October 20, 2011

This week, the president traveled across battleground states to pitch yet another stimulus spending proposal. Undaunted by the pesky fact that each of his previous stimulus policies has failed to break the worst unemployment crisis since the Great Depression, the president has been persistent in his calls for record spending, record debt, record tax increases, and record uncertainty for American small businesses who have created 64 percent of all new jobs over the past 15 years.

 

SUMMARY OF THE NEW STIMULUS PROPOSAL

President Obama has proposed consideration of his so-called “American Jobs Act” incrementally, beginning with $35 billion in temporary stimulus spending to supplant local and state funding for education and first responders. Based on the White House summary of the president’s plan, the bill would appropriate $30 billion to provide grants to pay teachers. The president’s plan would require participating states to maintain support for early childhood, elementary, and secondary education and public institutions of higher education at the same level of support as the previous fiscal year or higher, effectively prohibiting reforms to state education spending. The bill would also provide $5 billion for competitive grants to states to prevent layoffs and pay for the hiring of law enforcement officers and other first responders. To offset the temporary spending, the proposal would contain a 0.5 percent permanent tax increase on Americans earning $1 million or more annually.

 

KEY CONCERNS WITH NEW STIMULUS SPENDING

Permanent Tax Increases in Exchange for Temporary Stimulus: Once again, the Obama Administration and Senate Democrats are proposing to offset a temporary stimulus with a permanent tax increase that will cost private sector jobs for years to come. The proposal would impose a 0.5 percent permanent tax increase on Americans earning $1 million or more annually. According to the Department of Treasury, 41 percent of all business income reported on individual returns would be hit by the surtax. At a time when uncertainty is the most significant business issue facing job creators, threats of looming tax increases do nothing but exacerbate the unemployment crisis.

These Costly Policies Have Already Failed… Twice:  Spending billions on temporary stimulus sweeteners is nothing new for the president. The president’s original $1.2 trillion stimulus (P.L. 111-5) included $53.6 billion in “State Fiscal Stabilization” to supplant state and local education spending and an additional $44.6 billion in miscellaneous Department of Education spending. In 2010, Democrats again approved $10 billion in so-called “teacher-jobs” spending (P.L. 111-226).  Despite all this spending for local governments, combined with the “private sector job growth” touted by the president, the unemployment rate remains 9.1 percent and our nation is mired in the worst unemployment crisis since the Great Depression.

Temporary Spending?:  According to the Department of Education, the $53.6 billion teacher funding in the original stimulus was a “one-time appropriation” meant as “a historic infusion of funds that is expected to be temporary.” On July 1, 2009, President Obama stated that the temporary funding had accomplished its goals.  He said, “The Recovery Act [stimulus plan] was designed to make sure that local school districts didn’t layoff teachers and firefighters and police officers, and it’s done its job.” Just one year later, on August 6, 2010, then-Speaker Pelosi came back for another round of stimulus. She stated, “Democrats will return next week to save or create hundreds of thousands of jobs for our teachers, nurses, firefighters and police officers,” even though the president said the temporary spending had achieved its goal. With Democrats out of ideas to spur job creation, it seems they’ve decided to make failed stimulus spending a permanent policy platform. Instead of another stimulus spending sugar high, what America needs is steady, private-sector growth that will create jobs for the country’s 14 million unemployed.

Making Matters Worse: Numerous reports have suggested that Democrat stimulus spending has actually deterred economic growth and job creation.  In May 2011, a study was released by Ohio State University which found that the President’s failed stimulus “destroyed/forestalled roughly one million private sector jobs.” The full study concludes that the actual impact of the $1.2 trillion “stimulus” was a net job loss of 550,000.  In addition, researchers at Harvard Business School released a study in May, 2010, which “suggests that federal spending in states appears to cause local businesses to cut back rather than grow.”  In any event, this new proposal is assured to do almost nothing for the 14 million unemployed Americans looking for a job. According to the National Federation of Independent Businesses, a small business association with 350,000 members nationwide, “For those who are unemployed, the President’s jobs program will be very ineffective if enacted.” Rather than working with Republicans on solutions to facilitate job creation, the president wants more taxes and failed stimulus which would, at its very best, maintain the unacceptable status quo. 

More Deceptive “Saved or Created” Claims:  In early 2009 the White House famously predicted the $1.2 trillion stimulus bill would keep unemployment below 8 percent and “save or create at least 3 million jobs by the end of 2010.” In reality, From March 2009 (the month after the failed $1.2 trillion “stimulus” was enacted) through September 2011, unemployment averaged 9.4 percent. The problem is that the White House pre-determines the impact of government stimulus spending by plugging numbers into a Keynesian “multiplier model” which simply multiplies the amount of dollars spent by the number of jobs the administration thinks the money should produce. The “saved or created” metric was so deceptive and problematic the White House quietly abandoned it in late 2009. It seems, however, that the Obama Administration is back to its same old tricks.  As FactCheck.org reported this week, the president has already begun exaggerating the estimates on how many jobs this new proposal could save.

 

REPUBLICANS OFFER PRO-GROWTH PROPOSALS SUPPORTED BY BOTH PARTIES

While the president continues to push for more of the same failed short-term “stimulus” policies, the House is taking action on pro-growth proposals supported by both parties. Unlike the president and Congressional Democrats, House Republicans will not replicate failed stimulus spending policies and expect different results.  House Republicans have a Plan for America’s Job Creators that will reduce government red tape and provide lasting certainty for job creators so they can put Americans back to work. House Republicans have and will continue to send pro-growth legislation to the stagnant Senate. Republicans are listening to job creators, moving bills to create jobs, and reaching out to the president with ideas to grow the economy.

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