Saturday, February 6, 2010

A Little Lesson On Economics, Mr. President

Workers are disgruntled, benefits are being cut, and the unemployment rate continues to hover around ten percent. All of this has occurred while our nation’s leaders have been increasing the government’s deficit spending and were wooed by expensive, job-killing myths like government-run healthcare and “climate change” legislation.

So this week, President Obama revealed his best idea for jobs reform. A $5,000-per-head tax credit to businesses for each job they create. Put simply, the government will pay employers $5,000 for each hire they make, as a way to provide incentive for them to bring on new employees.

This is government naiveté at its pinnacle. What Mr. Obama fails to understand is that businesses aren’t sitting back with too much work to do, and a fear of hiring more people to do it. The problem is that businesses feel too restricted and overtaxed by the government, and so collectively there is not enough work to go around.

Obama’s idea is tantamount to the concept of paying our children five dollars every time they smile – and thinking that this will make them truly happy children (okay, okay – I recognize that our children may think this is a great idea and that it will lead them to happiness – but we all know it won’t be true happiness, right?). Paying them a token amount for an outward expression of behavior does not change them fundamentally inside.

Similarly, Obama’s plan does nothing about the root of the issue - job creation. Even FDR in the 1930’s understood that building highways and bridges and railroads actually created work for people to do. The New Deal had at least the advantage that it struck at the heart of the matter – it put people to work. Still, I’m no fan of Keynesian economic theory that thinks it acceptable for government deficit spending to somehow spark private industry. I believe that less government intrusion is what is needed.

One more thing – let’s not forget about that $5,000. I point out an obvious question – where does it come from? Clearly, it comes from the taxes paid by people who already have jobs and can afford to pay taxes to the government. More simply put, Obama’s plan takes money from the pockets of people who have it, and puts it into the pockets of those who don’t. That sounds an awful lot like socialism to me.

I am stunned at the clear lack of basic economic understanding in play here. Again, if a business had enough work to hire someone new, they would likely do so. Obama’s plan creates the risk that less-than-honest employers will cut hours or benefits for existing employees so that they can bring on new employees – and collect $5,000 for each. At the root, a jobs plan needs to first create work – and jobs will follow. Better yet, get the government out of the “jobs plan” business, cut corporate and personal taxes, and free up businesses to do what they do best – innovate, produce and hire more people. It’s not rocket science.

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