Obama’s American Jobs Act Spends More for Economic Recovery, Perpetuates Keynesian Myth

14 September 2011

President Obama delivered his jobs speech this evening, which focused on job creation via tax breaks for small businesses, cuts in payroll taxes, and more infrastructure projects. This is the usual rhetoric coming out of Washington and many will liken it simply to a last-ditch effort of the White House to improve polling numbers going into the campaign season. But we should not focus on such drivel. Rather what should be noted is that only one month after averting a U.S. sovereign default and seeing our credit rating downgraded for the first time in nearly a century, stimulus spending in the name of economic recovery has not left Washington, as it is at the heart of this legislation. President Obama stated:

The purpose of the American Jobs Act is simple: to put more people back to work and more money in the pockets of those who are working. It will create more jobs for construction workers, more jobs for teachers, more jobs for veterans, and more jobs for the long-term unemployed. It will provide a tax break for companies who hire new workers, and it will cut payroll taxes in half for every working American and every small business. It will provide a jolt to an economy that has stalled, and give companies confidence that if they invest and hire, there will be customers for their products and services. You should pass this jobs plan right away.

Wow! I am so glad we learned our lesson about unrestrained spending and fiscal prudence. Oh wait, President Obama also stated that every piece of this legislation is paid for. But this depends not on dollars we currently have saved in some bunker beneath the White House or the U.S. Treasury. The money that will pay for the American Jobs Act is that which has yet to be saved. Recall the Budget Control Act passed last month to avert a default on U.S. credit. It called for nearly $1 trillion in immediate cuts, but the term “immediately” in Washington-speak actually means spread out over the next ten years. So we are to pay for this legislation, much of it with immediate costs, with spending cuts that will be enacted under a different Congress and Executive? Really? But wait, there is also the additional $1.5 trillion in spending cuts to be determined by our beloved “Super Congress” before the end of the year. But the likelihood that such cuts will see the balance sheet within the Obama administration, or even the next, is not likely.

Here are some more reasons why Congress should pass yet another Keynesian policy, despite the utter failure of its predecessors.

Pass this jobs bill, and starting tomorrow , small businesses will get a tax cut if they hire new workers or raise workers’ wages.

, small businesses will get a tax cut if they hire new workers or raise workers’ wages. Pass this jobs bill, and all small business owners will also see their payroll taxes cut in half next year.

Pass this jobs bill, and thousands of teachers in every state will go back to work.

Pass this jobs bill, and companies will get extra tax credits if they hire America’s veterans.

Pass this jobs bill, and companies will get a $4,000 tax credit if they hire anyone who has spent more than six months looking for a job.

Pass this jobs bill, and the typical working family will get a fifteen hundred dollar tax cut next year.

The bottom line is this. Our government continues to spend and propose additional spending in the name of economic recovery with little results and an empty wallet to boot. The results at this point are certain. Any recovery proposed by Washington policy hounds or the President will fail because two things must happen for a recovery: (1) decreased government spending, and (2) increased spending in the private sector to fuel consumption. Yet, our government is stuck in the ideological misnomer of Keynesian stimulus spending. Consequently, they seek to accomplish private sector growth by crowding our private sector markets. It is an economical contradiction and illuminates the lunacy of Washington politics.

The best policy that could come out of Washington at this point is no policy at all. But that is not the take of our beloved President. He made his ideological stance on the government’s role in the free market quite clear. “As I’ve argued since I ran for this office, we have to look beyond the immediate crisis and start building an economy that lasts into the future – an economy that creates good, middle-class jobs that pay well and offer security.” By “we” he does not mean the American people, but Congress and the Executive. Despite the rhetoric of Washington politics looking to and “representing” the people, their record demonstrates actions often to the contrary. So one must conclude from this statement that the intent is not to let the markets recover on their own, but to continue crowding out any chance at a recovery now and in the near to mid future. The only substantive impact of increased spending now is increased taxes later, but without an economy to raise wages enough to offset such tax increases we will all see a real decline in living standards. Welcome to the new America!

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