small Business Tax Credit

Since the Administration’s earliest efforts to persuade America that ObamaCare will do more good than harm, one of the most hyped selling points has been “small business tax credits.”

In a September 2009 speech to a joint session of Congress the President promised:

For those small businesses who still cannot afford the lower-priced insurance available in the exchange, we will provide tax credits, the size of which will be based on your need.

More recently, during one of the President’s endless campaign tours, he regaled the audience with this:

Small business owners who provide health care to their workers can sit down at the end of the week, look at their expenses, and begin calculating how much money they’re going to save!

small-business-tax-credit tableWow!  Weekly savings for the small business employer to count. Sounds exciting, huh?

But, as with all ObamaCare promises the tax credit’s implementation particulars fall far short of the hype.  It turns out that the small business tax credit is so limited and restrictive it’s worthless or nearly worthless to most small businesses.

  • The maximum tax credit of 35% applies only to business with ten or fewer employees and only if those employees are paid less than $25,000 per year, or about $12.00 per hour.
  • If the employer hires more than ten or begins to pay more than $25,000 per year the law imposes a ruthless sliding scale, slashing the value of the tax credit in response to each additional employee and dollar of increased wages

Thus, ObamaCare is a barrier, a financial disincentive facing the small business owner who might consider an investment in job creating expansion, or rewarding employees with higher wages.

It gets worse

  • If the employer provides a health plan that costs more than the government later determines is “average” in the employer’s state, the tax credit will be retroactively reduced, and the IRS will send a bill.
  • Because ObamaCare compliant health plans come with a raft of new mandates, including a package of “free” (no co-pay) benefits, they will be substantially more expensive than the health plans most small businesses have carried in the past.  Thus, for most small employers the increase cost will more than offset the tax credit.

A Tsunami of Government Debt

Debt-held-by-public

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