Provisions of Obama’s jobs plan

The president unveiled his jobs package last night to a joint session of Congress.  Here are the main provisions of the $447 billion plan:

-EMPLOYEE TAX CUTS. A deeper payroll tax cut for all workers. Congress in December cut the payroll tax, which raises money for Social Security, from 6.2 percent for every worker to 4.2 percent, for all of 2011. Obama’s proposals would cut that tax even further – to 3.1 percent – for all workers in 2012. The tax applies to earnings up to $106,800. The estimated cost is $175 billion.

– EMPLOYER TAX CUTS. A payroll tax cuts for all business with payrolls up to $5 million. Obama’s proposal would cut the current 6.2 percent share of the payroll tax that employers pay to 3.1 percent. As with employees, that tax applies to annual employee earnings of $106,800. The White House says 98 percent of businesses have payrolls below the $5 million threshold. In addition, Obama proposes that businesses get a full payroll tax holiday for additional wages resulting from new hires or increased payrolls. The estimated cost is $65 billion.

– PUBLIC WORKS. The president proposes spending $30 billion to modernize schools and $50 billion on road and bridge projects. He also calls for an “infrastructure bank” to help raise private sector money to pay for infrastructure improvements and for a program to rehabilitate vacant properties as part of a neighborhood stabilization plan. The estimated total cost of all those programs is $105 billion.

-UNEMPLOYMENT BENEFITS. If approved by Congress, the proposal would continue assistance to millions of people who are receiving extended benefits under emergency unemployment insurance set up during the recession. That program expired in November but Congress renewed it for 2011. If not renewed again, it would expire at the end of this year, leaving about 6 million jobless people at risk of losing benefits. The president also wants to spend extra money on states that help long-term unemployed workers though training programs. One model cited is a Georgia program that lets people receiving unemployment benefits obtain job training at a company at no cost to the employer. The estimated cost is $49 billion.

-LOCAL GOVERNMENT AID. The ailing economy has forced state and local governments to lay off workers. Money that states and municipalities received in the 2009 stimulus package has been running out. Obama proposes spending to guard against layoffs of emergency personnel and teachers. The estimated cost is $35 billion.

-EMPLOYER TAX CREDITS. The president proposes a tax credit of up to $4,000 for businesses that hire workers who have been looking for a job for more than six months. The estimated cost is $8 billion.

-EQUIPMENT DEDUCTION. Wary of imposing a burden on business, Obama wants to continue for one year a tax break for businesses, allowing them to deduct the full value of new equipment. Previously, companies could only deduct 50 percent of the value. The president and Congress in December negotiated that provision into law for 2011, but it is set to expire at the end of this year. The estimated cost is $5 billion.

via Highlights of Obama’s jobs plan – Sacramento News – Local and Breaking Sacramento News | Sacramento Bee.

Lots of reliance on tax cuts.  I thought that was a Republican tactic that  Democrats scorn in their crusade for new revenue.  Isn’t all this help for business  what Democrats usually mock as “trickle down economics” and help for the rich?  There is, of course, lots of government spending of money that we do not have.

Do you think this will get Americans working again?

Economic purgatory

Here is a rather more optimistic assessment of the economy, based on the plans of America’s business executives.   I cite it, though, for the figure of speech in the final paragraph:

Washington policymakers are entering a crucial period for the nation’s stalling economy, starting with President Obama’s address to Congress about jobs on Thursday, but the fate of the recovery ultimately depends on decisions being made elsewhere: inside corporate America.

So far, business leaders have been standing firm, with senior executives making few revisions in the plans they had drawn up for expansion and hiring, according to interviews and a review of more than three dozen recent conference calls that executives have held with financial analysts. Even the wild swings on Wall Street during this cruel summer have not knocked executives off track.

But while companies are not undertaking new rounds of layoffs, hiring does not seem poised to take off. Executives speak of the same sluggish but steady job creation that has been underway for months continuing through the end of the year.

The cautious approach taken inside executive suites was also reflected in the grim jobs report from the Labor Department on Friday. While it showed that the nation’s job creation had ground to a halt in August, the private sector continued adding jobs slowly. After adjusting for workers on strike, mostly at Verizon, and employment cuts by government, the report revealed that private employers added the modest net sum of 62,000 jobs.

That result was consistent with the reflections of top executives, such Ronald L. Sargent, the chief executive of office-supply retailer Staples.

“I’m not an economist at all,” Sargent said in a conference call in mid-August with analysts to discuss quarterly earnings. “But from what I see, we have no chance at another recession. I think we’re probably more likely to stay in economic purgatory for a while longer, but I don’t have any worries about a double dip at this point.”

via Despite stock volatility, executives moving ahead with growth plans — for now – The Washington Post.

We are in economic purgatory!  We are being punished for our sins!  But we are still saved, eventually.   And government efforts to get us out are nothing but indulgences.  We can buy them, if it makes us feel better, but they don’t really work.  Can there be free forgiveness in the economics realm, or that just in the spiritual kingdom?

Zero job growth

Economists expected SOME job growth in August, but the numbers came in worse than expected:  ZERO job growth in non-farm occupations.

WebMonk alerted me to this, urged me to post it while the information is hot off the wires, and was helpful enough to link to the actual Department of Labor report.  It’s fascinating, though depressing, to read the details.  A sample, but you can read more with the link below.

Nonfarm payroll employment was unchanged (0) in August, and the unemployment rate held at 9.1 percent, the U.S. Bureau of Labor Statistics reported today.

Employment in most major industries changed little over the month. Healthcare continued to add jobs, and a decline in information employment reflected a strike. Government employment continued to trend down, despite the return of workers from a partial government shutdown in Minnesota.

via Employment Situation Summary.

To relate this to the above topic of conversation, this might be evidence that the economy will be so bad that the public will vote for a new president.  But do you think the vast numbers of the unemployed are more likely to vote for a “limited government” message or for a “spend even more to get the economy moving again” message?

Inflation as a solution

Some economists are suggesting that a cure for our economic woes would be for the government to purposefully create inflation.  Robert Samuelson explains:

The idea now is that the Fed would pump money into the economy until inflation — a rise in most prices, not just erratic gasoline prices — reached a desired level of perhaps 4 percent to 6 percent. Harvard economist Kenneth Rogoff admits the policy is “radical.” He supports it only because he sees the main threat to the U.S. and European recoveries as massive “debt overhangs” of private and governmental debt. “People are retrenching because they realize that high debt makes them vulnerable,” he says.

Inflation is one way to reduce debt burdens. As wages and prices rise, the value of existing debt erodes. Consumers, businesses and governments are liberated to spend more freely.

To be sure, higher inflation represents a wealth transfer to debtors (who repay in cheaper dollars) from creditors (who receive cheaper dollars). That’s unfair, Rogoff says, but it may be less unfair and disruptive than outright defaults by overborrowed debtors.

Faster inflation might boost the economy in other ways, too. If people think prices of cars, appliances or homes will be higher next month or next year, they may buy now instead of waiting. Higher inflation may also allow the Federal Reserve to lower effective interest rates. If interest rates stay below inflation — though that’s hardly assured — the resulting cheaper credit should spur borrowing.

All this explains why higher inflation appeals to economists across ideological lines. While Rogoff is slightly right of center, liberal economist and columnist Paul Krugman also favors it. The trouble is this: Inflation is hard to manipulate in precise and predictable doses. Once people become convinced that government will tolerate or encourage it, they adapt in unforeseen ways. We can’t know what would happen now, but we do know what happened in the 1960s and 1970s.

One adaptation was that companies and workers raised wages and prices much faster than expected. Higher interest rates followed. Rates on 10-year Treasury bonds went from 4 percent in 1962 to 8 percent in 1978. The stock market stagnated for nearly two decades. Consumers reacted to greater uncertainty by increasing their savings rates from 8 percent of disposable income in 1962 to 10 percent by 1971. That’s exactly the opposite of today’s goal — more, not less, consumer spending.

There might be other unpleasant surprises. If retail prices rose faster than wages — a good possibility with unemployment at 9.1 percent — higher inflation could act as a drag on the economy by reducing workers’ “real” purchasing power. If investors decided that the Fed had gone soft on inflation, there might be a panicky flight away from the dollar on financial and foreign exchange markets.

Moreover, the power of higher inflation to erode the real valu eof U.S. government debt is limited, because much of that debt is short-term. About 30 percent matures in less than a year; another 25 percent or so matures in less than three years. All this debt will be refinanced. With higher inflation, it would probably be refinanced at higher interest rates that investors would demand as protection against rising prices.

Inflation is not the answer. Remember: The economy’s basic problem is poor confidence spawned by pervasive uncertainties. The Fed shouldn’t make the problem worse by embracing policies that, whatever their theoretical attractions, will create more uncertainties in the real world.

via Inflation is not the answer – The Washington Post.

This is what Christian presidential candidate William Jennings Bryan called for in the 19th century with his famous “Cross of Gold” speech, since inflation would make it easier for farmers to pay their debts over and against the banking interests.  Do you think higher wages and higher prices for everything would be a good way to get the economy moving again?

Tax breaks as ‘Tax expenditures’

A major proposal to address the deficit is to eliminate various tax deductions–such as for home mortgages and charitable (such as church) giving.  Those tax breaks are being interpreted as the same as government spending.  Eliminating them would increase government revenue by billions of dollars, or even, according to some estimates, a trillion.  Glenn Kessler, the Washington Post “Fact Checker,” takes a look at these claims and finds that things are not so simple.  Actually, he shows, cutting out the tax breaks may not raise so much money after all.

His evidence and reasoning resists simple summary, so I urge you to read what he has to say:   Warning to budget mavens: ‘Tax expenditures’ may yield less than expected – The Fact Checker – The Washington Post.

He also mentions a simpler variation that might have a better chance of passage:

One interesting proposal, advanced by Martin Feldstein, Daniel Feenberg and Maya MacGuineas, would cap the total value of tax reductions that a person could take to just 2 percent of adjusted gross income. Their research suggests that such a cap would raise $278 billion in 2011, and it would encourage 35 million Americans to shift from itemized deductions to the standard deduction, thus simplifying their taxes. It might also be easier to implement than trying to eliminate or scale back some of these popular provisions.

We conservatives hate tax increases, and the notion that the government deigning to let us keep our money is the same as a government expenditure–as if everything we have rightly belongs to the government–is noxious on multiple levels.

And yet, addressing the deficit in a bipartisan plan will almost certainly call for increasing revenues.   Setting aside the question of whether that should be the case, what means of increasing government revenue would you find most, if only minimally, acceptable?  What tradeoffs would you be OK with?

For example, I would want to preserve the housing deduction (since to do otherwise would damage the housing market even more, which is where our economic woes hurt lots of ordinary Americans, as well as contributing to high unemployment).  I would also want to preserve deductions for charitable giving (since churches and other non-profit organizations depend on those).  But to preserve those, I might grudgingly accept a cap on deductions or an increase in other taxes.

HT:  FWS

Libertarian micro-nations

Some libertarian venture-capitalists are planning to build new nations on ocean platforms–they are calling it “seasteading” (get it–from homesteading?)–as libertarian mini-utopias:

[Patri] Friedman [grandson of free market economist Milton Friedman] wants to establish new sovereign nations built on oil-rig-type platforms anchored in international waters—free from the regulation, laws, and moral suasion of any landlocked country. They’d be small city-states at first, although the aim is to have tens of millions of seasteading residents by 2050. Architectural plans for a prototype involve a movable, diesel-powered, 12,000-ton structure with room for 270 residents, with the idea that dozens—perhaps even hundreds—of these could be linked together. Friedman hopes to launch a flotilla of offices off the San Francisco coast next year; full-time settlement, he predicts, will follow in about seven years; and full diplomatic recognition by the United Nations, well, that’ll take some lawyers and time.

“The ultimate goal,” Friedman says, “is to open a frontier for experimenting with new ideas for government.” This translates into the founding of ideologically oriented micro-states on the high seas, a kind of floating petri dish for implementing policies that libertarians, stymied by indifference at the voting booths, have been unable to advance: no welfare, looser building codes, no minimum wage, and few restrictions on weapons.

It’s a vivid, wild-eyed dream—think Burning Man as reimagined by Ayn Rand’s John Galt and steered out to sea by Captain Nemo—but Friedman and [Facebook funder Peter] Thiel, aware of the long and tragicomic history of failed libertarian utopias, believe that entrepreneurial zeal sets this scheme apart. One potential model is something Friedman calls Appletopia: A corporation, such as Apple, “starts a country as a business. The more desirable the country, the more valuable the real estate,” Friedman says. When I ask if this wouldn’t amount to a shareholder dictatorship, he doesn’t flinch. “The way most dictatorships work now, they’re enforced on people who aren’t allowed to leave.” Appletopia, or any seasteading colony, would entail a more benevolent variety of dictatorship, similar to your cell-phone contract: You don’t like it, you leave. Citizenship as free agency, you might say. Or as Ken Howery, one of Thiel’s partners at the Founders Fund, puts it, “It’s almost like there’s a cartel of governments, and this is a way to force governments to compete in a free-market way.”

via The Billionaire King of Techtopia: Critical Eye : Details.

Do you think this would work?  Can a nation really be run like a business to this extent?  Since an oil platform without the oil would have no natural resources, Appletopia would presumably rely on “intellectual” resources for its economy.   Wouldn’t all of the other countries you would depend on for your commodities and your  trade  have laws and regulations that would prevent you from having a completely free economy? And what if a ground-based country decided to send a ship to conquer you?  What would be some other problems with this kind of nation-state?

Would you be willing to emigrate to–or colonize–a country like this?

HT: Joe Carter


CLOSE | X

HIDE | X