Switching Gears and Talking About Obama's Jobs Plan

He had to do something.

With his approval rating plummeting and his popularity only marginally higher than that of Congress, our President had to offer a bold solution for the nation’s unemployment problem.

Was it too little, too late?  Would it be a non-starter for the GOP?  Did he open the negotiation with too much compromise?  Will the resulting legislation – if it gets passed at all – produce the desired effect of putting Americans back to work?  These are all questions for the TV talking heads to answer while they shout over each other and frighten and frustrate the rest of us.

Meanwhile, you hear the tired refrain “the government cannot create jobs – it can only create an environment conducive to job creation”.  One party believes this can only be accomplished by cutting taxes and rolling back regulations.  If Obama’s proposal doesn’t work, it will be because taxes weren’t low enough and there were still too many regulations.

But are these really the reasons why the private sector isn’t hiring?

When I ran a small business, we knew if we wanted to grow and generate more profit, we needed to increase our revenues while keeping our overhead low.  That’s Business 101.

Our tax burden – a percentage paid to the government based on our profitability – was only a consideration at the end of the year and only if we actually made a profit.  If we had a good year and were sitting on cash, we might invest in a new delivery vehicle or upgrade our computers, taking advantage of accelerated depreciation to wipe profit off the books.  If we were concerned about securing a loan for future growth, we had to show a profit and pay our fair share in taxes.

Not once did these year-end tax considerations dissuade us from seeking new revenue.   If we could tap into a new trend, branch off into related products or services to leverage our existing customer base, or take advantage of a competitor’s weakness, we would pursue the opportunity.  If the new tactic showed promise, we would hire personnel to support our efforts.  While complicated in execution, especially when evaluating risk and reward, the concept was actually pretty simple; opportunity precedes expansion.

Right now, America has a shortage of opportunity.  I even heard Ferris Bueller’s teacher (who is now a pundit) say something to this effect on TV last night.

Corporations that are sitting on record amounts of cash are still not hiring.  They took advantage of the economic crisis in late 2008, shed record amounts of workers, and asked remaining workers to do more for less.  While they can afford to hire new employees to take the added burden off their already taxed workforce, why should they?  It’s an employer’s market!  The prevailing attitude is “do what we ask or we can replace you with someone from that long line of applicants waiting outside the door”.

A tax break for hiring new workers is merely the icing on the cake.  Right now, there is no incentive to bake the cake in the first place.  The status quo works for the shareholders.  Their investment is secure.  They are free to risk their capital for bigger returns elsewhere and by elsewhere I mean anywhere in the world except the US.

Herein lies Obama’s jobs problem – a problem that the GOP hopes will make him a one-term President.  He can cut corporate taxes to zero, offer a complete payroll tax holiday on new hires, and even pay every company a bounty for each new job created and it still won’t make a dent in the unemployment rate.  If these new employees can’t be used to support new revenue opportunities – opportunities that don’t exist in the US market – they won’t be hired.  It’s that simple.  And whatever Obama does, his opponents can always say that he didn’t do enough and he’s adding to the deficit that their heroes Reagan and Bush created.

On the positive side, putting more dollars into the hands of American workers through an extended payroll tax holiday may stimulate consumer spending.  Investing in first responders, teachers, schools, and infrastructure offers tangible benefits for today and tomorrow.

As much as we would all like to see unemployment drop back down to 5%, we need to be realistic.  Opportunities exist in high tech innovation and health care.  These fields require extensive math and science education and a more specialized workforce.  Encourage your children to pursue this.

Today, however, we are caught in a transitional period.  Workplace automation is the new reality, forever creating a demand for fewer people.  Manufacturing of low price consumer goods is over.  Construction is on hold indefinitely.  Retail will continue to contract.  Customer service will continue to move overseas.

This paradigm shift is not Obama’s fault and we can’t expect him to wave a magic wand and make it all better overnight.  It was a long time coming.  It will take a long time to correct the course we’re on.

In the meantime, we all need to reject the GOP’s flawed economic theory that will only decrease government revenue and rob taxpayers of needed services like Social Security, Medicare, police, fire, public works, education, environmental and health standards, and infrastructure improvement.  We all need to remember that tax cuts, deregulation, and adherence to Trickle Down Economics lead to the depression that Obama is taxed with fixing.  Just as we will never forget 9/11, we should never forget the Great Recession and the party whose ideology caused it.

If the definition of insanity is doing the same thing over and over and expecting a different result, wouldn’t it be insane to revert back to an economic ideology with a legacy of putting Americans out of work, depleting their retirement savings, and devaluing their homes?

 

Filed under: Politics

Tags: Obama, Politics

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