Sunday, February 7, 2010

Will The Real Barack Obama Stand Up Please

      Yesterday I wrote that although Barack Obama needs to be prudent about how he spends the federal dollar, attempting to reduce overall spending would be a bad mistake at this time. Today I will attempt to expand that thought.
     It is true that every dollar spent on either goods or services creates a job somewhere along the line, whether it is spent for prostitutes or Air Force tankers. However, not all dollars spent produce the same number of jobs. To the extent possible, the President should spend the money on those items which will produce the most “jobs per buck.” The following is a chart of jobs created by industry per million dollars spent:


      In an interview on CNN days before the election, Mr. Obama explicitly ranked his priorities, starting with an economic recovery package that would include middle-class tax relief. His second priority, he said, would be energy; third, health care; fourth, tax restructuring; and fifth, education. At least from a job creation standpoint he seemed to have things a bit muddled, although his recent actions indicate that he has reworked the order.
      He seems to be bullish on Green Investments, and that’s a good thing. And he has riled Louisiana politicians with his proposal to cut oil and gas subsidies, and that too is a step in the right direction. (Cutting incentives, not riling politicians.)
      He has also pushed for middle class tax cuts from the start, and I can’t find fault with that.
      His biggest and most hopeful switch has been on education; he has signaled that he wants to make the Pell Grant program for college a mandatory program at a cost of $307 billion over the next ten years. He hopes to make a college education as much an entitlement as Social Security. A wise choice, not only from the standpoint of job creation, but also as a counter to the tremendous productive growth of China, India and other third world countries.
      Unfortunately the chart does not show the health care industry, but I suspect that if he manages to get any kind of comprehensive plan passed, the job potential will be huge. However, at this point that “if” is really, really big.
      As for infrastructure, he has tended to push that off on the states, while at the same time cutting back on federal assistance. Realistically he does not seem to be much help there.
      Finally, he has very little choice but to expand military spending. Like it or not, it does create jobs.
      I am confused about one thing he has proposed: a job creation incentive for businesses. Suppose you have a business employing ten people. Because of the recession your sales have decreased to the point where you have to lay off five of them. Now suppose you are offered a tax incentive of $5,000 for every new job you create. Are you going to hire someone for say, $30,000 to get $5,000 off your taxes? And when people start buying your product again, will you not hire what employees you need in order to service your customers?? At that point an incentive would be nice, but the job would be created with or without the incentive. Job creation incentives appear to be political posturing.
      In reality, if Obama is to get any traction on these programs, he needs to remind Congress and the country that both he and a majority of Congress were elected because of the policies he proposed. A small group of small people, John McCain, Sarah Palin, Rush Limbaugh, Glenn Beck, “Fair and Balanced News” et al have managed to create a deep split in the electorate. Obama needs to step up and take charge.

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