Big Frick Dot Com

Perhaps the problem is in the semantics.

In a speech this past December 8^th, President and economic guru Barack Hussein Obama said he was putting the finishing touches on his jobs creation plan.  Showing a penchant for the same cost cutting that has been displayed by most major corporations, Obama used the same talking points he used for the 2 years he spent running for the office he now holds.  He said “We need to grow jobs and get America back to work as quickly as we can.”  One might have expected that seeing as he has been saying this for the past 36 months he might have actually had these “finishing touches” competed prior to the one year anniversary of his election.

But along with being tardy in actually having a plan, the plan he is set to announce is fraught with misconceptions.

According to the White House the president is looking at sending federally collected tax revenues to cash strapped states that have experienced a devastating decline in their tax-money coffers.  This exchange of taxpayer dollars from the left pocket to the right pocket is intended to prevent further job cuts of state employees.  To the extent that more state workers will continue to receive a paycheck it is, in the loosest possible sense, a jobs plan.  But as far as actually stimulating job growth this portion of the plan will be completely fruitless.  It will simply allow states that currently follow the federal guidelines for financial mismanagement to continue practicing fiscal negligence until this hand out runs out.

Another major portion of the president’s plan is more funding for road construction projects.   The beautiful thing about this portion of the plan is that it really won’t matter where you build the roads as nobody is going anywhere anyway.  The construction workers building these new highways will likely be the only employed people using them as it will, once again, do nothing to stimulate job growth.  Eventually we could pave the fruited plains from sea to shining sea but it still won’t stimulate sustainable employment for most of the 20% of Americans that are actually unemployed.

A minor portion of the president’s plan will give tax incentives to small businesses that hire new employees.  This may be the only portion of the plan that is actually workable, but small businesses will not hire new workers strictly because of a tax incentive alone.  They need new customers to justify additional payroll.

If the president is serious about creating new jobs he need look no farther than the past 50 year history of the American economy.  Even an economic neophyte could see that the times of the greatest job creation is after a reduction in taxes on the American workforce.  Sending tax refunds to people who don’t pay taxes may help get some debt off the books at the quickie loan places and may buy Columbian drug lords some new Rolexes, but it does nothing to stimulate the greater economy.  Cutting taxes for people who pay taxes stimulates spending which in turn stimulates hiring. 

The first move should be to eliminate the penalty for early withdrawal of funds from 401K’s and other retirement accounts.  The money could be taxed as income, but the additional 10% penalty places undue hardship on people forced to withdraw funds just to keep their head above water.  The second move should be to reinstate all the previous Bush-era tax cuts and make them permanent.  Let wage earners decide where to spend their money and jobs will be created by the additional spending.  Additional spending will create additional tax revenues and the roads will get built anyway.  This approach will mean a complete reversal of the Obama administrations damning of wealthy Americans, but the reality that when wealthy people spend, poor people benefit must be eminently clear by now.

As stated earlier; the Obama approach to stimulating is an unfortunate example of misinterpreted semantics.   Some may find getting a large quantity of smoke blown up their kilt quite stimulating.

The economy, unfortunately, does not react the same way.