Back to Jobs

With the defeat in Massachusetts last Tuesday President Obama and the Democrats shifted their focus from trying to force bad legislation through Congress to "putting Americans back to work." Good idea, but then so is reformation of aspects of our healthcare industries.

As a quick recap, in February 2009 with Obama in office less than a month Congress passed the American Recovery and Reinvestment Act of 2009. Quickly signed by the President, ARRA, known at "the Stimulus" had a price tag of $787 billion. The purpose of the Act was to create and preserve jobs and, according to the White House, prevent U.S. unemployment from reaching 8%. Money was going to go to communities across the country for "shovel ready" projects to promote infrastructure development and create local jobs.

As I wrote last January, the Congressional Budget Office in analyzing the bill stated it would have little impact on the recession or creating jobs before the current recession ends. Almost all of the spending in the bill would occur in the months leading up to the 2012 election cycle. Almost all of the funds went not to private sector companies and projects, but rather to state and local bureaucracies. The CBO analysis appears to have been correct, the ARRA would have no impact during the fiscal year it was passed. Unemployment has crested 10%. Because of red tape and inherent government inefficiencies communities across the country have nice signs that say "This work project funded by the American Recovery and Reinvestment Act of 2009" that sit on corners or streets for months with no visible work being done. Chalk ARRA up as the first misstep, or failure, of the Obama Administration and his Congressional allies who at the time needed not one Republican vote to pass any legislation--and none in Congress voted for ARRA.

In the past year private sector unemployment has been shrinking month after month. This past week another 485,000 filed for first time unemployment claims. The number of Americans on unemployment roles has stayed somewhat constant because the number of Americans falling off the unemployment roles has about equalled the number going on. Stretched out because part of the ARRA funds went to states to extend unemployment benefits--a jobs stimulus bill that paid states to pay those not working longer, an oxymoron only government cannot understand--the true, or real, unemployment number in the United States is in excess of 10%.

Almost all of the jobs lost in the current economic cycle are from the private sector. Amazingly while Americans working for private companies have seen lay-offs, business closings, salary and bonus cuts, and other economic hardship, government employees have been mostly untouched--especially Federal employees. In California the economic reality of a broke state and many municipalities has caused many workers to share the pain of the private sector with furlough days, but overall employment in the sector has not shrunk, especially compared to their private sector neighbors.

Nationally, the number one industry for job security and growth has been working for the government. While the number of Americans paying taxes has shrunk, the number of Americans benefiting from tax revenues in the form of salary and benefits has increased. And incredibly many are making more today than they did in 2008. This past week it was announced that for the first time in history the number of Americans in public employee unions exceeds the number of those in private sector employee unions (while government owned I believe the GM members of UAW are counted as private sector).

So in the past year Congress and Obama dedicated $787 billion for job growth and protection. Millions of Americans have lost their jobs in the private sector, millions more have seen cuts in salary and benefits. Those collecting paychecks and benefits for working in government jobs have seen increases in their paychecks and an increase in co-workers on the job as government payrolls have grown not only in salary but in numbers of checks issued.

Now as Obama talks about focusing on jobs Americans need to hold on to their pocket books because we know more spending is on the way. Blessed with the inability to acknowledge mistakes, missteps and the people, Obama, Speaker Nancy Pelosi and Senate Majority Leader Harry Reid do not see ARRA as the rush-to-spend that it was, but rather a success. Their myopia, as seen with their reactions to Massachusetts, leads them on a collision course with more bad legislation and policies that will not increase jobs in our country, but more likely add to the dissonance in the private sector preventing investment and growth.

Step one of the next misstep is Obama attacking banks. Trying to rally the mob, Obama attacked the bonuses and salaries of bank executives, bemoaning their paying themselves but not lending and extending credit to start and aid economic recovery. He stated he was going to reform the banking system and establish new rules for them. Ignoring, or ignorant of, the incredible Federal oversight currently going on of U.S. banks, Obama has promised more oversight and accountability.

But banks are not lending money because they have no idea what the repercussions of lending to small and medium businesses will be. Under attack since the TARP funds were put into the system, whether some banks wanted them or not, banks have been very tight on credit. Seeing the PR damage to their industry and to the executives who make the decisions, banks are not going to stick out their necks making small business loans. Risky loans invite federal scrutiny. Federal scrutiny leads to federal takeover. Better to not make risky loans and instead invest in more secure investments like Treasury bills and overnights to major corporations.

Jobs are created by entrepreneurs and those with vision. In a bad economic environment most business owners hunker down. They cut expenses, the number one expense almost always being payroll. They hoard cash and do not expand or invest. Advertising gets cut. Marketing gets cut. A little bit lower grade of supplies are used. This behavior maintains or worsens a recession. To reverse the process risk takers are needed.

Small and medium businesses are the number one employers in America. Towns and cities across the nation are dependent on these companies for economic health and growth. For growth they need capital. For capital they need banks to loan them money. For banks to loan them money they need some room from regulators to be able to extend some risky loans to those willing to expand in a shrinking economy.

Until the rules are set for banks. Until banks are secure in knowing they can extend credit with some risk attached. Until banks are not governed to a zero-loan loss expectation. Until a small business owner with a plan and an idea that needs ten, twenty, fifty thousand dollars to implement is provided the capital. Until these happen our economy will be stuck on unemployed.

Obama's Administrations says they are focused on jobs in America. Great. Connect the dots. Jobs need employers. Employers need capital. Capital needs banks. Banks need firm and set rules.

Quit the rhetoric and playing to the fawning press. Rhetoric is killing the markets and investments in America. Let the banks lend and see what happens. Quit trying to legislate to prevent failure and instead allow for some risk to enable growth.

Uh-Oh! Obama and Dems Talking About Jobs Again

In Washington the White House and Congressional Democrats are working on another spending spree that is meant to create jobs in 2010. Given their inability to understand the $787 billion "stimulus package" passed in February the American taxpayer, and worker, has cause for concern. You remember the stimulus package, it was supposed to limit unemployment to 8% (now over 10%) create or save millions of jobs (three and half million jobs lost since its passage) and help our economy recover.

It appears the Obama Administration and Democrats cannot remember what they passed since the bill was set up for almost none of the $787 billion to be spent in 2009. The spending from the stimulus package was meant to begin in 2010, to coincide with re-election plans in November and maintaining the majority in both Houses. Further, over $540 billion of the funds are not scheduled for expenditure until 2011. Ooops.

It is now evident that the severity of the economy was misjudged and perhaps more of the funds from the bill should have been spent this year. At the time the timeline was to inject some funds before the 2010 midterm elections and then have the bulk of the funding hit in 2011 so by the 2012 elections, including one for President, the economy will have recovered and Congress and Obama could point to the spending as being the cause.

Now looking at the political and economic landscape, the House Democrats up for re-election in 2010 are pressuring the White House to do something so they can pump more money sooner into their Congressional Districts before unemployed voters go to the polls and vote them out. Not willing to wait for the money already scheduled to be spent in 2010, some are worried their constituents (and by that we do not mean voters do we?) will be out of work, furloughed or otherwise facing reduced paychecks and with those reduced checks comes reduced support.

From a Press-Telegram article on the jobs issue here are some statements from Congressional Democrats showing how out of touch they really are:

The stimulus boosted employment but "did it in a way that was not as highly visible as a lot of people would like," said Rep. Betty Sutton, D-Ohio, one of the House members devising the jobs bill. "It did so in somewhat of a scattershot approach - a job here and a job there, trickled out over time. ..."

Ms. Sutton, it is not high visibility people want but actual jobs. When doling out pork the results tend to be scattershot, a skate park here, a walking path there, raises and not jobs over there...

"I hope we don't play around the edges with this and we do what will work. Invest the money now," said Rep. Barbara Lee, D-Oakland, who chairs the Congressional Black Caucus.

$787 Billion is playing around the edges? But when you voted for and passed the bill Obama said it would create millions of jobs, that's not the edges.

"The American people have an anger about the growth of the deficit because they're not getting anything for it," she (Speaker Nancy Pelosi) said in a conference call.

No, we are angry about the deficit because we are having to pay for it, and we will not get anything for it today or tomorrow. It appears her approach is give something to everyone out of the public trough and we will be happy. Typical politician trying to find the price point when buying votes. This works for special interests, like unions and fellow government employees, but it fails for most Americans who think beyond today when they vote.

The one line in the article that really showed how limited the group intellect and how narrow-minded the thinking is in Washington was this:

"House members also are considering a plan to funnel aid to state and local governments with the assurance the money would be used to preserve jobs."

Whose jobs would they be preserving? State and local governments that are cash strapped and facing huge deficits need to cut spending, the number one expense as with any business is salaries and benefits. By giving a one time shot of cash to a state or city to "preserve jobs" are we putting off the inevitable correction to budgets for one year, and adding another year of future benefit payments? This is a direct payment to government employees, the only organized labor sector that has grown in the past decade, who vote overwhelmingly Democrat, and who would be able to keep their jobs until the 2010 elections.

Let's review the attack on jobs and businesses thus far from the 111th Congress with encouragement and support from the Obama White House. Keep in mind two things: first, businesses, particularly small businesses, employ the overwhelming majority of Americans--they also lay off the majority of unemployed workers; second, our economy is Consumer-centric, with consumer spending responsible for approximately 70% of our economic activity. Fewer jobs means fewer consumers means fewer businesses able to stay in business--and hire workers.

The stimulus package was passed and added $787 billion to the budget and deficit. The funds are primarily targeted to public works, which puts most of the funds through government bureaucrats which leads to inefficiencies and loss of funds as it trickles down to the job site; as well disproportionate amounts of funding go to public works contracts not with private contractors but with public employees--keeping those jobs on city, county and state payrolls and budgets.

Congress tried, and thankfully thus far has failed, to pass Cap and Trade. A massive tax burden on American businesses meant to prevent "global warming." News is coming out that much of the scientific study has been skewed and the books cooked to prevent dissenting views and research on the subject from coming to light. The Cap and Trade bill would increase taxes on American businesses hundreds of billions of dollars with no return. It would lead to job losses in the United States as manufacturers take even more jobs out of the country.

The Senate and House are working on massive health care bills that if passed will increase taxes across the board for health care insurance, medical devices (virtually everything you buy for health and personal care from tampons to toothbrushes), employers and individuals. More taxes means less money to spend on other items, such as microwaves and bicycles, which dampens further the economic engine of America.

My reaction to the Democrats and White House working towards another jobs bill is that we will end up with another couple of hundred billion dollars in spending with them looking for who to pay for the tab. You can bet that whoever gets stuck with the attendant tax bill are those who are currently employing millions of Americans, or have the ability to hire as many if they had the funds to do so.

If they are serious about creating jobs they need to get over their "the rich must pay" rhetoric, quit defining "middle class" as their union supporters, and enact tax incentives for businesses and consumers. After the Bush tax cuts in 2000 the annual revenue to the U.S. Treasury from tax collection increased every year until 2008. Making those cut permanent and adding marginal cuts across the board will put money back on the balance sheets of small businesses, increase disposable income for the American consumer and boost the economy as spending and hiring slowly increase.

Unfortunately Congressional Democrats and members of the Obama Administration think they can spend money more wisely and efficiently than the average American, who evidently cannot be trusted with their own financial decisions. Unfortunately they have no sense of history, economics or memory as to what bills and spending packages they have already passed.

Bad news for the American worker and economy, the people who brought us Stimulus I are working on Stimulus II.