Too many people who are making the rules have never played in the game.
by Curtis Coleman
We desperately need to create an environment in America that will create millions of new jobs and I will aggressively support a plan that will actually do that, but a stimulus bill by any other name, including “jobs bill”, is still just that – another ineffective debt-growing “stimulus” bill. And the “jobs” stimulus bill now making its way through the Congress is extraordinary proof that too many people who are making the rules have never played in the game. They just don’t get it.
Here’s the essence of the Democrat’s “jobs” bill: businesses will not have to pay their share of the payroll tax (from February 3, 2010 to December 31, 2010) for each new individual hired under the rules of the bill. So, if a business hires someone and pays them $10,000/year, the business will temporarily save roughly $52 a month on the payroll taxes it would have been required to pay. If a business hires someone at an annual salary of $51,000, it will temporarily save roughly $264 a month on the payroll taxes it would have been required to pay.
Now here’s what the folks in D.C. just don’t get. A business will have to spend an additional $10,000+/year to save $52/month, or an additional $51,000+/year to save $264/month! And here’s something else the D.C’ers don’t get: Businesses have to make a profit to survive. And they have to make a profit (either directly or indirectly) because of every employee they hire. So – and here’s the bottom line – if businesses could make a profit by hiring more people they would be doing that anyway!
There are thousands of businesses across Arkansas and America hanging on “by their fingernails”. If we want to risk adding to our exploding national debt by giving them a payroll tax holiday, let’s do it for the employees they have! But if we really want them to prosper and therefore hire new employees, let’s do a no cost jobs-creation plan:
- Permanently extend the 2001 and 2003 tax cuts accompanied by a reduction in size and cost of government.
- Repeal the increasingly invasive and expensive mandates and regulations that add to the high cost of running a business, including elimination of duplicative, over-lapping bureaucratic agencies.
- Eliminate crippling taxes—including capital gains taxes and death taxes – that prevent investors and owners from investing growth capital and creating new jobs.
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Here is a very simple way of understanding the Stimulus: Assume that GDP grows at a rate of 2.5% per year from a starting level of $14300 billions for the next 5 years BECAUSE of Govt stimulus which increases the aggregate demand for goods and services in the economy. The Stimulus was REQUIRED because the aggregate demand was falling off very precipitously. This would start a very dangerous downward spiral forcing the economy to shed lot more jobs than it did so far w/o the timely Stimulus. Then at the end of 5 years, the GDP is at least about 1.125 X of the $14300 = $16087. The difference is $1787 billions. Deduct $600 billions out of this. The NET increase is $1187 billions. This is the NET benefit because of the Stimulus ( I am ignoring the compounding effect). The economy could grow stronger than I assumed. But 2.5% a year real GDP growth is very reasonable assumption (inflation is assumed to be internally corrected). Again, it depends on the assumptions you make regarding the future event of GDP growth. People practicing the Dismal Science need to struggle to explain simple math.
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