Last year Congress moved to reduce the 6.2% FICA taxes for employees to 4%. It was limited for one year, and would expire in December, but is now proposed to be extended through 2012. Obama is also proposing to increase the cut to 3.1%, and additionally do the same for the employers. This is the largest cost component of his plan. So is it effective?
Sept 8, 2011For employers, the proposal would halve the employer’s share of the payroll tax temporarily – to 3.1% from the current 6.2% – on the first $5 million of a firm’s payroll in 2012. About 98% of firms have payrolls of $5 million or less, the White House said in materials distributed before the speech.
In addition, its plan would completely eliminate payroll taxes for firms that increased their payrolls by adding new workers or increasing wages of current workers. That new break would be limited to the first $50 million of a firm’s payroll increases, measured against the prior year.
The basic problem with the belief that this will have an impact on jobs is that it is temporary. No company can depend on factoring this into any long term hiring. And we certainly hope jobs would last more than a few months. Private sector jobs require long term sustained increases in business revenue to be self-sustaining, reducing or eliminating taxes on a job does very little to accomplish that. The short term nature of the tax reduction does not help overcome the uncertainty, or as the markets drop this week might make you think certainty, of not having that long term increased revenue. We need long term sustainable private sector jobs, not temporary.
It appears the belief is that this plan worked so well that we are going to double down on it.
Sept. 13, 2011 “There has been zero evidence that it moved the needle last year, and nothing suggests doing it again, albeit in a larger way, would increase hiring,” said a GOP aide.
At the same time, Republicans may find it hard to vote against a big tax cut, and in the current political climate, lawmakers are wary of doing nothing to address the lack of jobs. That is why some top Republicans are signaling support for renewing the payroll tax cut.
Sep 8, 2011 But with Obama’s re-election prospects hinging on the state of the economy, just how effective could a payroll tax break be in stimulating job growth?
“It won’t be,” said Curtis Dubay, senior tax policy analyst at the Heritage Foundation, a conservative think tank. “Let’s not forget it’s in place right now and the unemployment rate is 9.1 percent.”
Dubay said a better option would be, for example, permanently reducing the corporate tax rate, which is currently the highest in the world.
“Temporary tax measures never spur economic activity because families and businesses don’t make economic decisions based on short term tax breaks,” Dubay said. “When trying to achieve a specific purpose, it has to be done correctly and the payroll holiday is the wrong way.”
The main goal of this is the premise that “putting more money in peoples pockets” for them to spend will spur increased demand for products. More often the use of a single short term infusion of cash is to pay credit card debt or just pocket the savings. Neither is a bad option, its just not the spur they are looking for. Since we have already pulled the income tax trigger, to the point that close to half the people in the US pay no federal income tax, the FICA tax is about the only game left in town. The effect this will have on the already stressed social security system is hard to ignore, even with the protestations from Obama that this will be paid for.
And there's rather a big poison pill for Congress in here: Obama has proposed no pay-for. Or rather, he proposed that Congress figure out how to pay for it:
Obama: "Here's the deal: I take credit for the new spending now; you take credit for making politically unpopular cuts later."
Select committees are turning into the Laffer Curve of the left: every time you want more money to pay for something, assign a committee to make unspecified cuts years in the future.
Republican complaints that the spending will happen and the pay-fors won't aren't unreasonable, and I suspect they'll get some traction with independents.
The unemployment numbers remain at 9.1% (much higher if you consider those who have given up looking), indicating the first shot using the payroll tax wasn’t and thus the double down will probably not be the silver bullet. And since the method for financing this still seems hinged on debt, it does not help on that front either. But then there is the ever popular class warfare approach of "tax the wealthy". Yeah, they'll buy that one!
That the theory of anthropogenic global warming is anything but “settled science” can readily be seen in the various articles and comments about the latest data from a CERN test supporting the theory presented by Dr. Henrik Svensmark, a physicist at the Danish National Space Center in Copenhagen who studies the effects of cosmic rays on cloud formation. Svensmark presented his theory in a very readable book “The Chilling Stars”. He studies a phenomena that is poorly understood, but may be critical to the understanding of temperature variation.
It sounds like a conspiracy theory: 'cosmic rays' from deep space might be creating clouds in Earth's atmosphere and changing the climate. Yet an experiment at CERN, Europe's high-energy physics laboratory near Geneva, Switzerland, is finding tentative evidence for just that.
For years, physicist Henrik Svensmark of the Danish National Space Institute (who has presented at conferences organized by CFACT and EIKE) has been asking inconvenient questions about the relationship between the sun, clouds and climate. He demonstrated in the lab that cosmic rays from the sun affect cloud formation. Cosmic rays are a factor not meaningfully considered in the computer climate models which global warming proponents have declared to be so robust that they are beyond discussion.
To the vexation of true climate believers, Svensmark’s work has been confirmed at CERN, the European Organization for Nuclear Research. CERN is home to the Hadron super conducting super collider near Geneva. CERN simulated the effect of cosmic rays in the earth’s atmosphere and found that it does indeed influence cloud formation.
This is very inconvenient science for the global warming campaigners, researchers and myriad carbon carpetbaggers, all of whose incomes have come to depend on government willingness to accept the authority of climate models as gospel. The more people know about computer climate models, the less they are willing to curtail the freedom and prosperity of the developed world.
Kirkby shares Pierce's caution. He argues that CLOUD's results "say nothing about cosmic-ray effects on clouds" because the aerosols produced in the experiment are far too small to seed clouds. But he adds that the collaboration will have some "interesting new results" to present later this year regarding the role of organic molecules in aerosol formation. "What is needed now to settle this question are precise, quantitative measurements," he adds.
It has been proposed that Earth's climate could be affected by changes in cloudiness caused by variations in the intensity of galactic cosmic rays in the atmosphere. This proposal stems from an observed correlation between cosmic ray intensity and Earth's average cloud cover over the course of one solar cycle. Some scientists question the reliability of the observations, whereas others, who accept them as reliable, suggest that the correlation may be caused by other physical phenomena with decadal periods or by a response to volcanic activity or El Niño
And then there’s that inevitable response by Al Gore, who’s quoting Media Matters as a scientific source.
In another recent development that shows the frequent exaggerations that have made in support of the AGW claims, only now beginning to get serious criticism from traditional media, Harper Collin’s published new ice sheet maps of Greenland.
"These new maps are ridiculously off base, way exaggerated relative to the reality of rapid change in Greenland," said Jeffrey S. Kargel, senior research scientist at the University of Arizona.
The Times Atlas suggested the Greenland ice sheet has lost 300,000 square kilometers in the past 12 years, at a rate of 1.5 percent per year.
However, measurements suggest this rate is at least 10 times faster than in reality, added J. Graham Cogley, Professor of Geography at Trent University, Ontario, Canada.
"It could easily be 20 times too fast and might well be 50 times too fast," he added.
Last year, a U.N. committee of climate scientists came under fire for bungling a forecast of when Himalayan glaciers would thaw.
The panel's 2007 report, the main guide for governments in fighting climate change, included an incorrect projection that all Himalayan glaciers could vanish by 2035, hundreds of years earlier than scientists' projections.
And finally, scientists are becoming more vocal in rebelling against the idea that the science is “settled”, and especially with the APS (American Physical Society), and the distortion to the scientific process that this monolithic conformity creates. This takes enormous courage and motivation, because of the very real threat of ostracism that they face as a result.
Nobel Prize-Winning Physicist Resigns Over Global Warming here and here
September 14, 2011 Giaever explained in his email to APS: "In the APS it is ok to discuss whether the mass of the proton changes over time and how a multi-universe behaves, but the evidence of global warming is incontrovertible? The claim (how can you measure the average temperature of the whole earth for a whole year?) is that the temperature has changed from ~288.0 to ~288.8 degree Kelvin in about 150 years, which (if true) means to me is that the temperature has been amazingly stable, and both human health and happiness have definitely improved in this 'warming' period."
Top Physics Professor Resigns From Post, Denouncing Global Warming "Fraud" here and here
October 13, 2010 In perhaps the biggest critique delivered against the current state of global warming research "consensus", since "climategate" at the University of East Anglia, a renowned physics professor has written a lengthy letter resigning from the American Physical Society and condemning the state of warming research.
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California meteorologist turned blogger Anthony Watts describes it as "a letter on the scale of Martin Luther, nailing his 95 theses to the Wittenburg church door". Whether you agree or disagree with the current state of global warming research, it's hard to argue with that assertion.
Here we have a prominent researcher in one of the primary fields of global warming research -- physics -- putting his reputation on the line to challenge what he feels is clear and present wrongdoing.
Earlier groups had voiced their strong dissent, one example from August 05, 2009
More than 60 prominent German scientists have publicly declared their dissent from man-made global warming fears in an open letter to German Chancellor Angela Merkel. The more than 60 signers of the letter include several United Nations IPCC scientists.
The scientists declared that global warming has become a “pseudo religion” and they noted that rising CO2 has “had no measurable effect” on temperatures. The German scientists, also wrote that the “UN IPCC has lost its scientific credibility.”
How prescient, since the many public evidences were yet to be revealed, Climategate and the fascinating "Harry Readme" file in November, and the AfricaGate and Glaciergate the following January (2010).
So where does the Al Gore promoted myth of near total consensus came from?
What of the claim that “97% of climate scientists believe in AGW”? The origin of this spurious claim is a 2009 online survey of scientists by two University of Illinois professors who claimed to have found that 75 out of 77 climate scientists (yes, only 77 climate scientists!)
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Regarding the sample size … according to Lawrence Solomon, the two researchers who produced the survey deliberately left out solar scientists, space scientists, cosmologists, physicists, meteorologists, and astronomers … all scientists likely to be aware of natural causes of climate change. Only scientists employed by governments or universities were chosen to be surveyed, introducing another source of bias. Of the 10,000 or so scientists left, about 3,000 replied to the 2-minute online survey. No surprise, 82% of that unrepresentative sample answered yes to the ambiguous question. The authors then looked at a subset of just 77 scientists who participated in the survey and were successful in getting more than half their papers accepted by peer-reviewed climate science journals and found that 75 of those answered “yes.” 75/77 = 97%.
This may be how sausage is made, but it is not how accurate surveys are conducted. The “97% of climate scientists” claim is garbage. Anyone who cites it ought to be ashamed.
There is strong evidence that the earth has been warming since the "Little Ice Age". And cooling before that (hence the "Little Ice Age"), and warming, in fact many cycles. The real question is how much of the warming in the last 150 years might be due to natural effects and what part human interaction? Is man’s impact significant, or very small? The study of climate change is a very complex one, an inescapable understatement. That the present models are woefully inadequate to be able to include many very basic influences like clouds and precipitation systems, is becoming more known and discussed is a good thing. Perhaps we can take the discussion out of the realm of a political tool and restore credibility to the system.
During the speech he did not disclose any costs, which tops $447 billion, but did make 17 demands to "pass this bill". A bill that wasn't even available until Monday, after his Rose Garden update, and as of Tuesday has still not been submitted by any Democratic Congressman. In his Thursday speech he basically passed the buck to determine how pay for it to the Congress.
"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 the American Jobs Act is not going to add to the debt — it’s fully paid for. I want to repeat that. It is fully paid for. (Laughter.) It’s not going to add a dime to the deficit."
Since then he has reversed again and returns to advocating the tax the rich solution that has been shown to be woefully inadequate. The really glaring omission in his speech was no mention at all of the biggest opportunity for increasing jobs -- the energy industry. Probably the biggest reason for that is that the day he was giving his speech, the FBI was raiding Obama's green industry darling Solyndra.
Rep Betty McCollum gave her response to President Obama's jobs speech in an MPR article:
WASHINGTON - Before a special joint session of a bitterly divided Congress, President Obama laid out his agenda for creating jobs and reducing unemployment through a $450 billion package of targeted tax cuts and infrastructure investments.
And for an example of why there is such bitter divide Rep Betty McCollum offered this advice:
Rep. Betty McCollum - "For the past eight months, the world has witnessed an out-of-control Tea Party majority in Congress, harming our economy and stalling job growth with their posturing and political games," said McCollum, a liberal DFL member from St. Paul, in a written statement. "The American people want jobs, not dangerous and harmful Tea Party schemes to protect polluters, bust unions, eliminate Medicare, and outsource more jobs."
That Betty McCollum and Barack Obama (is that redundant?) are outstanding Union supporters is no surprise to anyone. That she should use such a demogogic statement to malign those who are trying honestly to correct the financial morass we are in, is simply poor judgement. The evidence for "out-of-control" behavior is apparently that the Tea Party opposes the economic ideology of Keynes and the profligate spending that Washington is known for, and in particular the liberal DFL side of the ideological world. Meanwhile the evidence for "out-of'control" behavior by their favored Unions and those who oppose the ideology of the Tea Party is rampant.
One sergeant was threatened with baseball bats and retreated, Duscha said. “One officer with hundreds of Longshoremen? He used the better part of discretion.”
"Hey, remember when Jimmy Hoffa Jr pledged that his union “army” would take out those “sons of bitches” in the Tea Party? Well, you can’t just jump into battle without tuning up a little first. The labor movement apparently decided to fight its first skirmish in Longview, Washington, where the ILWU seized grain and hostages while wreaking havoc at a rail yard"
September 8, 2011 "Approximately 500 Longshoremen protesters went to the EGT property, entered that property, damaged windows in the guard shack, pushed a private security vehicle into a ditch," Duscha said.
Duscha says boxcars were damaged and had grain dumped from them.
..
Union leaders and supporters say the actions reflect members' frustration.
Clad in red shirts, the workers held up signs that read, "CWA on Strike Against Verizon’s Corporate Greed," and cheered as honking cars passed by.
Matt Gates is one of the striking Verizon employees.
"Being out here - they didn't leave us a choice. They didn't want to bargain. We want to make sure everyone’s aware that corporate greed has to stop."
When the country is looking to our leaders to create an environment where jobs can grow, we expect plans that really have a chance of improving the economy, not simply retreads and name calling. Emphasis needs to be placed on finding out what businesses need! Improving the economy so companies will have the demand to create jobs to bring us back to work. President Obama made one statement Thursday that really was on target, and does a great job of summing up. If he and Betty McCollum only listen to it, instead of seeking scores for political rhetoric.
Those of us here tonight can’t solve all of our nation’s woes. Ultimately, our recovery will be driven not by Washington, but by our businesses and our workers. But we can help. We can make a difference. There are steps we can take right now to improve people’s lives.
Its just critical to get the right kind of help. So far this proposal does not look like they have.
The previous article covered the constitutional and moral problems with "Which by the way is mostly our money! Its not the money of the rich, and its not the money of the corporations!". In particular, the federalist arguments for controlling and opposing the "violence of faction". "Publius defines a faction as a "number of individuals, whether a majority or minority of the whole, who are united and actuated by some passion or interest adverse to the rights of other citizens and the permanent interests of the community" (Federalist 10)."
There are two points the questioner states about the property of others:
1) "the rich and the corporations have tens of trillions of dollars. Corporations are not investing that money in jobs. The rich are not using it in the trickle down way that we hear from the other side from the right wing, from the radical right wing, is the only good way economically."
2) "Which by the way is mostly our money! Its not the money of the rich, and its not the money of the corporations!"
Altruism is real, and many do provide for fantastic altruistic efforts, but it will always depend on having made enough to be altruistic with, e.g "The Bill & Melinda Gates Foundation" (but then, what else are they going to do with it all?). No profit, no altruism, at least not for long. The solution of increased taxes presented by the questioner and Rep Betty McCollum are their viewpoint, in fact they appear to be the consensus liberal viewpoint. It is also a viewpoint which many believe would have, and does have, a very chilling effect on our economy. In fact this "solution" is one that feeds directly into the issues that contribute to the frozen state of our job market. Its another source of risk and uncertainty.
So why is it that significant "cash" is sitting on the sidelines? The motivation for increasing the cash reserves must be fairly strong for corporations to have excessive money not invested. Cash sitting,represents a significant opportunity loss.
"Sitting on cash can be an expensive luxury simply because it incurs a heavy opportunity cost. Holding onto excess cash that is beyond reasonable liquidity requirement is not only capital inefficient; it also creates a drag on a company’s valuation.
In particular, the massive cash hoards that American corporations have amassed have been a saving grace in ensuring that the financial crisis did not cause additional damage to the economy.
Today, these companies are sitting on US$1.93 trillion in cash and other liquid assets, rather than using this money in rebuilding its battered economy."
So one of the first problems is that his numbers are off by quite a bit. Its not "tens of trillions"? If you expand the scope so you are looking at all money market funds, like what many people hold in their 401K's, its more like $3.92 trillion in 2009
Sept. 28, 2009 Cash in U.S. money-market funds also rose in the 2008 bear market, reaching a record US$3.92-trillion by mid-January. A broader measure that also includes cash and bank deposits reached US$9.55-trillion this month, based on data from the U.S. federal reserve. That’s more than the combined US$9.22-trillion market capitalization of all the companies making up the S&P500 index.
Jobs are not created simply because there happens to be some cash, even what the questioner considers "excessive", laying around in a financial reserve account. Employers create jobs when they believe the risks of estimating the market having increased demand for their products and services, versus the risk of adding to their workforce swing to the side of growth. Otherwise they would be doing something else. They will not be able to stay in business if their employment costs expand the cost of goods sold to exceed their revenue. Then everyone in the company is out of a job.
Did you know that it is a requirement of McDonald's that a franchisee must have $500,000 of liquid cash on hand (though they recommend more), and it will consume a total investment between $1-2 million, to start a franchise? They recognize that there are risks involved, and require a certain level of capital as well as expertise. It is not the person of low economic means that starts a business. These are the people in the cross-hairs of the "Tax the top 2%" campaigns. That one entrepreneur will create upwards of 70 jobs in his community.
So what really stands in the way of creating jobs? Managing risk and uncertainty of what will happen if they do invest, is the key to getting money out of the safety of a money market, and into investments like a new business. Giving employers confidence that they can make the change in investment, with risks they believe they understand and can have some assurance of it having the ability to overcome. Here are some of the risks they worry about facing:
1) Uncertainty of costs of employment, one significant part is due to Obama care
Brett Parker, a finance officer for a small business in New York City, noted that ObamaCare has failed to “rein in costs, and instead increased them, while loading job creators with mandates, regulations, new taxes and burdens. Rather than solve the problems in the health care system, PPACA ignores costs and instead redistributes money from producers in order to fund vast new entitlements and expand old ones – this was not an improvement over the status quo, it was a step backwards.
In his ruling declaring ObamaCare unconstitutional, U.S. District Court Judge Robert Vinson provided a key example of how the law is - as a group of 200 economists deemed it - "a barrier to job growth."
Judge Vinson references small business owner and plaintiff, Mary Brown, who indicated that the health care law is forcing her to consider “whether she can maintain her business,” or if she will be forced to “lay off employees” or “close her business” altogether.
2) Uncertainty of taxation, to which this budding Marxist questioner and Rep McCollum want to add The Uncertainty Tax (NY Times, 6/12/2011)
But do not underestimate uncertainty as a silent jobs killer. Congress and the White House seem paralyzed in deciding the future of taxes and spending. Where are we going in these areas? Investors and companies who have to make hiring decisions have no clue. “The economy is paying a high uncertainty premium right now,” says Mohamed El-Erian, the C.E.O. of the world’s largest bond fund, Pimco. “With such uncertainty, people delay as many decisions as possible.”
Obama's video statement "if someone wants to build a coal powered plant they can, its just that it will bankrupt them because they're going to be charged a huge sum"
http://www.youtube.com/watch?v=Hdi4onAQBWQ
"When I was asked earlier about the issue of coal, under my plan of a cap and trade system electricity rates would necessarily skyrocket" http://www.youtube.com/watch?v=BqHL404zhcU
He couldn't get the cap and trade plan passed, so now it is being done through regulations at the EPA.
American Electric Power on Thursday announced it plans to shut down several coal-fired power plants, convert or retrofit others, and cut as many as 600 jobs in the next few years to comply with regulations proposed by the U.S. Environmental Protection Agency.
Gasoline prices continued to rise across the nation last week, putting the cost per gallon to more than one dollar over this time last year. As rising energy prices threaten economic recovery, Congress has an obligation to examine Obama administration policies that, taken together, reveal the pattern of a concerted campaign to raise the price of energy through blocking, delaying, or revoking project permits and approvals.
If you are a heavy industry, or any industry that depends on energy (and what industry doesn't?) you cannot set forth a reasonable business plan with the tremendous risk of energy costs.
Regulatory agencies have seen their combined budgets grow a healthy 16% since 2008, topping $54 billion, according to the annual "Regulator's Budget," compiled by George Washington University and Washington University in St. Louis.
That's at a time when the overall economy grew a paltry 5%
The regulatory burden is particularly heavy on small business. Crain and Crain calculated that adhering to federal rules cost $10,585 per worker for businesses with 19 or fewer workers, but only 78 percent of that amount for businesses with 500-plus workers.
What is also interesting is that when you look at the distribution of regulatory compliance by firm size for small business with less than 20 employees, compliance with economic regulations cost $4,120, followed very slightly by environmental regulations at $4,101. Combined these account for nearly 78% of regulatory compliance for small business, contributing to the majority of this cost factor. This major cost factor alone erodes small business growth.
Many businesses could hire at this point but have chosen not to simply because they have no idea what sort of financial impact hiring will have on them in the future once new rules are fully written out and implemented.
5) Uncertainty in the economy, will there be enough customers to pay the bills?
So, let's stipulate that Buffett can “afford” to pay more taxes. But this statement ignores the more important question: How would the middle class and poor be affected by the higher tax rates that Buffett advocates. Let's consider what happens when the rich pay more in taxes. With less disposable income:
They could reduce their consumption. Although unlikely, this would mean a loss of sales to one or more companies, leading to layoffs;
Or, they could make fewer investments. But that means some company or entrepreneur will be deprived of much needed capital, and would be unable to expand their business and increase employment;
Or they could give less to charity. But then those in need will have less sustenance, or cultural and social institutions which Mr. Buffet and other rich philanthropists support would have to cut back on their missions and perhaps employment.
Even the authors at HuffPo get this. Though they still think the government does more than just get in the way. The Huffington Post, Alexander Eichler, First Posted: 8/9/11 10:50 AM ET
Caught between a government unable to agree on the best way to expand the economy, and nervous consumers reluctant to make discretionary purchases, small business owners are feeling the squeeze as much as anyone.
It was an issue thoroughly considered by our founding father, discussed at length in the federalist and the anti-federalist papers about tyranny of the masses, tyranny of the minority, and why property right were a central theme. If you cannot be secure in your property you cannot be secure.
So what will Betty McCollum do when Obama puts forth his jobs plan next week which will almost certainly be centered on yet another major stimulus bill. Increasing debt even more, and recommending even more taxes to offset it. Stimulus in which the government is picking and choosing the winners and losers. A track record of unparalleled failure in doing so. Example is Solyndra.
Rep Betty McCollum said "So what disturbs me about the tax cuts. Is all the tax cuts that are part of the Bush tax cut, every single one of them, even the ones that the middle class are getting, We're borrowing the money for the tax cuts". Will she make the choice not to go along with the Obama Stimulus, say no to more borrowing and deficit, or will she continue to try to "Soak the Rich", when that has been shown not to be able to balance the spending?
We need to fix the five points above. Let's get our economy and jobs back on track.
