e-News February 12, 20102/12/10
The Week Just Past
“The Jimmy Carter Tax Credit”
An Economic Stimulus – Overseas!
Student Loan Debacle
Closer to Nuclear Weapons, Closer to More Sanctions
An outpouring of “Valentines for Vets”
The Week Just Past
“As we in northern New Jersey continue to dig out from this week’s major winter storm, official Washington is struggling to recover, too. The House of Representatives was not in session this past week as the Capital was hit with back-to-back historic snowstorms.
“This is actually good because Congress did not have the opportunity to consider new taxes or other job-killing policies this week, sending chills down the back of families, taxpayers, and the engine of our economy – small businessmen and women.
“It is true that layoffs appear to have slowed and the economy did see some growth in last half of 2009, but companies, large and small, are still very reluctant to hire new workers. The unemployment rate hovers just below 10 percent and many economists expect it to increase in the coming months.
“What's most ominous is not today's job market; it's the outlook. Most economists predict any recovery, which may or may not be sustainable at this point, will, at best, be ‘jobless.’ That is, most forecasters expect a weak recovery which will only gradually dent unemployment.
“These are all reasons that the Administration and Congress should be working aggressively together to find more effective ways to spur private sector job creation.
“All businesses, especially small businessmen and women, need to have financial stability, not worry about higher taxes, regulatory burdens, and health care mandates and they need consumers who have the confidence to become buyers once again!”
“And yet, most of the talk this week was about the President’s invitation to Congressional Republicans to attend some sort of televised ‘health care summit’ in two weeks. It all seemed like more political theater – more ‘show’ than ‘substance’.
“We do not need to wait for a ‘summit’ to begin genuine bipartisan discussions on health care. First, scrap the Pelosi-Reid government takeover of health care and work together to pass single, stand-alone bills that 1) control costs, both for families and businesses, but also for our government; 2) deal with insurance abuses that affect millions of Americans who’ve got health insurance; and 3) make health insurance more available to people in the individual markets, without mandating it.
“I hope this is the course we take.”
Opinion: “The Jimmy Carter Jobs Credit”
(From The Wall Street Journal Editorial Board, February 10)
“Stimulus Plan A didn't work to create jobs or reduce unemployment. That was the $165 billion of tax rebates and money for states in February 2008.
\Plan B flopped too. That was last February's stimulus that has devoted $862 billion into mostly government programs. The unemployment rate climbed steadily until last month, and the main lasting impact has been nearly $1 trillion added to the national debt.
Now comes Plan C, another February stimulus, though this time everyone has been instructed not to use the "s word," lest it scare the voters. This one is a "jobs bill," as if Plans A and B were about something else. Don't expect this one to work any better than the last two.
This latest Senate Democratic bill will cost $85 billion and is shaping up to be largely a rehash of last year's stimulus: extended unemployment insurance, Medicaid cash for the states, and some public works spending. The one new twist is a proposal for a one-year $5,000 tax credit for small businesses for each new worker hired. President Obama calls the credit "the best way to cut taxes" to help small businesses.
But we've also seen this economic movie before—in 1977 under Jimmy Carter. During the two years it was in effect, a jobs credit worth about $7,000 in today's dollars became a $20 billion free lunch as businesses claimed the handout for one of every three new employees.
In the short term, the Jimmy Carter jobs credit appeared to reduce unemployment. The jobless rate dropped by 1.2 percentage points (to 5.8% in 1979 from 7% in 1977). But that effect was short-lived, and when the subsidies ended two years later the layoffs resumed and the unemployment rate rose again and by 1980 was back to 7.2%.
Citing this not-so-happy experience, Wisconsin Democrat Ron Kind says the tax credit is evidence that Congress doesn't "do anything new around here except the history we repeat." The left-leaning Tax Policy Center recently looked at a proposal for a $5,000 payroll tax credit, which is similar in concept to the Senate jobs credit, and concluded that "The problem with subsidies such as this is that they are exceedingly sloppy. A lot of money goes to those firms that would have hired anyway."
They're right: The Labor Department reports that in December 2009 there were 2.5 million job openings. Will the government pay $5,000 for every one of these new jobs that would have existed anyway? In the dynamic American economy, thousands of workers are hired, fired or quit each day.
The President is trying to lure Republicans to support this policy as a "business tax cut." But they should know that it violates sound tax principles. Pro-growth tax cuts, as adopted so successfully by JFK in the 1960s and Ronald Reagan in the 1980s, are broad-based and lower tax rates for as many people as possible. This reduces the distortions of the tax system, while permanently adding to the rewards for investment and risk-taking.
That's the opposite of Mr. Obama's tax strategy, which is to dole out special tax credits and loopholes for favored behavior or industries—hybrid cars, buying a new house, wind power—and then paying for these by raising tax rates on anyone making more than $200,000 starting next year. The result will be higher tax rates paid on a shrinking tax base, with a misallocation of capital toward projects chosen by politics rather than by prices or potential return on investment.
A 2009 study by the World Bank and Harvard University examined growth and entrepreneurship in 85 countries and found that lower tax rates on firms are powerful spurs to job growth and business start-ups. Perhaps Mr. Obama and Senate Majority Leader Harry Reid need a tax policy refresher from Dick Gephardt, Bill Bradley and other Democratic champions of tax reform from the 1980s.
Republicans and Democrats looking for a better way should call for a permanent reduction in the top personal and corporate tax rate to 25% to attract capital to the U.S. Making the current 15% tax rate on capital gains permanent, rather than raising it next year as Mr. Obama wants to do, would also help.
Recent surveys by the National Federation of Independent Business, the small business association, suggest that small employers don't want tax credits. They want a future in which Congress and federal agencies stop imposing new tax and regulatory burdens. Given the damage done by the current Congress, doing no more harm would do far more to increase hiring than a reprise of Carternomics.”
Recommended Reading: Joseph Rago in the weekend Wall Street Journal: “A Wasted Opportunity” on health care:
1179 Days and Waiting for Jobs!
In a nation where over 16 million Americans are looking for work, the President should be exploring every possible means to protect and create PRIVATE sector jobs.
Unfortunately, he is ignoring an energetic international trade policy that benefits U.S. companies, their products and workers.
The President seemed to acknowledge this in his January State of the Union address. He stated: "If America sits on the sidelines while other nations sign trade deals, we will lose the chance to create jobs on our shores."
He knows that the Colombia Free Trade Agreement was signed 1,179 days ago and still has not been approved, or even debated, in Congress. Likewise, free trade agreements with South Korea and Panama have languished for years!
Speaker Nancy Pelosi and Senate Majority Leader Harry Reid have refused to allow even a debate on these three pacts, all of which will tear down tariff barriers to OUR products. In fact, since the Colombia Free Trade Agreement was initialed, American businesses have paid over $2 billion dollars to the Colombian government in duties and tariffs!
I assume President Obama can convince Speaker Pelosi and Senator Reid to move these important agreements. If he wants to.
An Economic Stimulus – Overseas!
As we approach the one year anniversary of enactment of President Obama’s failed $1 trillion economic stimulus package, we are receiving word that millions of taxpayer dollars have been spent abroad!
Of the more than $2 billion the federal government has given out to create green-energy jobs, more than three-quarters has gone to foreign-owned companies that dominate manufacturing of wind-power parts, components and systems.
Read the story in the San Diego Tribune News here:
Recommended Reading II: Peggy Noonan in the weekend Wall Street Journal: “Question Time Isn’t The Answer”, working together on terrorism is:
Student Loan Debacle
The Administration’s drive to nationalize the federal student loan system has stalled in the Senate, thanks, in part, to the loss of the Majority Leader Harry Reid’s “supermajority.” Last fall, the Congressional leadership was all but certain they would succeed in passing an overhaul of the student loan business. The idea, which President Obama called a “no-brainer,” would allow students to borrow directly from the government through their colleges, and would replace the current system, which pays private companies to provide and service loans.
The House of Representatives has already passed its version of the bill (Rodney opposed) which eliminates the portion of the federal lending industry that pays private companies to provide risk-free loans that are guaranteed by the government.
This government takeover of a remarkably successful student loan system will squelch competition, diminish services to students and cost thousands of private sector jobs, while growing the size of the federal government and spur the hiring of thousands of new government bureaucrats.
In the meantime, New Jersey colleges and universities warned Rodney of coming “chaos” in the student loan system as they are reacting to the House Majority's bill and White House imperatives to scrap the current system. In the process, they are breaking ties with banks and organizations which had been helping deserving students for decades.
Closer to Nuclear Weapons, Closer to More Sanctions
Iranian President Mahmoud Ahmadinejad confirmed this week that Iran began enriching uranium at levels closer to weapons grade at a facility near Natanz. The Iranian regime says it is moving to this new phase of “research and development” to produce materials for “medical purposes.”
At the same time, the United States and other nations seeking to restrain Iran's nuclear ambitions are offering to help the Islamic Republic purchase medical isotopes on the international market, which is how many nations – including the U.S. - get them for medical purposes.
The latest move by President Ahmadinejad, in defiance of international efforts to curb Tehran's nuclear ambitions, brought new calls to pursue economic sanctions on Iran.
“We have bent over backwards to say to the Islamic Republic of Iran that we are willing to have a constructive conversation with them about how they can align themselves with international norms,' President Obama said at a White House news conference on Tuesday. 'The next step is sanctions. ' "
The “next step” is sanctions?
Having tried to curry favor with Ahmadinejad since he took office over a year ago, President Obama seems to have alternated between flirting with and flailing the Iranian regime with very little to show for it!
Unfortunately, the International Atomic Energy Agency (IAEA) continues to provide" cover" for Iran's accelerated push to obtain and produce nuclear weapons.
Where are the President’s “roving ambassadors” and our State Department?
In December, the House passed legislation, which Rodney had cosponsored, aimed at pressuring Iran to suspend its nuclear weapons program by imposing sanctions on multinational companies that do business with the Tehran government. The measure (H.R. 2194) would impose sanctions against companies that supply Iran with, or support its domestic production of, gasoline and other refined-petroleum products.
Iranis a nation rich in oil resources, but it imports 40 percent of its gasoline supply because its oil refining infrastructure is badly outdated. The bill takes aim at Iran’s gasoline imports by penalizing companies that supply the country with refined petroleum.
An Outpouring of “Valentines for Vets”
Over fifty schools and over a thousand students participated in this year’s “Valentines for Veterans” program. Each year, Rodney invites elementary and middle schools from across the area to create hand-made Valentines Day cards for hospitalized veterans.
He was joined by decorated World War II veteran Jim Smith, from Chester.
“These messages from students lifted the spirits of men and women confined to a hospital on Valentine’s Day,” said Rodney, a veteran of the Vietnam War. “It is also an important way for young people to learn more about the sacrifices made by Americans veterans. Veterans are a symbol of what makes our nation great, and we must never forget all they have done to ensure our freedom.”
The valentines will be delivered to veterans at Lyons and East Orange Veterans Medical Centers.