The American Jobs Act – A Speech by President Barack Obama

President Obama addressed a joint session of Congress tonight, giving a speech about creating jobs in the United States, and introducing his “American Jobs Act,” which he asked Congress to pass immediately.  To some, it was a speech that could mark a turning point in his flailing presidency.  To others, it was a rehashing of failed policies and ideas.

Obama at Congress

The Good

The president did what he did best tonight; his rhetoric was good.  He delivered a well-crafted speech, which included bipartisan language, such as,

“Those of us here tonight can’t solve all of our nation’s woes. Ultimately, our recovery will be driven not by Washington, but by our businesses and our workers. But we can help. We can make a difference. There are steps we can take right now to improve people’s lives.

He used quite a bit of language that was meant to show that he was ready to work with everyone in Congress to get the American economy moving again.  Here’s another one:

“Yes, we are rugged individualists. Yes, we are strong and self-reliant. And it has been the drive and initiative of our workers and entrepreneurs that has made this economy the engine and envy of the world.

But there has always been another thread running throughout our history — a belief that we are all connected; and that there are some things we can only do together, as a nation.”

But those uniting words rang hollow as he presented the details of his plan to Congress.

The Bad

The act that the president introduced tonight was a continuation of what we’ve seen from this administration before, and much of it has failed before.  He prefaced his description of the bill with, “There should be nothing controversial about this piece of legislation,” but most of what he is proposing has already been tried by this administration already, and has failed.

  1. Infrastructure Investment – The stimulus package of 2009 had a lot of money for infrastructure spending, and it hasn’t helped our economy all that much.
  2. Hire more teachers – The U.S. already spends more per student than the vast majority of other countries in the world ($10,297), yet we lag behind other countries in standardized tests.
  3. Extending unemployment benefits – why extend unemployment benefits?  Studies have been done that have shown that people will use their unemployment benefits until they run out, and then they will get a job.  Extending unemployment benefits was also a part of the 2009 stimulus package.
  4. Help people refinance their mortgages – there have been numerous programs to help struggling people with their mortgages (under both Republican and Democrat presidents), and all have been underfunded and unsuccessful.

All of these initiatives are built on the premise that government can best promote economic growth, and the administration knows the areas in which the money would best be spent.  Instead of giving every company in every industry money back to spend in their economic sector, the president would rather spend the money in industries where (a) he thinks there should be more money, and (b) he has more supporters.

The Incessant

Time and again, President Obama said, “You should pass this jobs bill right away,” or, “You should pass it right away,” or, “Pass this jobs bill,” or, “which is why you should pass this bill right away.”  17 times he said this in the speech.

It was evident that he wants Congress to do something, but as he said it, it sounded more pleading than reasoning.  If he sent a good bill to Congress, they would have passed it.  It sounded like he will be sending them a crappy bill, and he’s pleading with them to pass it anyways, because it’s a last-ditch effort.

The Misconception

The major misconception of the speech was the president’s belief that government can stimulate the economy.  It can’t.  Yes, you can build roads and hire teachers, but that isn’t the most effective way to increase the national economic output of the country.  His solution was to take money from the people who are making money, and put it into areas that don’t currently merit expenditure.

Instead of proposing plans that would be good for the entire economy, he proposed spending that would be good for only part of the economy.  Ironically, it’s largely those sections of the economy that will be voting for him in 14 months.

Another misconception is that this “American Jobs Act” will be fully paid for, as President Obama claimed.  It’s “paid for” in the sense that we spend the money now, and “pay for it” later.  We add the cost of the “American Jobs Act” to the 10-year deficit plan that is supposed to be developed by the Joint Deficit Super-Committee that will be meeting between now and December.  This is the old Washington bait-and-switch.  I, for one, have high doubts about whether more than 10% of the proposed cuts made by this committee will ever actually happen, much less the $400 billion that this new “American Jobs Act” will cost the country.

The Bottom Line

Yes, we do need infrastructure spending.  Yes, we do need to employ teachers.  Yes, the United States does need to compete in a global economy.  Yes, we do need to have safe workplaces and a good environment.

But we don’t need to saddle our economy with (a) more debt to pay for the AJA, or (b) more taxes to pay for it.  What America needs right now is a business environment that is conducive to growth, which this administration has been loathe to create.

One thing in the president’s speech that I could get wholeheartedly behind was his call for reforming the corporate tax code:

“I’ll also offer ideas to reform a corporate tax code that stands as a monument to special interest influence in Washington. By eliminating pages of loopholes and deductions, we can lower one of the highest corporate tax rates in the world.”

I would be in favor of completely reforming the tax code, which is what will create the business environment for economic growth:

  • One flat tax rate, with an exemption for the first $40,000-60,000 of income.  This would make sure that the rich in the country would pay the highest amount of taxes, and also the most, which should satisfy the left.
  • Eliminate the corporate income tax, because (a) the corporate income tax ends up being passed on to consumers by way of price increases anyways, (b) the corporate income tax encourages the hiding of corporate income (offshore or otherwise), and (c) eliminating the corporate income tax will make us much more competitive in the world.
  • Eliminate the capital gains tax.  This is the #1 thing that economists say will spur economic growth.  If people don’t have to pay capital gains tax, then they are much more likely to move their money around to new investments.  Even a capital gains tax holiday (shorter-term) would be a big way to stimulate the economy.
  • Implement a consumption tax, with an exemption for basic staple products (food, clothing, etc.).  This would mean that people would pay for what they buy, not for what they save or invest.  This tax would hit the rich much harder than it would the poor and middle class, making this a very progressive tax.

This country needs a reformed tax code, which leads to a better business environment, not a laundry list of government investments that will do little to stimulate the economy.

Questions: Did you watch the president’s speech tonight?  What did you agree/disagree with?

  • http://brocmiddleton.blogspot.com/ Broc Middleton

    President Obama you want us to do what with your jobs bill, I forgot…OH, pass it.  When did you want us to pass it again…OH, now.  I am not sure he hit that point quite hard enough.
     
    President Obama should visit Martha’s Vineyard more often because he has come back a different President.  This speech had a completely different tone and purpose than any speech he has given in the last two years.  It was stronger more aggressive, it was more specific and had a very pointed challenge.  President Obama has positioned himself VERY well on this issue.  He has put himself on “common ground” for job creation.  He put forth a mix of Republican, bipartisan, and Democratic ideas and by establishing himself in the middle it makes it possible for Obama to a win economically or politically. 
    –          Economically, if Republicans support or pass a majority of his proposal, the economy will improve before the 2012 elections and the unemployment rate will go down. Early estimates say unemployment could drop by about 1% if this plan is approved.  That is good for the Economy and good for the American people
    –          Politically, if President Obama doesn’t shoot himself in the foot somehow, this is a win/win.  If Republicans support or pass a majority of his proposal, President Obama will be the ONLY elected official to pass a Job’s Bill.  That is a huge victory for Obama.  If Republicans do NOT support or pass a majority of his proposal, Republicans will be voting against programs and ideas they have historically supported.  Republicans will again look like intransient partisans who put party over the good of the country. 
    President Obama has framed this issue very effectively and I wouldn’t surprise me if we don’t hear any real Republican push back until after the 9/11 weekend.  One because they need to figure out how to counter Obama’s very effective positioning but also out of respect for the upcoming 10 year anniversary.  That was my take on the speech now to address your take….
     
     
    “…The stimulus package of 2009 had a lot of money for infrastructure spending, and it hasn’t helped our economy all that much…”
    Many economist and members of business community have said that everyone underestimated the scope and size of the economic problems created during the Bush years, and have said that the stimulus package was NOT BIG ENOUGH, given how vast and massive the economic problems were.  Secondly “the stimulus” which you give a backhanded slap to was the LARGEST TAX CUT in history.  Republican’s love to bash the stimulus as huge wasteful spending but they always leave out the fact the Republican’s forced more and more of that stimulus package to be tax cuts not actual spending or investment into project or programs that would have created more jobs. 
     
     
    “…Hire more teachers…”
    I agree that our education system needs reform; blindly throwing money at hiring more teaches is not going to solve our problems.  It may help the unemployment numbers but it will not significantly improve our education system.  We need to raise the requirement s needed to be a teacher, we need to raise expectations and pay teachers a lot more money.  Countries with the best education systems (Sweden, Norway) require Master Degrees in the subject they teach. They refer to teachers as nation builders, Teachers are valued, respected and are sought after positions.   If we are going to invest more money in schools it should be in modernizing and updating facilities and classrooms.  Give teachers the environment, equipment and supplies needed to teach more effectively and teach our young people the skills needed in the 21st century. 
     
     
    “…Studies have been done that have shown that people will use their unemployment benefits until they run out, and then they will get a job…”
    Your study was not conduct after the economic collapse of 2008.  So while prior to 2008 when jobs may have actually be available and people may have been turning them down.  That is not the situation now; people are not finding work because jobs are not as available.  Unemployed are not simply going to magically find a job when their benefits run out.  Your study does not apply and nor  does your agreements in this case.
     
    “…there have been numerous programs to help struggling people with their mortgages (under both Republican and Democrat presidents), and all have been underfunded and unsuccessful…”
    Then, let’s get it right this time and NOT underfund the program!
     
    “…It sounded like he will be sending them a crappy bill, and he’s pleading with them to pass it anyways, because it’s a last-ditch effort….”
    Your partisanship is affecting your sense of hearing now too? 
     
     
    Your “bottom line”
    I disagree with just about every point you make about “tax reform” and your analysis of its impact. 

    • http://bobewoldt.com Robert Ewoldt

      Sounds like someone has been watching too much MSNBC… :)

      You say that the president has staked out the “common ground” for job creation, but he really hasn’t. He spent much of his time talking about how the government can spend money to stimulate economic growth, which is a far-left idea.

      He continued to put government in the place of choosing who wins in our economy. The economy is not going to recover if we continue to choose who gets money and who loses.

      Also, you say that the president is in a political win/win situation, which I think is false. Yes, if they pass his bill, he wins, and if they don’t pass his bill, he wins. But, if they come up with a BETTER plan (which, in my opinion, wouldn’t be too hard) and pass it, then he doesn’t win. They could come up with a plan that spends the same amount of money ($447B), and spends it in a way that would stimulate the ENTIRE economy for many years to come. So, politically, I don’t think you’re looking at every scenario.
      There were things that I agreed with in the speech–decreasing some regulation and reforming the corporate tax code. You say that you disagree with my assessment of the tax reforms that are needed, and that puts you to the left of President Obama. President Obama affirmed that the U.S. corporate tax is among the highest in the world, and we need to lower it. I
      agree. I agree with President Obama that the special corporate loopholes
      need to be closed in favor of lowering the overall corporate tax rate, which
      will help ALL American businesses, instead of just a few.

      I would enjoy hearing why you disagree with the other tax reform
      possibilities that I proposed, and why you think they are the wrong steps to
      take.

      One more thing… while there is some merit to the president’s “tax cuts,”
      most of them come in the form of tax credits, which is also prejudicial to
      certain companies. So, rather than helping everyone, the president would
      like for us to make the tax code MORE complex, instead of leaving money with
      ALL companies to spend as they please.

      • http://brocmiddleton.blogspot.com/ Broc Middleton

        Too much MSNBC… Maybe too much CNN (so says my wife) but the only show I consistently watch on MSNBC is “Morning Joe”.  It is hands down the best political morning show.  Fox News and CNN is more pop culture, US and World Events.  Morning Joe is much more focused on political issues.

        Just so we are both clear, do you agree that the stimulus package was the LARGEST TAX CUT in American history?
         
        As I stated before his proposal was a mix of Republican, bipartisan and Democratic ideas… Yes there are aspects of democratic ideas but also programs that are traditional Republican, and bipartisan.  If Republicans want to put forth a Jobs Bill now to “counter” the Presidents plans that would be GREAT.  Since no elected official in the White House or Congress has put forth a real jobs plan to this point.  Everyone wants to talk job but ZERO legislation has gotten any traction.  Obama’s will be the first real Job proposal to get voted on.  However even if Republicans put forth a plan now it will be in response to Obama’s job plan, Obama has gotten the ball rolling FINALLY on actual jobs legislation.  Before now both sides were just doing a lot of lip service to the American people with no follow through. 
         
        Y our tax reform ideas
        –          Flat tax , I made an assumption that your tax rate for this “flat tax” would be somewhere around 25-28%, if that was in error let me know.  I disagree with this because it is incomplete.  What is the tax rate for those under $60,000? What about families who make less that $40,000?  More information required.
        –          Eliminate corporate tax rates, if you had said LOWER the tax rate and get rid of loop holes so that all business are on a level playing field and some business do not get a advantage over others I would be on board with that but you didn’t. You said ELIMINATE, this is a terrible idea.  So really I am not left of Obama. Businesses here in America take more advantage of the natural resources, legal system, safe borders and many other things more than people and citizens who pay taxes.  If business want to setup shop here they should have to invest in the government which makes it possible for them to operate (don’t give me that line that they do contribute by hiring workers..blah blah blah they hire workers because they need to lets not pretend corporations are doing us a favor by providing jobs.)
        –          Eliminate capital gains tax, no I say raise the capital gains tax rate.  Many investors and Wall-street types receive all of their income from capital gains and its tax rates is lower than the income tax rate. IE the famous example that Obama even uses now that Warren Buffet pays less in taxes than his secretary. No make the capital gains tax equal to the income tax or corporate tax rates. 
        –          Consumption Tax, again there is too much unknown here. What would be taxed, what would not be taxed?  I would need to see more details before signing on to a consumption tax. 

        • http://bobewoldt.com Robert Ewoldt

          So you’re not against my ideas, you’re only against them in theory?

          Why tax corporations instead of the people that make up the corporation? The corporate tax is, in essence, double taxation. You’re taxing people when they make money (income tax), when they spend money (sales tax), when they save money (capital gains tax), and when they invest money (corporate tax). If you want businesses to grow and hire people, then you need to lower the capital gains and corporate taxes. At least President Obama is acknowledging that the high corporate tax in the U.S. is hindering us from being competitive in the world. You want us to RAISE the capital gains tax, which would make us LESS competitive! Where are you getting that from?

          • http://brocmiddleton.blogspot.com/ Broc Middleton

            I can not agree with some of your ideas because there is too much unknown. 
             
            “…Why tax corporations instead of the people that make up the corporation?”
            Didn’t you hear…. The Supreme Court says corporations are people too…so let’s tax them like they are people….OH SNAP!!!

    • http://bobewoldt.com Robert Ewoldt

      Re: Unemployment Benefits – Harvard economics professor Robert Barro says this: “The unemployment-insurance program involves a balance between compassion—providing for persons temporarily without work—and efficiency. The loss in efficiency results partly because the program subsidizes unemployment, causing insufficient job-search, job-acceptance and levels of employment. A further inefficiency concerns the distortions from the increases in taxes required to pay for the program.”

      • http://brocmiddleton.blogspot.com/ Broc Middleton

        Ya that Harvard guy sounds like an idiot…LOL.  Like I said before in a different job enviroment,I might agree with you, but in our current job climate that is simply not accurate. 

        • http://bobewoldt.com Robert Ewoldt

          I don’t think you can say that the job environment is substantially different today than it was any other time that we’ve had 9% unemployment. If so, I’d like to know how.

          • http://brocmiddleton.blogspot.com/ Broc Middleton

            This recovery has been VERY different than others in the aspect that Wall-Street and Corporations have recovered however JOBS are not being produced…hence the term “jobless recovery.” This is dramatically different than other historical periods.

  • http://brocmiddleton.blogspot.com/ Broc Middleton

    It looks like President Obama and I are on the same page when it comes to capital gains taxes, he stated in his speech on 9-19-11.  http://video.foxnews.com/v/1168093763001/obama-us-cant-cut-our-way-out-of-budget-crisis/ 

    Obama is going after that “balanced approach” again…watch the Republicans shout class warfare while at the same time shouting for cuts to government assistance programs designed to help the poor. 

    • http://brocmiddleton.blogspot.com/ Broc Middleton

      You can not balance the budget with just spending cuts without dramatic effects to social programs and you can not balance the budget with just tax increases.  The sooner BOTH parties admit this FACT, the better off our country will be.