The Downside of Obama's Latest Stimulus: the Jobs it Will Kill

Ever since the President announced his latest $50 billion infrastructure proposal-- don't call it "stimulus"-- I've been meaning to write about what's worst about the plan: how he intends to "pay for it."

His big idea? Take away special "tax breaks" from Big Oil. Don't buy this nonsense. The "breaks" he's talking about aren't special giveaways to the energy industry, they're available to all U.S. manufacturers and are meant to spur employment here. Thankfully, I don't need to write more on this because a solid editorial on the topic appeared in this morning's NY Post:

The Prez's New 150,000 Jobs Killer

First, let me point out that this estimate could be substantially too low. The Institute for Energy Research suggests the job losses from repealing the Sec 199 tax credit would be 5 times higher than that figure over the course of a decade. Whichever number is correct, the crux of the story can be seen here:

Just last week, President Obama explicitly targeted the industry for two massive tax hikes. First, he'd ban oil and gas companies from using the "Section 199" tax credit, a measure for domestic manufacturers enacted in 2004 to boost US employment. (The Senate is set to vote this week on its version of the ban.) Second, he wants to end "dual capacity" protection for US energy firms.

Yet, by the federal government's own economic model, these tax hikes would lead to huge, immediate job losses. I ran the numbers through the Commerce Department's RIMS II model; it shows, under the proposed changes to Section 199 and dual capacity, Americans would almost immediately lose more than 150,000 stable, private-sector jobs.

Because our energy firms operate as part of an integrated economy, as much as 38 percent of the job losses would come in professional fields, such as education, administration, health care, real estate and the arts. Another 21 percent would hit producers of necessities such as our food and textiles.

In other words, lawmakers would be slamming the very teachers, firemen and factory workers that they claim to want to help.

The middle class ends up getting damaged most: no surprise there.

Predictably, though, the President has been getting plenty of cover from his pals in the Liberal blogosphere. They've embarked on a new round of outcries over the energy industry and how it is supposedly one of the most heavily subsidized industries in America.

Actually, folks, this Tax Foundation report showed in July that oil and gas companies receive far fewer targeted tax credits than other industries. That includes renewable energy, which receives 4 times as many tax goodies.

And, keep in mind this is the same Tax Foundation which issued the stunning report just 5 years ago that major energy producers actually pay more in taxes than they earn in net income.

So, the next time you hear some pull-the-string argument from a Lefty about all the subsidies big oil gets, you'll be armed with some facts to set that person straight.

The Senate may vote as early as this week on the repeal of section 199 for oil and gas companies. Republicans in that House had better arm themselves with the facts and get ready to filibuster this nonsense, because it's just one more big Obama economy killer, nothing more.

President Obama inexperience is very telling President's inability to understand how small businesses work has had a MASSIVE impact on the American small business sector. President Obama is sending more burdensome regulations our way. It is going to be more costly to keep employees/workers - so guess what: small businesses will hire fewer people or not replace workers when they retire or leave. There's a principle in chemistry called "Le Chatelier's principle", which is used to predict the effect of a change in conditions on a chemical equilibrium. Push an equilibrium in one direction and "the equilibrium shifts to counteract the imposed change and a new equilibrium is established" (see, e.g., Wiki). In business it goes like this: make it more stressful and expensive to hire workers and small businesses will hire fewer workers and won't replace workers when they leave. President Obama needs to do a crash course on Le Chatelier's principle. Submitted by Dr Christopher Wood (not verified) on Thu, 2010/09/23 - 5:23pm » reply |