Amusingly, the plan is overweight tax cuts in an attempt to get Republican buy-ins.
Let's dissect portions of Obama's speech, lie by lie.
Obama: I am sending this Congress a plan that you should pass right away. It’s called the American Jobs Act. There should be nothing controversial about this piece of legislation.
Mish: That is lie #1. There shouldn't be anything controversial about the proposal, but there is. Obama's proposal is primarily an election stunt as opposed to a genuine effort to produce jobs.
Obama: Everything in here is the kind of proposal that’s been supported by both Democrats and Republicans – including many who sit here tonight.
Mish: That is lie number two. There is no general consensus by Democrats for tax cuts or Republicans for fiscal stimulus.
Obama: And everything in this bill will be paid for. Everything.
Mish: That is lie number 3. I will cut the president some slack and call those sentences one lie repeated rather than two lies. Obama's stimulus plan is nothing but another spend now, make cuts later "sleight-of-hand" proposal.
Obama: The purpose of the American Jobs Act is simple: to put more people back to work and more money in the pockets of those who are working. It will create more jobs for construction workers, more jobs for teachers, more jobs for veterans, and more jobs for the long-term unemployed. It will provide a tax break for companies who hire new workers, and it will cut payroll taxes in half for every working American and every small business. It will provide a jolt to an economy that has stalled, and give companies confidence that if they invest and hire, there will be customers for their products and services.
Mish: That is lie number 4. The primary purpose of the American Jobs Act is simple: To keep one person (namely President Obama), in his job.
Payroll tax cuts to businesses will not spur hiring. The idea is sheer lunacy. Businesses will hire only when it makes economic sense, not because of a reduction in employer social security taxes.
Obama: Pass this jobs bill, and we can put people to work rebuilding America. Everyone here knows that we have badly decaying roads and bridges all over this country. Our highways are clogged with traffic. Our skies are the most congested in the world.
Mish: Putting people to work will un-congest the skies? Is that lie number 5 or just complete silliness? High speed trains are not going to replace a significant amount of air traffic, nor will such programs be economically viable. Instead they will be a long-term drain on taxpayers. Moreover, if the president did any homework he would know China's high speed rail program is rife with fraud and shoddy workmanship, was overbudget, is falling apart, and is barely used. It was not economically viable.
Obama: The American Jobs Act will repair and modernize at least 35,000 schools. It will put people to work right now fixing roofs and windows; installing science labs and high-speed internet in classrooms all across this country.
Mish: Excuse me for asking, but didn't we pay for this already in the first stimulus plan?
Obama: And to make sure the money is properly spent and for good purposes, we’re building on reforms we’ve already put in place. No more earmarks. No more boondoggles. No more bridges to nowhere. We’re cutting the red tape that prevents some of these projects from getting started as quickly as possible. And we’ll set up an independent fund to attract private dollars and issue loans based on two criteria: how badly a construction project is needed and how much good it would do for the economy.
Mish: Will it be the same geniuses who were responsible for guaranteeing $535 million to a solar energy firm that is now bankrupt?
Obama: Pass this jobs bill, and thousands of teachers in every state will go back to work. These are the men and women charged with preparing our children for a world where the competition has never been tougher. But while they’re adding teachers in places like South Korea, we’re laying them off in droves. It’s unfair to our kids. It undermines their future and ours. And it has to stop. Pass this jobs bill, and put our teachers back in the classroom where they belong.
Mish: I have a better idea. Cut union pay and benefits and even more teachers will go back to work and at no expense to taxpayers.
Obama: The agreement we passed in July will cut government spending by about $1 trillion over the next ten years. It also charges this Congress to come up with an additional $1.5 trillion in savings by Christmas. Tonight, I’m asking you to increase that amount so that it covers the full cost of the American Jobs Act. And a week from Monday, I’ll be releasing a more ambitious deficit plan – a plan that will not only cover the cost of this jobs bill, but stabilize our debt in the long run.
Mish: Neither the president nor Congress has remotely done anything to stabilize the debt. In spite of promises, Obama will not do so a week from Monday. We will graciously call this lie number 6.
Obama: By eliminating pages of loopholes and deductions, we can lower one of the highest corporate tax rates in the world. Our tax code shouldn’t give an advantage to companies that can afford the best-connected lobbyists. It should give an advantage to companies that invest and create jobs here in America.
Mish: Hooray! The president finally put together an entire paragraph that makes sense.
Obama: And on all of our efforts to strengthen competitiveness, we need to look for ways to work side-by-side with America’s businesses. That’s why I’ve brought together a Jobs Council of leaders from different industries who are developing a wide range of new ideas to help companies grow and create jobs.
Mish: You do not need a jobs council. All you need to do is scrap Davis-bacon, kill prevailing wage laws, and pass a national right-to-work law.
Obama: I reject the idea that we have to strip away collective bargaining rights to compete in a global economy. We shouldn’t be in a race to the bottom, where we try to offer the cheapest labor and the worst pollution standards. America should be in a race to the top. And I believe that’s a race we can win.
Mish: While it is true we do not need to have the worst pollution standards in the world, but the president lumps all of these things together as if it is one big idea. When it comes to collective bargaining the president rejects common sense.
The US cannot afford a $447 billion boondoggle that will create zero lasting jobs, for no other purpose than to get the president reelected. If Congress has any sense, this proposal will be Dead-on-Arrival in the US house.
As an alternative, and as proposed previously in Bernanke's Waterloo; Midst of Deflationary Collapse or Brink of Inflationary Disaster? 12 Specific Recommendations here is an alternative set of stimulus proposals that will not cost a dime.
The basis for the following set of ideas is that throwing money at problems never solves a thing. We must first fix numerous structural problems immediately if there is any hope for this economy.
Twelve Specific Recommendations
- Banks and bondholders should take a hit. Banks are not going to lend anyway so bailing them out at the expense of taxpayers is both morally and economically stupid. End the bailouts, all of them, and prosecute fraud, the higher up the better.
- Implement serious bank reform now, not 9 years from now. Banks should be banks, not hedge funds. This proposal will necessitate breaking up banks. So be it.
- Scrap Davis-Bacon and all prevailing wage laws. Such laws drive up costs and have wreaked havoc on many cities and municipalities, now bankrupt or on the verge of bankruptcy.
- Pass national right-to-work laws. Once again, we need to reduce costs on businesses and local governments to spur more hiring and reduce costs.
- End collective bargaining rights of all public unions. The goal of unions is to provide the least service for the most money. The goal of government should be to provide the most services for the least money.
- Scrap ethanol policy and end all tariffs.
- Legalize hemp and tax it. Prison costs will go down, tax revenue will grow, and biofuel and fiber research will expand as hemp produces very soft fibers.
- Corporate income tax rates should be lower in the US than abroad. Current policy encourages capital flight and jobs flight via lower tax rates on profits overseas than in the united states. This penalizes businesses that work only in the US, especially small businesses that do not have an army of lawyers and lobbyists.
- Stop the wars and set a plan to bring home all US troops from Iraq, Afghanistan, and 140 or so other countries.The US can no longer afford to be the world's policeman.
- Implement Paul Ryan's Medicare voucher proposal. It is the only way so far that anyone has proposed that puts much needed consumer "skin-in-the-game" that will reduce medical costs.
- Legalize drug imports from Canada
- End the Fed and fractional reserve lending. Both have led to boom-bust cycles of ever-increasing amplitude.
Notice how counterproductive Fed policy is and how counterproductive Obama's policies are.
The Fed wants positive inflation but businesses have not been able to pass the costs on. Instead, companies outsource to China. Those on fixed income get hammered.
Obama wants to create jobs via stimulus measures. It's a fool's mission.
Prevailing wages drive up the costs, few are hired, and the cost-per-job (created or saved) is staggering. Money never goes very far because the US overpays every step of the way.
Stimulus plans that do not fix the structural problems are as productive as pissing in the wind. Then when the stimulus dies, which it is guaranteed to do, a mountain of debt remains.
Instead, my 12-point recommendation list will fix numerous structural problems, create lasting jobs, and reduce the deficit. What more can you ask?
Well one more thing: campaign finance reform is needed to stop the vote-buying of unions and corporations alike.
With that, I wish to reiterate "The primary purpose of the 447 billion dollar American Jobs Act is simple: To keep one person (namely President Obama), in his job."
If it works, it will be the most costly price paid per job created-or-saved in history (in more ways than one).
Mike "Mish" Shedlock
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