Exploring The Obama Jobs Deficit
Investor's Business Daily,
Mar 8 -
After crunching the numbers, the Heritage Foundation found the
economy actually lost fewer jobs — 48 million — during the first six
months of this recession than during the milder downturn in 2001, when
50 million were shed.
So why is unemployment so much higher now? A dearth of job creation.
Through the first two quarters of 2009, the economy created just 40
million jobs vs. the 47 million it created two quarters into the 2001
recession. Now, eight months into a recovery, the economy still isn't
adding positions. In fact, it has lost an additional 1.1 million jobs —
including 36,000 last month — despite a rebound in gross domestic
product growth.
A huge share of the unemployed has been out of work for more than a
year. Minorities have been hit hardest, with the jobless rate for young
black men climbing to a record high.
What's the deal? No entrepreneurial incentives — namely,
across-the-board cuts in marginal tax rates, which fueled hiring in last
decade's recovery as well as the one in the 1980s. Worse, President
Obama plans to raise taxes on the entrepreneurial class.
Studies show cuts in individual tax rates encourage new business
startups, the catalyst for job creation. And there's nothing now to
incentivize existing small businesses to create jobs.
According to the Census Bureau, average yearly employment from
startups accounted for 3% of total employment from 1980-2005. Without
the new business formed during that period, employment growth would have
been negative. This recovery has favored big companies, while small
businesses are still not expanding — and most Americans work for small
businesses.
Even the corporate job gains are weak. Big firms are cautious about
hiring because of uncertainty over new government red tape and corporate
tax policy. Obama wants to make U.S. corporations pay taxes on all
their income abroad, whether or not they repatriated it. Already, some
corporations with foreign operations reportedly are drawing up plans to
turn themselves into foreign companies with U.S. operations.
Changing tax treatment on foreign revenues could drive multinational
corporations — and the jobs they create — permanently out of the
country.
For the first time, the U.S. is facing European-style structural
unemployment, which could dry up consumer spending and tip the
consumer-driven economy into another recession. So far the economy has
lost a net 8.4 million jobs from this recession. If lost permanently,
the housing market may never fully recover, making it harder for the
economy to sustain a recovery.
Without home-price appreciation, we won't see the kind of mortgage
equity withdrawals that helped fuel consumer spending in previous
recoveries. And without strong consumer spending, something like a tax
hike could easily lead to a double-dip recession.
The president is preparing vast new taxes, including raising the top
individual rate to 45% from the current 35% with a 5.4% surcharge, plus
the expiration of the Bush tax cuts. These tax hikes will hit small
businesses especially hard.
Instead of holding an "entrepreneurship summit" for Muslims, like the
one the White House announced last week to build economic ties with the
Islamic world, the president should hold one in America so our
entrepreneurs can tell him what it takes to start businesses and put
people back to work here.
Online: Investor's Business Daily
