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December 15, 2009 Tuesday 12:01 AM EST
SECTION: NEWS & COMMENTARY; Commentary; Irwin Kellner
LENGTH: 582 words
HEADLINE: Doing the opposite of creating jobs
BYLINE: Irwin Kellner, MarketWatch mailto:Ilkellner@gmail.com.
Irwin Kellner is MarketWatch’s chief economist.
PORT WASHINGTON, N.Y. (MarketWatch) — Although it thinks it is working to create jobs, the Administration is actually doing just the opposite.
The first stimulus package is a prime example of Washington’s wrong-headed thinking. So far it has created few, if any, new jobs for two reasons.
First, very little of the $787 billion package has actually reached the economy — only 20%, to be precise. Second, only a tiny piece of that has gone directly into job creation ()
The Administration’s latest proposals to increase jobs give with one hand while taking back with the other.
Tax credits for hiring, more generous depreciation allowances and no capital gains tax for small business are a start in the right direction. So are tax credits for homebuyers and extending jobless benefits.
But most companies remain reluctant to hire people because when they look ahead, they are facing more than the usual uncertainties, most of which are being created by the Obama Administration — whether it realizes it or not.
For one thing, business people are unsure what their tax rates will be going forward, both at the corporate and personal levels. Then they don’t know what their costs for health care, energy and the environment will be.
These concerns stem from the president’s wishes to deal with all of these issues simultaneously, instead of just focusing on job creation alone.
For another, company execs don’t know what to think about the government’s burgeoning budget deficit. Does its present need to stimulate the economy outweigh its future consequences such as higher taxes, a new round of inflation and record sums owed to those countries that buy our debt?
Then there is the plethora of regulations that the government is intent on passing. They seem intended to increase Washington’s control over business and finance, and to change the rules of the game — exactly how remains to be seen.
Even the inability of many small- and mid-size firms to obtain a loan from their bank stems at least in part from Administration policy.
While the president has admonished bankers to make more loans, their regulators are pressing them to boost their lending standards as well. Also, the caps on executive pay have led the banks to make every effort to repay the government, thus using capital that might otherwise have backed new loans.
As for jobs, those firms that are hiring prefer to hire people from other countries, if for no other reason than the fact that government policies abroad are more stable than they seem to be here. Labor costs in the United States are also boosted by the payroll tax.
When day is done, however, there are few signs that demand is increasing enough to justify adding staff from any locale. Nor is the government doing much to change things, in the opinion of most CEOs.
The Administration could rectify this swiftly by employing my gift card idea (). This would inject billions of dollars directly into the economy quickly and would boost demand for goods and services according to the people’s choices — not those of government bureaucrats.
Since this is apparently politically unpalatable, you may expect the unemployment rate to hover in double-digits for at least another year or two. And this assumes that the recovery continues.
If it does not (), the jobless rate could well remain at today’s levels or higher for as long as a generation!
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