Rich On Money

President Obama is late to the plate with stimulus

I took a look at the President’s proposal to stimulate the economy which amounts to $347 billion and my first look surprised me. This is not going to work. A couple of hundred billion is dedicated to temporary tax cuts like cutting payroll taxes for both people and employers. The hope is that employers will add new jobs to their corporations if the government cuts the payroll tax. Well I figured it out and if a corporation pays an employee $30,000 per year, net of all taxes it will add $300 to the employer’s bottom line. What company is going to add to their labor force by saving $300 per individual. Workers do just about as well under the proposal. 

I have talked to a number of economists and they all seem to come in at about the same numbers that I worked out regarding adding new jobs to the labor force. The answer is that this proposal could add a million jobs to the labor force over the next year. When you consider the amount of money being spent on jobs alone, it comes to a cost of about $200,000 per job. Does this really seem like the best use of money. 

My last point is simple. The President is once again proposing to increase taxes to pay for this stimulus package. Now let’s be realistic. He knows the Republicans control the House of Representatives. He therefore knows his proposal will not pass the House. So what is he doing? Is he window dressing? Is he simply grandstanding for re-election? It would seem so. 

One final point for us to think about. The taxes he wants to implement would be permanent increases, and yet the stimulus package is temporary. Once again the President is simply prepping for re-election. If he were serious about stimulus, he should have started two years ago instead of concentrating on health care reform, which involved a maximum of 15% of the America’s population of 315,000,000. Misplaced priorities and letting time lapse is not a prescription for leading what is still the world’s most powerful economy.