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.
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.
- 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.
- 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.
- 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.
- 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?
