President Obama introduced his so called jobs plan, spending $447 billion. 51% of this is tax cuts, 31% is infrastructure and local aid and 14% of unemployment insurance. Firstly, it has been shown time and time again, tax cuts do not create jobs. We just showed one would be better off hiring people to cut grass with scissors than enact a payroll tax cut. The payroll tax cuts alone are $240 billion, or over half of Obama's plan.
So why then does Obama push policies that are proved not to work? The only thing we can think of is to justify destroying social security and of course Medicare, which Obama has already promoted as something to cut under the guise of deficit reduction. Payroll taxes are actually the funding for social security and Medicare, otherwise known as FICA. While claims money will be taken out of the general budget to cover this underfunding of social security, that's hard to believe when right at the same time, Obama is promoting cutting social security and Medicare to balance the budget. Social safety nets, not defense, or consideration of a transaction tax are the places where Obama will pay for this so called jobs plan. This jobs plan is really tax cuts, which will be paid for, once again, on the backs of the middle class, this time by slicing and dicing social security.
Here's the so called America Jobs Act:
$, bn
Tax Cuts to Help America’s Small Businesses Hire and Grow
70
Cut employer payroll taxes in half & bonus payroll cut for new jobs/wages
65
Extend 100% expensing in 2012
5
Putting Workers Back on the Job While Rebuilding and Modernizing America
140
Teacher rehiring and first responders
35
Modernizing schools
30
Immediate surface transportation
50
Infrastructure bank
10
Rehabilitation/repurposing of vacant property (neighborhood stabilization)
15
National wireless initiative
0*
Veterans hiring initiative
n.a.
Pathways Back to Work for Americans Looking for Jobs
62
UI Reform and Extension
49
Jobs tax credit for long term unemployed
8
Pathways back to work fund
5
More Money in the Pockets of Every American Worker and Family
175
Cutting employee payroll taxes in half in 2012
175
TOTAL
447
That said, some of the tax cuts, at least, are being tied to direct hires, as incentives for employers to hire. Yet with a demand problem and a jobs crisis, a 6.2% reduction of no funds available to hire with is still zero. This is small business. We know corporations as a whole have had record profits and are sitting on $1.8 trillion in cash.
One of the better ideas of this plan is to enable unemployment insurance to subsidize part time hours. This allows employers to cut hours, instead of simply laying off workers completely. Germany does this and it's helped their economy. In other words, it's proven to work and keep unemployment levels from soaring.
The infrastructure bank details are too sketchy to know it's effectiveness, but in principle sounds like one of the better proposals. Yet, still, why is one so interested in partnering with the private sector instead of managing infrastructure projects through existing agencies as well as creating direct job hires?
We've heard many a time about this administrations' scam claiming to help homeowners. Yet another short on details proposal claiming to help people to qualify for 4% mortgage refinancing is in question. Last we heard the lending standards had become so tight, no one who actually needs financial help can possibly qualify for refinancing.
On a side note, there is hope the Federal Reserve might set interest to zero on money stashed at the Fed by private banks, forcing banks to stop sitting on their trillions in cash and release it into the economy, as lending.
A second step under consideration at the Fed, one getting mixed reviews internally, would reduce or eliminate a 0.25% interest rate the Fed currently is paying banks that keep cash on reserve with the central bank.
From the speech, instead of confronting age discrimination in technical occupations, there is no shortage of American engineers and scientists, we have another backdoor method to displace U.S. STEM with foreign guest workers, this time through training, so called internships, which are backdoor guest worker Visas through the OPT program.
It seems the silence on China's currency manipulation is also deafening at this point. Promoting more bad trade deals shown to lose jobs isn't a good sign this administration or Congress is in economic reality either.
We already know patent reform was a gift to large corporations and now the New York Times says it has even more special favors.
We'll have more on the specifics on this latest plan, with GDP multipliers and details, as information is updated and given. For now I recommend economist Menzie Chinn's pre-game highlights of some of the proposals with their corresponding GDP multipliers, current output gap estimates and a few new estimates of real GDP percentage gain.
Comments
Revenue and Outlays
Do the current revenues collected through the FICA and MediCare taxes cover current outlays? It is my understanding that, previous surpluses in the programs have been replaced with IOU's. Can the generations born after the baby boomers do both, that is, replace the the IOU's and fund their own pensions and healthcare.
I'm 43, 14 years working for the same company my pay raises have not kept up with inflation, no healthcare and no pension I am told these social programs are broke when I would use it. Cutting my loses seems like the thing to do. Opting out should be an option. I have no confidence in the country or the programs. The structure of the programs is a ponzi scheme and there is a population problem, no?
Odin
social security is the best anti-poverty program to date
Unfortunately few know the economic history of the United States, but before social security, older people often died in abject poverty. Today, more than ever, traditional pensions were taken away, replaced with 401ks with massive losses due to stock market crashes and worse, corporations firing people right before they vested into their options. This happened a lot with startups in particular, but the large companies, not only committing age discrimination, but a side bonus means you lose stock options before vesting schedules.
Fixing social security is well known and an easy fix. They need to a. not let the funding be touched, this is Al Gore's infamous "lock box" which he was made fun of in 2000, and then, they need to graduate the scale based on income and make the contribution into the fund progressive. This was the removal of the cap on earnings subject to the 6.2% pay in to social security.
I think they could also look at totalization agreements and cancelling some of these to reduce costs as well.
So, bottom line here is this is a philosophy. Various groups have been out to destroy social security ever since it was enacted and especially for the last 30 years. It's either Wall Street, wanting retirement funds playing the gambling game in the markets, or it's a host of people who want more wealth, don't want social equality, believe America you should be on your own, a return to 1897.
So, it's easily fixed, unlike Medicare and Medicaid, which need massive cost reductions.
If you want to see a massive increase in abject poverty, suffering, despair, destroy social security.
Talk about a hidden stimulus, imagine those 54 million people, many 100% dependent upon this monthly meager amount....having zero income.
You want to watch consumer spending drop like a stone, that also would be it.
Today's 40's and 50's people have zero for retirement. Between getting fired all of the time, the infamous disposable worker syndrome, stock market crashes, housing implosions and shrinking paychecks which don't even cover rent...they have nothing.
No traditional pensions, unlike the current batch of retirees.
That entire "Ponzi scheme" rhetoric is just masking some philosophy, that again, probably never looked at a data table in their lives. It's not a ponzi scheme. In it's current form it's too regressive as a set up and because social security is under attack by powerful interests, they have been raiding it.
Since I think the GDP multiplier for the payroll tax is too small, to me, any multiplier that is less effective than simply using the same amount of money and hiring people to do something for a year just makes no sense, then how I interpret this is to mean they are out to destroy social security.
We've seen this time and time again and Obama from his time as candidate, has kept fairly hidden, but clearly also an agenda to destroy social security from many of his campaign economic advisers.
So, while the claim is they will take money from the general fund to replace the funding lost to social security, I don't think so.
graduated benefits
A third leg on fixing social security is a graduated reduction in benefits. For example, say Mary Sue paid into social security only $200 a year, but Hedge fund manager Billy Bob paid in $20,000. Well, by income, savings, Billy Bob has $40 million, Mary Sue has $9.35. So, the idea here is to reduce payout to Billy Bob when he goes to collect his benefit, age 67 or whatever.
That is a strong progressive style tax and it is basically an additional tax on the rich. Which considering income inequality in this country, sounds like a grand idea.
Broader Tax Base
Beyond removing the cap, I would advocate removing the restriction to payroll earnings and apply the social security tax to capital gains distributions and other unearned income. That's the primary source of income for the very rich. Even Billy Bob, the private equity manager will pay serious money into the system. You could probably fund Medicare from that move alone. Won't ever happen, but it's nice to dream. Those private equity folks are some of the most blatant economic parasites in the system. Not only did they bribe Congress to let them treat their income as capital gains (they only pay 15% income tax), but the destruction and looting of some of the once vibrant manufacturing companies in the US has been unprecedented. The story of Simmons is a prime example.
Dreaming of fair taxation
"Won't ever happen, but it's nice to dream." -- 'Seed'
There are ways that capital gains are combined with stock options to amount to a loophole for profiteering tax-evading CEOs and others. That's one level of the discussion of capital gains -- the way it combines with other loopholes in the great ever-evolving loophole system of the IRC, part of the global system for shifting wealth 'upwards' from working families to the super-rich.
I have proposed that when there are gains made in trading derivatives (paper based on paper, even most short plays and futures), then that should be taxed like gambling -- you can't claim losses greater than your gains for the year, so you can't carry losses forward from last year to offset gains this year. In other words, not all winnings (or losses) are eligible for capital gains loopholes. If it looks like gambling and it talks like gambling, it probably IS gambling.
Isn't the whole derivatives thing based on the questionable practice of buying with cash you don't have and selling stuff (or even complex intertwined paperwork) that you don't own ... or even nobody, including yourself, knows what it is you own or don't own? It's like fractional reserves banking ... of course there are cycles of boom and bust! But is that the best way for people to live? In today's world of corporate globalization, is there any value placed on social stability? Should there be any penalty on profiteering that contributes to the tendency toward social instability?
We should remember that VC is a very important component of any free enterprise economy. But that doesn't exclude, for example, a rule that some portion of capital gains, if exceeding some limit, must be realistically considered as something like a salary that you pay yourself and therefore subject to FICA. After all, productive investors earn their wages.
What needs to be understood is that we are always talking about a taxation system, and discussion becomes meaningless when particular components are conceptually isolated to be evaluated as "redistribution" (fundamentally evil according to the rationalizations of too-smart-by-half pseudo-libertarians) or as "the way to pay for Medicare" (justification presumably for any tax of any kind).
The need is to think in terms of the entire system, letting the system evolve, fundamentally guided by democratic principles. That's macroeconomics and that's why EP is onto something -- the popularization of systems thinking. Unfortunately, systems-thinking isn't something taught in school in the USA, even in most USA universities -- as close as we get to it is courses in investment, where there is an abstraction to an individual bottom-line that obscures understanding of the systems dynamics, that is, the system tends to be seen as reducing to a minimax problem where there's "the computer" figuring something out and no one has any understanding of it. As Robert Oak points out, computerized HFT is like that. Like when the entire system melts down despite all the computerized systems that are brilliantly assuring investors that everything is safe and insured.
All the issues are complicated by the reality of global capital sloshing around the world without 'barriers' to 'trade' (= barriers to labor arbitrage and related social instability). Brilliant mathematicians and superfast supercomputers do not equate to the necessary human understanding of what the economic system of global capital means in human terms. Similarly, oversimplifications of those most overpaid of all the politicians -- radio talk-show hosts and other 'talking heads' -- do not promote understanding of what the economic system of global capital means in human terms.
To take this beyond the dreaming, to make a reality at least for a tax plank in the platform of a political party ... something potentially very attractive to American working people ... how about this? Reform the income tax such that it no longer discriminates against earned income! I mean, there's always this idea that we have to "encourage investors," and that results -- absent egalitarian principles of taxation -- in discouraging work. And isn't that a big part of the problem? Americans no longer respect work, no longer respect workers. It's all about making smart moves with your money. It's all about when you get to the "financial freedom" point where your work is irrelevant, just a hobby for a rich person.
This idea of taxing all income equally isn't so politically far-fetched as might be thought. It was proposed by Jerry Brown in his presidential campaign in 1992 (campaigning for Democratic nomination, which unfortunately went to the DLC's golden boy, Bill Clinton). BTW: I favor elimination of estate taxes and gift taxes, to be replaced by taxing the recipients on the income received just like wage earners. However, I also support income averaging as an essential part of the reform.
Fundamentally, IMO, there's nothing wrong with self-employment. Lincoln envisioned a nation that was primarily made up of a self-employed middle class. And there's nothing wrong with people whose work is management of investments. What's wrong is demeaning of work itself, replacing the ideal of productivity with the ideal of scamming and profiteering from the productivity of others. What's wrong is the idea that concentration of capital in the hands of a few is, in and of itself, somehow the key to productivity -- the one-and-only "job creation" machine. That fallacy is at the heart of the neo-conservative/neo-liberal delusional system -- the fallacy that defines 'good', per Ludwig von Mises, as the accumulation of capital in private hands regardless of how extreme the concentration of capital may be.
There's really only one option
"Opting out should be an option." -- Odin
No, opting out should not be an option! Ask any actuary!
The only real option we here in the USA have is to throw all corrupt politicians out of the Congress, elect a third-party POTUS (or nominate Buddy Roemer in the GOP and/or Dennis Kucinich for the Democrats), enact a Judicial Reform Act to get rid of the current activist SCOTUS and also enact an Electro-magnetic Spectrum Allocation and Interstate Fiber Optic Reorganization Act to destroy the monopolistic corporate media. Also, American Monetary Reform Act, maybe along with a Gold Confiscation Act, if necessary (if too many of "them that have it" insist on making a nuisance of themselves). Then ... Social Security wouldn't even be discussed as a problem, just as part of a legacy of on-going democratic solutions.
Putting it another way: there are two options for the USA --
CONTINUING LEVERAGED TAKE-OVER OF THE USA BY INTERNATIONALIST (including FOREIGN-BASED) INTERESTS
or
REPLACE CURRENT MANAGEMENT with NEW MANAGEMENT FROM OUTSIDE THE USUAL Dempublicrat APPARATCHIKS
Freedom - use it or lose it!
Economics 101 - Reform Party
Don't short Third Party stock
Powerful Interest
In theory these are easy fixes, but in practice the golden rule applies. He who has the gold makes the rules. As you say these are powerful interest and their interest aren't my or anyone else's interest. Even the President has aligned himself with those who would have me continue to send money down a rat hole. I agree with the ambition. I don't believe the program is too for gone but i do think the fix is against human nature, the people who have it are not going to come off of it.
Thanks for your discussion .
Odin
Why do pigeons fly out of hats?
"So why then does Obama push policies that are proved not to work?" -- Robert Oak ('First Pass on Obama's Jobs Stimulus Redux')
Why does Obama push any policies?
That's like asking why fish swim, why birds fly, why and animal breathes.
He's a political animal.
If he were underwater, he'd grow gills. Of course, he wouldn't have to. The Secret Service SEAL team would deliver tanked oxygen.
When in Los Angeles, Pittsburgh or Louisville -- do you breathe the air even though there's an Air Quality alert so that, fundamentally, it's been proved not to work?
As usual, I cite evidence for my claims --
NYT (2 September 2011, John M. Broder) Obama Administration Abandons Plan to Tighten Air-Quality Rules
Because it's part of the show!
Robert Oak uses the term "proved not to work" with the meaning that the policies proposed could not improve the unemployment-underemployment situation, even if they could be enacted. But I would broaden the meaning, as follows:
The President's "jobs" proposals will not even make it out of committee in the House, except as "trade adjustment assistance" in connection with enactment of the three pending FTA's, will not be enacted by Congress, except as "trade adjustment assistance" in connection with enactment of the three pending FTA's, and, if the FTAs and the related TAA is enacted, that will be haled by corporate media as a win-win for Republicans/Democrats as well as for workers/business.
"Easy Money Trick. Learn Misdirection Tips. How To Do Magic Tricks With Money."
"You can even make money as a magician. The secret is to be likeable and smile.
"Money money money; that's what people like and it's what makes magic with notes and coins very popular."
http://www.youtube.com/watch?v=WFJSSx-hjYs
As usual, I back up my claims with evidence --
Excerpted for review purposes from Reuters article (Wednesday, 7 September 2011)
And here's more citation, which in turn includes detailed citation to recent history of all this (back to origin with last Bush administration) --
Excerpt from Scott Lincicome's The TAA-FTA "Deal," Part 3: It's the Politics, Stupid
More exactly, I would describe the origins of "concerns" among Democrats as "concerns of progressive-populist Democrats and a few populist Republicans."
But the good news is ...
DISTRUST! Hoozah! for inter-party distrust in Congress!
"White House, Republicans At Odds Over Sequencing Of FTAs, TAA"
(Current insidetrade.com headline)
Cortez meets with Monctezuma
(Image in public domain via Wikipedia's Wikimedia Commons)
Wiki link
Let's hear a big Hoozah! for distrust in the Capitol! Do you trust them? Do you trust bought-and-paid-for representatives of foreign devils? Should they "trust" us to support them and the "deals" they have made in secret with the President or anyone else?
It's no surprise that Speaker Boehner at this point trusts nothing but solid gold, and that is upon delivery.
Should we, the people, trust our representatives in Congress to make secret deals or to be bound by anything but their duty to represent us and the best interests of the nation?
The "best deal" we can get is open government!
This whole charade is an effort to resurrect the old WTOers 'argument' of inevitability.
What's inevitable today is increasing opposition to 'free' trade. Protectionism, if suppressed in the major parties, will bring about re-creation and increasing popularity of alternative parties. So-called 'free' trade legislation is more unpopular than ever before -- and politicians who vote for FTAs are more likely than ever before to be replaced in November. If the proverbial yellow dog is the only alternative voters have, we'll vote for the yellow dog.
Don't short Third Party stock
Excuse ME! I am NOT a protectionist
I've been calling myself a protectionist, and I'll continue to support 'protectionism', although what I am doing is simply opposing anti-Americanism. (Especially when such anti-Americanism is by our own elected politicians.)
It really isn't protectionist to push, for example, for Congress to enact a 15% Across-the-Board Tariff (ABT).
Here's why.
'Mo' explains the point in a comment at article currently linked in EP's links to "Trade Reform," as follows:
'Mo' is commenting at Avoid Trade War? We’re Already in One! (Ian Fletcher, www.TradeReform.org, 29 August 2011)
Ian Fletcher:
Excellent article by Ian Fletcher! And thank you to EP for linking to Trade Reform!
Fletcher is Senior Economist of the Coalition for a Prosperous America, a nationwide grass-roots organization dedicated to fixing America’s trade policies and comprising representatives from business, agriculture, and labor. He was previously Research Fellow at the U.S. Business and Industry Council, a Washington think tank founded in 1933 and before that, an economist in private practice serving mainly hedge funds and private equity firms. Educated at Columbia University and the University of Chicago, he lives in San Francisco.
("Ian's writings do not necessarily represent the views of the Coalition for a Prosperous America.")
Link to TradeReform's webpage for Fletcher
Fletcher on Romney on trade
See, Ian Fletcher's Is Romney for Real on Trade? (9 September 2011)
I have a very hard time believing that
Romney is notorious to want unlimited guest worker Visas, never met a labor arbitrage he didn't like. Not to say that Obama hasn't been busy doing the exact same thing.
Question of trust
I am willing to give some weight to Fletcher's summary that overall, if Romney means what he has put into the record in 2011, having announced as a candidate for the presidency in 2012, he's the best of the lot on trade issues.
Romney's Plan for Jobs and Economic Growth (LINK TO PDF)
TradeReform states the negative side in a comment by 'Arthur Taylor':
Okay, that's Romney the capitalist, the individual without sworn loyalty to government.
Here's an excerpt from a Romney press release (5 March 2004) when he was governor of Massachusetts --
News Release (Mar 05 2004) via MIT archive
If the point is that when operating as a private capitalist in the private sector, that Romney downsized corporations and outsourced jobs as a means of increasing equity values, then we have to ask if Romney as President might be, or might not be, like the case of FDR's appointment of Joe Kennedy to head up the SEC. FDR's opposition accused him of hiring a fox to guard the hen house, but when FDR was asked why he had tapped such a crook, FDR replied, "Takes one to catch one." It turned out that the choice was excellent, Kennedy did a great job as SEC head, establishing a sound set of rules that lasted for many years. It's widely believed that Kennedy's knowledge of financial markets equipped him to identify areas requiring attention of regulators.
Fleming's analysis is based on Romney's published policy positions on trade and those are worthy of consideration as something seriously intended. What I like is that Romney is unafraid to use the term 'tariff'.
However, as Fletcher points out, Romney's proposals aren’t perfect, they aren’t consistent, and he (Fletcher) in no way endorses the entirety of Romney's economic philosophy, let alone his candidacy. "But they are still an order of magnitude more serious about fixing America’s catastrophic trade mess than what has been proposed elsewhere."
It really comes down to an element of trust -- it's either there or not. It appears to be a matter of record that Romney signed legislation that ended some substantial corporate tax breaks while he was governor, and there don't seem to be accusations that he led any move to outsource state jobs while he was governor.
I still think that we should pay a whole lot more attention to contests for House and Senate and a whole lot less than we do to the Presidential two-ring circus.
BTW: The supposed contradiction between Romney's Massachusetts Health Care Plan and Obama's Health Care Act is no contradiction at all. It's a very simply understood matter of the Tenth Amendment to the Constitution. I am hopeful that Romney has actually read and understands the Constitution of the United States.
Permanent tax cuts will
Permanent tax cuts will create jobs. Temporary ones won't. Rolling back regulations that are harmful to business is important too. The best thing they could do for the economy is roll back Obamacare. But that won't happen.
yet another idiot who cannot pass 2nd grade math
It's truly amazing in the face of overwhelming statistics, correlations and data people like you deny the facts. No, they do not create jobs and either will "rolling back Obamacare", another misinformed, lack of knowledge comment.
If you have any clue, health care costs, before "Obama care", which is what you want to return to and worse, are a significant detriment to businesses, mentioned often.
That's before "Obamacare".
Either you have no ability to add two numbers together or you are a corporate lobbyists troll..
but the stupidity of people not being able to read a single graph or add even two numbers together, such as this comment reflects, is assuredly an element in America's destruction.
And Pray Tell
How can a tax cut (or increase) be permanent? The idiiots who rule us, take us to war, set our tax rates, and debase our currency are not permanent, nor are their policies. Let these "what's mine is mine and what's yours is your tough luck" fools remember that the interstate highway system was built with tax money, and the reason you don't put granny out to die from exposure or get eaten by bears is because we have a social safety net (full of holes thanks to tea bag "thinkers.") I'll pay my taxes, even to the thieves in Washington (and Texas). If only GE and the ultra-rich would do the same.
Frank T.