“If by a "Liberal" they mean someone who looks ahead and not behind, someone who welcomes new ideas without rigid reactions, someone who cares about the welfare of the people-their health, their housing, their schools, their jobs, their civil rights and their civil liberties-someone who believes we can break through the stalemate and suspicions that grip us in our policies abroad, if that is what they mean by a "Liberal", then I'm proud to say I'm a "Liberal.”
John F. Kennedy, Profiles in Courage

Poverty in America

Robert Reich Explains the Economy

Tea Party Pubic Service Announcement

September 14, 2011

The No (or not so many) Jobs Jobs Bill

In his speech to the joint session of Congress on September 8, President Obama proposed the American Jobs Act,  designed to be his answer to the stalled economy and high unemployment.  The $447 billion bill relies heavily on tax cuts as a way of stimulating the economy by putting more money in the hands of consumers and encouraging employers to create jobs.  This, in spite of the fact that there is no empirical, historical evidence that tax cuts create jobs.  In reality if you follow the arc of tax cuts starting with Reaganomics and the small government fervor of the 1980’s, through the Bush-error tax cuts, in reality it would appear that tax cuts have a negative impact on the economy.
The costliest cut proposed is a fifty per cent reduction in the payroll tax.  By calling this a payroll tax cut,  the President is obfuscating the fact that in realty it is a Social Security payroll tax cut.  The President is proposing that the 6.2% Social Security payroll tax paid by employers and employees be halved to 3.1% costing an estimated $240 billion.  The idea behind this cut is to put more money into the economy so that small businesses can hire new workers and current workers will have more cash to spend, thereby stimulating the economy.  The average worker will realize a payroll tax reduction of approximately $1,500.  While this is not an insignificant amount to put into someone’s pocket, it will do little to change an individual’s economic circumstances.  First, $1,500 translates to less than $30 per week or $120 per month.  Most people with an extra $120 per month will use it towards offsetting the high gasoline costs, paying down their credit card bills or helping to pay their mortgage or rent.  Not one of these options contributes to creating one single new job.  Instead it will increase the demand for gasoline thereby helping to maintain high gas prices or go directly to the banks and help fund even larger bonuses for executives.
The bigger issue that the President does not address, and which has been entirely ignored by the media, is that this $240 billion cut will further strangle the Social Security trust fund.  This is a Democratic president hammering another nail into the coffin of Social Security.  Even the Republicans have criticized their leading presidential contender for suggesting that Social Security would need to be done away with.  How can the President justify reducing the income of Social Security by $240 billion while it is agreed by all analysts that the trust fund needs to be shored up to provide for the long-term viability of the program and ensuring benefits for today’s workers?  The system requires additional inputs of cash, not less.  In 1955 there were 8.6 workers paying into the system for each retiree receiving benefits, while in 2010 there were less than three.  As the baby boom generation marches toward retirement, this ratio will continue to decrease.  Additionally, as older workers are laid off and are unable to find new jobs, they will file for Social Security earlier creating more of a drain on the system.
According to the President’s proposal a quarter of a trillion dollars will be taken from the system at a time when we should be looking at ways to increase the money going into the Social security trust fund, not reducing it.  While this cut will have little or no impact on job creation, it will move the crisis of Social Security up a number of years resulting in cuts to benefits and raising the retirement age.  While the President seeks to solve one crisis, he is exacerbating another.
The president has also proposed tax credits to companies that hire certain unemployed individuals.  Companies hiring a person who has been unemployed for six months or more can qualify for a $4,000 tax credit and companies hiring an unemployed veteran  can qualify for a $9,600 tax credit.  Just like tax cuts, tax credits do not create jobs.  All these credits will do is determine who gets hired when a  job is available.  The tax credits will flow to companies that would be offering jobs anyway.  These will not necessarily be new jobs.  In order for a company to create a job, there needs to be work .  If the economy remains stagnant, and consumer demand remains low, then regardless of tax credits, new jobs will not be created.  So these tax credits will not result in any net increase in employment.  And the President does not address what happens to those jobs once the tax credit expires.  Is he just creating a vicious cycle of short-term employment? 
By referring to his American Jobs Act as a bi-partisan bill that includes both Republican and Democratic initiatives, the president has proposed a bill designed to win Republican support through its heavy reliance on tax cuts.  These tax cuts make up approximately 59% of the cost of the bill, with only 41% targeting government spending that will actually impact unemployment.  There is a simple fact of life, government spending on big projects, such as those proposed only modestly in this bill – modernizing up to 35,000 schools and infrastructure investments – and not tax cuts put people back to work.  Employed people spend money and pay taxes, and that is what impacts a recession.  The only institution large enough and broad enough to help the country spend its way out of this economic slump is the United States Government.
It does not take Nostradamus to predict the outcome of this legislative process.  The Republican controlled House will support portions of the bill, those that focus on tax cuts, while defeating the spending portions of the bill including saving the jobs of teachers, cops and firefighters, extending unemployment and providing low cost mortgage refinancing.  Furthermore, the Republicans in the House will defeat any attempt by the President to offset the cost of this bill through closing tax loopholes for big business and raising taxes on the wealthiest Americans.  Once again the Republicans will show that they are the shills of the truly wealthy and of corporate America, and once again the Democrats will show that they have no backbone as a party.  The goal of the Republicans is to stop the President from a second term in office, and nothing guarantees that more than a sagging economy. 

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