Tag Archives: foundation scholars

President Obama’s job speech reacted to by Heritage Foundation scholars (Part 6)

President Obama’s job speech reacted to by Heritage Foundation scholars (Part 6)

I love going to the Heritage Foundation website because of articles like this:

Heritage’s experts watched President Barack Obama’s jobs speech delivered to a joint session of Congress. Here are some of their immediate reactions:

Obama Calls for Reviving Failed Hiring Tax Credit

What to make of President Obama’s plan in his speech tonight to revive a tax credit for businesses hiring new workers? In March 2010, the President signed into law an almost identical credit.

It was a credit he pushed for Congress to pass. The credit lasted from March through the end of December. It had no beneficial impact on job creation and added billions to the national debt. There is absolutely no good reason for trying it again.

As we argued before the first hiring credit became law, such a policy won’t spur permanent hiring because it only temporarily reduces the costs of employing new workers. Businesses only hire new workers when they anticipate those new workers will increase their profitability over the long haul.

A credit of a few thousand dollars, a mere fraction of the cost of hiring a worker, does nothing to change that calculation. The only positive effect on hiring the credit could have would be on temporary positions if it makes adding a few new temps profitable in the short term. But once the credit expires businesses will let those workers go.

To get the true picture of the credit’s effectiveness, however, you can’t just look at the few temporary jobs it might create. You also need to subtract the jobs foregone because the government took the money for the credit out of the hands of the private sector by taxing or borrowing to give it to the businesses that qualify. In the end it is more likely the hiring credit will actually destroy jobs on net.

– Curtis Dubay

Extending Unemployment Benefits

Today, Senate Minority Leader Mitch McConnell (R-KY) quoted Albert Einstein who he said once defined insanity as doing the same thing over and over again and expecting different results. By that measure President Obama’s plan to boost the economy by spending more on unemployment benefits is insane. Unfortunately, the President isn’t joking.

Congress has expanded unemployment insurance (UI) dramatically since the recession began. Laid off workers can now collect up to 99 weeks of benefits in some states. It isn’t hard to see why Congress did so. Normally workers can collect benefits for to up to six months. But the average unemployed worker has now been out of a job for nine months.

For welfare reasons Congress wants to help workers who cannot find jobs. This is understandable. That doesn’t mean it will help the economy, no matter how much the President wants it to.

The stimulus bill extended UI benefits. Congress has kept them in place several times since then. All told the government has spent over $300 billion on unemployment benefits since Obama took office. All that spending has done nothing to boost the economy. Unemployment is higher than the Administration projected if Congress did nothing. This failure was predictable.

The studies that show that UI spending stimulates the economy are based on macroeconomic models programmed to show large “multiplier effects” from government spending. These models assume that each dollar of government spending creates more than a dollar of economic growth. They essentially assume their conclusion. Actual empirical research shows that UI payments do not boost GDP. This is exactly what economic theory predicts.

One of the most thoroughly established findings of labor economics is the fact that extended unemployment benefits cause workers to remain unemployed longer. Even Alan Krueger, President Obama’s nominee to chair the Council of Economic Advisors, agrees. Studies show that raising benefits to 99 weeks during the recession has increased the unemployment rate by 0.5 to 1.5 percentage points. Extended benefits come at an economic cost.

There are understandable reasons for wanting to extend UI benefits despite this cost. But as much as it would be wonderful if doing so also boosted the economy, it does not. It would be similarly wonderful if an all you can eat bacon and ice-cream diet helped shed pounds. Wishing does not make it so.

If Congress thinks that keeping extended benefits is good policy then Congress should pay for it by reducing spending on less important programs. But spending tens of billions more on unemployment insurance will not stimulate the economy any more than the last extensions did.

– James Sherk

President Obama’s job speech reacted to by Heritage Foundation scholars (Part 5)

President Obama’s job speech reacted to by Heritage Foundation scholars (Part 5)

I love going to the Heritage Foundation website because of articles like this:

Heritage’s experts watched President Barack Obama’s jobs speech delivered to a joint session of Congress. Here are some of their immediate reactions:

Obama Calls for Tax Hikes on Job Creators – In Jobs Speech

It was expected that President Obama would rehash and recycle a litany of policies that have no hope of stimulating job creation in his big speech tonight. What comes as a surprise is that he called for offsetting the costs of his sure-to-be-ineffective policies with tax hikes. On job creators.

The President has said himself that tax hikes slow economic growth and deter job creation. That was the justification he gave in December for extending the Bush tax cuts through 2012. It seems he has forgotten what he himself said less than a year ago.

The President called for raising taxes on investors, businesses, and entrepreneurs in his speech. These are the job creators he so desperately needs to help revive the economy. Raising their taxes will reduce the already limited incentives they have to invest and add new workers right now.

This is akin to bailing water into an already-sinking ship.

If Congress foolishly passed the President’s ill-advised plan the tax hikes would be permanent and the jobs policies permanent. The American people would get a permanently enlarged federal government for temporary jobs policies that won’t create any jobs.

Uncertainty is the major factor causing businesses to hold back on new investment and refrain from adding workers. One of the biggest sources of that uncertainty is the President’s never-ending crusade to raise taxes. As long as their taxes might go up, job creators will be hesitant to add new workers.

If the President stopped incessantly demanding higher levies it would relieve some of the uncertainty. That alone won’t cure all that ails the economy, but it would be a big help.

C’mon Mr. President, surprise us in your next major speech by not calling for tax hikes.

– Curtis Dubay

Unsurprisingly, Obama Ignores Energy Exploration as a Solution

Increasing energy supply should have been a no-brainer for President Obama.  It’s a policy that can lower energy prices, create jobs and generate hundreds of billions in revenue from more royalties, leases, and rent.   And it’s a massive revenue raiser that occurs without raising taxes. Instead, the president used the opportunity to take a jab at oil companies and the “tax loopholes” they receive.

To be clear, what the President and anti-oil crusaders label a tax loophole is not tax treatment specific to the oil and gas industry. These are broad tax policies that apply to many industries.

The reality is the economy is weak and steep energy prices will hurt the economic recovery.  Despite the fact that oil settled at $89 per barrel, gas prices remain high and the economic pain as a result of higher gas prices spreads far beyond the pump. Higher energy prices also drive up production costs, which must be reflected in product prices, especially for goods reliant on transportation. Since higher prices reduce quantities sold, producers produce less. In turn, this drives wages down and incomes decline.

At least the people of Louisiana have the Saints to watch, because they don’t have jobs. Despite the fact that the administration lifted the official moratorium on deepwater drilling, the molasses-like permitting process is impeding the Gulf’s economic recovery; 20 rigs are in jeopardy of leaving the Gulf.

But it’s not just the Gulf that would benefit from allowing access for energy exploration and creating an efficient regulatory process that allows energy projects to move forward in a timely manner.  Colorado, Montana, New Mexico, North Dakota, Utah, and Wyoming have all suffered from a slower permitting process would see tremendous economic benefits if companies could explore and drill in a more timely manner.  Alaska has 19 billion barrels of oil of its coasts and another 10.4 billion in the Arctic National Wildlife Refuge (ANWR).  Increased proven natural gas reserves increased states like Pennsylvania, New York, Texas, Oklahoma, Arkansas and Louisiana has increased regional interest.

Increasing access to oil and natural gas reserves in the United States both onshore and offshore, would help offset rising demand, increase jobs and revenue, and provide the real economic boost our country needs rather than more the same tried-and-failed government spending programs.

– Nicolas Loris