The news is buzzing with the possibility of the hard-core left rejecting Obama’s cave-in to the GOP on taxes and unemployment benefits. That would really be a stunner as the left would then be savagely attacked for interrupting the unemployment checks and raising everyone’s taxes on Jan. 1st. I would think they will make some noise to get their point across to Obama, but will pass it in the end and not risk the poison fallout from that strategy.
So what did we really get out of the deal if it passes? The preserving of the current tax rates is good for stability. We’ve spent the last year discussing the issue and many individuals and businesses have delayed future plans while awaiting the outcome. But the fact remains, this only keeps things the same on the revenue side and is not the tax cut we need to really spur growth. That may sound counter-intuitive to some, but it’s a proven fact. Reduce tax rates and you will see an increase in overall tax revenue.
Now, the payroll tax reduction of 2% is a legit tax cut. That will allow every taxpayer to keep more of their own money. This is always a good thing. But let’s keep it in context. Say you’re an average Joe making $35,000 per year. You’ve been contributing a little over $40 a week toward social security. For the next year, it will only be a little over $28 a week. While you won’t turn away keeping $12 more of your own money, it won’t make a much of a difference on creating jobs. It will help in that the money will surely be spent and consumer spending will rise as a result. However, the retail sector relies heavily on part-time flexible workers, so this will just result in them getting additional hours to meet the increased demand. So as a new jobs creator, it’s not gonna happen to any significant degree.
What is not promoted is that the Obama “Making work pay” tax credit expires at the end of this year. $400 for a single taxpayer and $800 for a married couple. That’s stimulus funded and gone for 2011, so before anybody gets too excited about the payroll tax credit, remember that is offset by the loss of this credit. The estate tax is also back on the table now going from zero this year to 35% next year for estates over $5 million. Harry Reid wants a $3.5 million threshold. Whatever they end with, it’s a jobs killer. Those rich are very good at tax shelters and will revert back to hiding their income rather than sign it over to Congress to spend.
Then, we have the unemployment extension. The 99’ers have now become the 155’ers. 13 additional months of unemployment for the long-term unemployed will now mean over 3 years available. Just imagine the changes that take place in your life over a three-year period. That’s a long time. The simple fact is that the longer someone goes in the position of relying welfare to get by, the harder it will be to get out of their situation. Their job skills have eroded. New technology may have been introduced in the career field and they have fallen behind. Studies show that it will take a job with wages significantly higher than the benefit check they are receiving to motivate someone to give up the free money and return to work.
Let’s face it, these benefits are a charity issue. We do it out of compassion to our fellow-man. They simply cannot grow the economy and create jobs despite the idiotic claims of the left. They spew out some made-up multiplier effect akin to “saving or creating jobs”. Pure hogwash, but it sounds very scientific and they can sell it to the sheeple. Actually, most people don’t realize we have 3 million job openings unfilled as we speak. That’s direct from the Bureau of Labor Statistics. We may have 15 million unemployed, but getting them matched up with these job openings is not easy.
I don’t oppose what Obama and Congress are attempting to do here. Regardless of intentions and spin, these actions help. Even the unemployment extension. It had to be done. Of course it should come with a corresponding cut somewhere else in the bloated federal budget. But I wouldn’t expect much in the way of saving the economy and getting over 20 million people fully employed. These are token actions in that regard. But let’s not mistake what this is. Parts of it equate to a second stimulus package and they will cost money we don’t have to spend. That is where the GOP is going to have to step in next year and address the spending. And no, I have no confidence they will get it done.
We need drastic measures on revenue and spending. Lord knows there is no end to the capital available for investors. Bernanke is making sure of that with his printing press. Investors need real incentives and long-term, permanent tax reductions to really turn them loose. Drastically cut the corporate tax rate permanently. In fact, cut all tax rates permanently across the board. Capital gains, personal income taxes, payroll taxes, estate taxes, all of them. It’s the only thing that will work to grow the economy. It’s the only thing that will work to actually INCREASE revenue. Most on the left simply can’t comprehend this principle. However, you can be sure that those at the top even on the left know it. Obama, Pelosi, Reid and the rest. They all know it. But they also know it greatly reduces their power and re-electability. They feel the need to control our money and create dependency, that is the left’s formula for success. Bottom line, don’t expect much here in the way of real job growth.
UPDATE: It seems as though the final deal will not include those who have already drawn for 99 weeks, so they will be left out. Gee, I thought that was what the outrage was all about. We’ll have to see the final legislation, but it would appear that the Dems have abandoned this group completely.