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 3)
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:
The Absurdity of Obama’s Spending Offsets
It is absurd that this President — who ignored the recommendations of his own fiscal commission, and then sought to raise the debt ceiling without a nickel of spending reductions — now demands the super-committee created in the debt-ceiling negotiations to come up with additional savings to pay for his jobs proposal.?? ?
– Patrick Knudsen
And When, the Rest of the Story, Mr. President?
In giving his big jobs speech this evening before a rare Joint Session of Congress, also gave us a classic “Paul Harvey” moment.
Paul Harvey was a famous radio commentator and personality with one of the longest running national radio programs in history. His trademark was to tell the audience the big lead into a big story and then break for a commercial. When he came back he would then announce, “And now, (pause) the rest of the story”. We’re still waiting for Barack Obama to give us the rest of the story.
In his jobs speech, the President laid out a bunch of retread policy ideas that two years after they were first tried managed to create an arithmetic novelty – exactly zero job growth in August. In total, the President is calling for more new spending on proven policies that are proven failures, and he says these will all be paid for with budget reductions elsewhere.
But he refused to give his proposals for offsetting the cost of his proposals. Desserts only, no spinach?. We’re still waiting for “the rest of the story”. Was he unable to decide in time on what to propose? Did he think perhaps no one would notice? Why put out what is literally a half-baked plan?
– J.D. Foster
Rising Deficits Drive U.S. Debt Limit Higher, Faster
Everyone wants to know more about the budget and here is some key information with a chart from the Heritage Foundation and a video from the Cato Institute.
Congress first placed a statutory limit on total federal debt in 1917, in the Second Liberty Bond Act. Since 1962, Congress has altered the debt limit through 74 separate measures, raising it 10 times since 2001. Since 1990, the debt limit has been raised a total of $10.1 trillion, but nearly half of that increase has occurred since September 2007.
U.S. DEBT LIMIT
Chart 26 of 42
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Technical Notes
The charts in this book are based primarily on data available as of March 2011 from the Office of Management and Budget (OMB) and the Congressional Budget Office (CBO). The charts using OMB data display the historical growth of the federal government to 2010 while the charts using CBO data display both historical and projected growth from as early as 1940 to 2084. Projections based on OMB data are taken from the White House Fiscal Year 2012 budget. The charts provide data on an annual basis except… Read More
Authors
Emily GoffResearch Assistant
Thomas A. Roe Institute for Economic Policy StudiesKathryn NixPolicy Analyst
Center for Health Policy StudiesJohn FlemingSenior Data Graphics Editor