Obama's Jobs Plan Comes Up Short

Obama revealed today his jobs plan and no surprise, it comes up short.

I. THREE KEY AREAS FOR ACCELERATING JOB GROWTH

1. Helping Small Businesses Expand Investment, Hire Workers and Access Credit

  • Tax cuts to support additional business investment next year – with a particular focus on struggling small businesses – with much of the cost recouped over time.
  • Zero capital gains for small businesses: To encourage investment by small businesses and improve their access to capital, the Administration is calling for a one-year elimination of the tax on capital gains from new investments in small business stock. The Recovery Act allowed a 75% exclusion from capital gains taxes on small business investments.
  • Extension of enhanced expensing provisions for small businesses: The Administration is also calling for the extension through 2010 of the Recovery Act provision that allows small businesses to immediately expense up to $250,000 of qualified investment.
  • Extension of Recovery Act bonus depreciation tax incentive: To give businesses an incentive to invest, the Administration is calling for extending the Recovery Act provision that accelerates the rate at which business can deduct the cost of capital expenditures. This provision will put more than $20 billion in the hands of businesses in 2010, while enabling Treasury to recoup much of the funding as business regain their strength.
  • A new tax cut for small businesses to encourage hiring in 2010. Although the economy is now growing again, many businesses remain reluctant to hire. In this economic environment, an employment tax cut for small businesses has the potential to accelerate the pace of hiring. The Administration believes it is important to provide a short-term tax incentive to encourage small business hiring and support employment, and will work with Congress to design a provision that accomplishes these goals.
  • Eliminating fees and increasing guarantees for small businesses that borrow through major SBA programs in 2010. The President called for the elimination of fees and an increase in guarantees for loans through the Small Business Administration, a measure that extends provisions in the Recovery Act through the end of 2010. In addition, the President called for continued Treasury efforts to use the TARP to support small business lending.

2. Investing in America’s Roads, Bridges and Infrastructure

  • Additional investment in highways, transit, rail, aviation and water. The President is calling for new investments in a wide range of infrastructure, designed to get out the door as quickly as possible while continuing a sustained effort at creating jobs and improving America’s productivity.
  • Support for merit-based infrastructure investment that leverages federal dollars. The Administration supports financing infrastructure investments in new ways, allowing projects to be selected on merit and leveraging money with a combination of grants and loans as was done through the Recovery Act’s TIGER program.

3. Creating Jobs Through Energy Efficiency and Clean Energy Investments

  • New incentives for consumers who invest in energy efficient retrofits in their homes. Smart, targeted investments in energy efficiency can help create jobs while improving our energy security and saving consumers money. The President today called on Congress to consider a new program to provide rebates for consumers who make energy efficiency retrofits. Such a program will harness the power of the private sector to help drive consumers to make cost-saving investments in their homes.
  • Expansion of successful oversubscribed Recovery Act programs to leverage private investment in energy efficiency and create clean energy manufacturing jobs. The Recovery Act included historic investments that have helped to build the foundation for a clean energy economy. The Administration supports expanding programs for which additional federal dollars will leverage private investment and create jobs quickly, such as industrial energy efficiency investments and tax incentives for investing in renewable manufacturing facilities in the U.S.

No direct jobs program, instead, we get....you guessed it tax cuts. Did President Bush cast a spell over the White House that causes the next administration to become possessed and chant the same phrase, tax cuts, tax cuts, tax cuts? See this post on precisely who is haunting the White House.

Instead of a payroll tax holiday we get....a capital gains holiday. How many small businesses in the United States need a capital gains break? But do hedge funds? Sure thing they do. Do start-ups about to go IPO? How about the investors sitting with Pre-IPO stock? Are they classified as small business, yup. Needing modifications in accounting? Small business? I don't think so. Your basic Mom & Pop operations are not about accounting methods, they are about revenues and the need to make hiring cheaper to generate revenues. See any subsidies or tax cuts for direct hires? No.

All we see in terms of a payroll tax holiday is some vague concept to work with Congress. If the administration supports a payroll tax holiday, they would come out and spell it out, spit it out. So while the rhetoric could mean just about anything (as can the keyword change), not presenting a very specific proposal means...well, nothing. They can spell out a zero capital gains, more funneling to the dysfunctional and corrupt SBA, but spell out something specific to generate new hires by the businesses under 500 employees? Hell no.

The blog Manufacture This went out shopping and as reported in past posts on this site, they proved that cash for caulkers will stimulate the economies of China, Mexico and other nations where energy efficient materials are manufactured.

The only thing left is infrastructure projects that have a prayer's chance to generate jobs. The problem is the government is not initiating projects themselves based on macro economic data to enhance the national economy. Nope. They are simply running a grant program and supposedly selecting those that apply based on merit. Obviously we need to visit the TIGER track record to date, to see what counts as merit these days, but in terms of real infrastructure projects, this is about as good as it gets. Did I say we need 10.9 million jobs?

Once again we have initiatives which help foreign manufacturers, pouring U.S. taxpayer funds overseas like a sieve, really do not generate a hell of a lot of jobs and seem to be almost special favors under the guise of helping small business with their stock trades.

Amazing isn't it? We need to generate 10.9 million jobs. Yet studies detailing precisely how to do that are not implemented.

To pay for this the Obama administration will Tap TARP funds. But wait, cash for caulkers is estimated to cost $23 billion. Let's see. I can go out and buy a tube of caulk for a buck. I could give everyone in America a tube of Chinese made caulk for $307 million. Folks, realize, while with autos, some cars made in the U.S. benefited, these were large ticket items, involving some U.S. manufacturing and a host of sales people, dealerships. As the AAM noted, caulk is not the same as cars.

So, we have the same ineffective ideas, odds on favoring special interests, peddled as Stimulus....again.

What is that definition of insanity? Doing the same thing over and over again expecting different results? How about having the same special interests over and over again controlling the U.S. government?

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Comments

I'm sorry I quit smoking.

It really made it difficult to get through the 8 years of the megalomaniacal Bush/Cheny regime. Now we are less than one year into the narcissistic Obama regime, replete with Rubin's Rubes and Rahm's Blue Dogs, and I am really, really looking to get back on the fags soon!

I thought things were bleak and pretty hopeless at the beginning of 2009, but I am actually hoping and even praying (I'm not a religious man) that we experience total friggin' collapse, ... NOW! Before every goddam ounce of wealth is sucked out of us peons in the lower 98% of the population. We are experiencing the willful and intentional raping of the vast majority of the population of this country. Whatever legislation will pass, rest assured, it will only pass if the elite, investor class want it to pass.

It is, and has been, class warfare for a long time. The collective ignorance and gullibility of the majority of the citizens of this country is appalling. Endangered species would present more push back than we are seeing.

Smoke 'em if you've got 'em.

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Gez

Well, firstly congratulations on the quitting deal and secondly, my response to these sorts of things is "when it's fucked don't help the bastards out by fucking yourself".

Seriously. There are way better things to do, say go on a very cheap road trip than react to this beyond believe middle class screw job than self-destructive actions.

Besides you know you won't have health insurance if you get sick from the consequences. ;)

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I guess bold leadership wasn't part of the plan.

"Change" means not preserving the status quo. I don't understand how tax credits help if there is still NO demand or reason for employers to hire people.

Some are saying he is doing the best he can with this congress. But a little leadership would help.

RebelCapitalist.com - Financial Information for the Rest of Us.

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I was just going to say the same thing

Business owners I know have said two dilemmas are on their plate:

1) Demand for their product or service is low right now

2) They don't know what their costs will be with regards to legislation that is being proposed (Cap 'n' Trade for example).

Really demand-side economics and supply-side compliment each other, yet folks argue one or the other. For the record, "supply side" is really just a political toy came up with by a conservative by the name of Jude Wanniski. That isn't to say tax cuts/credits wouldn't help. They would...WHEN THE TIME IS RIGHT. At this point, folks are more worried about making rent/mortgage and/or looking for a job.

But businesses, at this point are playing a guessing game. I got a friend, her name is Debra and she runs a laminating firm in Skokie. She's wondering if he she has to hire an environmental specialist for carbon credits or something. Her business is dying, and she's been offered to get her product made in Asia but refuses to do so (she's an ardent nationalist). She's also struggling to provide health insurance for many of her workers, and wonders now what's the deal with the health bill being talked about. I can tell you right now she isn't holiday shopping nor are many of her workers.

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Hey JV!

Glad to see you comment. Can you change your account email address for your old one is dead city and I've lost the new one.

I whole heartily agree with this and glad to see Demand side econ spelled out more clearly. This is exactly the point, people need jobs, businesses need revenues, people need income to go out and buy things from other businesses.

I forgot also to mention the absurd tight credit to small business. They aren't doing much it appears on that front either.

Frankly some of this sounds like someone has household chores they never got around to, like home repair and thought somehow that would make a nice jobs program.

Unreal.

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A dose of reality for the O-man.

First, the administration is completely losing it's credibility with the populace. The latest Gallup poll shows Obama's approval rating is down to 47%.

And then there is the Chart of the Day.

Global trade with the US was down 9% in November.

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That's it!

Are they truly trying to totally discredit Keynesian economics? Again, small businesses are low on cash and have no access to credit - how the fuck are they going to hire anyone and have enough for capital expenditures.

RebelCapitalist.com - Financial Information for the Rest of Us.

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what I liked about the AAM proposal

is in their multipliers they describe assumptions. Those are hire Americans and buy Americans and this does conform to Keynesian economics, to keep temporary government expenditures within the domestic economy to be stimulated.

Even better, they analyzed projects based on their final contribution to national GDP and that includes the efficiency improvements obtained by select infrastructure projects.

It's also clear, from the GAO, CBO, private analysis, that tax cuts do not give as much "bang for the buck" but to me
the real issue is once again, these "plans" are skewed towards larger multi-million dollar businesses.

10.9 million jobs is massive.

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As a former small businessman...

I think I can shed some light on the "small business mindset," having been a small business that sold out in 2007 (while we were profitable):

1. The previous comments about the uselessness of a cap gains tax are right. I was happy to sell for about what we had into the business (a farm - about a a mil and a quarter$$ investment in land, equipment and crops). We could see the real estate mess coming up fast, as well as future instability in fuel and fertilizer prices.

2. Cuts in the payroll tax would have helped... but without a better explanation of when they would be withdrawn and how much warning we'd have, it probably would not have induced us to hire any additional people.

3. What most people here (and I'm sure most people in the Obama administration) completely miss is that small (< 100 employee and especially < 50 employee) businesses don't have a crack team of lawyers and CPA's to unravel regulatory changes to allow management to plan how to respond to them. No, there's just the folks who started the business, most of the time they're not MBA's, they're just people with a good dose of common business sense. They don't have time to wade through more than perhaps one large change of assumptions to their business model per year.

Since 2007, here's what many small businesses have to cope with in the way of changes:

- all assumptions about fuel prices (and more importantly) the stability of fuel prices are now gone. In the ag sector, small businesses live in fear of the next fuel price shock, and many smaller businesses in the ag and transport sector will not survive the next fuel price spike. Also, inputs that spike when fuel prices spike (eg, fertilizers, petro-based chemicals) or when commodities spike (metal inputs) as well as power, natural gas and other energy inputs - small businesses are not big enough users to allow them to create a cost-effective hedging program, and they typically don't have their pricing set up as "cost+margin+fuel surcharges" the way many large businesses have now.

Want to really help small businesses? Stabilize the price of diesel fuel going forward for the next five years.

- no one is explaining (or even attempting to explain) what the impact of "health care reform" will be on small businesses. So businesses aren't in a hiring mood until they see what the real impact of this is going to be on them.

- no one is attempting to explain (or mitigate) increases in costs as a result of Congress effecting some form of "climate change" legislation.

- small business credit is very difficult to come by, even if you have been profitable for the last five years, even if you have clean books. The general rule of thumb now is this: if you need a loan, you won't get a loan. If you really don't need a loan, they might give you a loan. And if your collateral is land or real estate, fuggetaboutit.

Now, in this environment, the small business is supposed to not only continue his/her business, but expand and *hire* people.

Riiiight.

We'll get right on that.

What did help (a bit) over the last 10 years was the increase in the Section 179 deduction. It would be useful to allow businesses to accelerate their depreciation of some items. For example, if Congress wanted to accelerate the uptake of newer truck emissions requirements, allowing buyers of heavy trucks (I'm not talking pickups here people, I'm talking about Peterbilts) to write the entire expense of a new tractor or a engine replacement off in one year would be a smart thing. The increase in Sec. 179 deductions resulted in a big flush of orders in the ag sector for things like irrigation equipment and other equipment improvements. If we wanted to target certain sectors, then we could target the deductions to certain sectors and certain capital expenditures - with a generic description that benefits US-based manufacturing businesses first and foremost.

Lastly, tell Congress to quit playing with the income tax system. Just leave it alone. When Congress gets into these stupid games every year or every other year, it drives small business up a wall. I really didn't care exactly what the tax rate was, as long as it wasn't confiscatory. 35 vs. 39% at the top end, or 33 vs 35% in the middle? Not my biggest worry. I want Congress more than anything else to simply STFU and quit meddling with it, so that I can plan from one year to the next, because again, there's no crack team of CPA's and tax lawyers on my staff to do this stuff for me. There's just me, and every hour I spend responding to regulation and tax changes is another hour I'm not doing business or making money.

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