Today, the Department of Labor reported that 570,000 Americans filed initial claims for jobless benefits last week. This follows news from ADP Employer Services on Wednesday that private employers cut 298,000 jobs last month. As bad as these numbers sound (and they are bad) the real threat facing our nation’s economy is that, as Gallup’s Chief Economist Dennis Jacobe puts it: “job creation in August is just not taking place in the U.S. economy.” Why is job creation more important than job loss numbers? Heritage fellow James Sherk explains:
The American economy is highly dynamic. Industries continually expand and contract while entrepreneurs create new companies and uncompetitive firms go out of business. Workers move between jobs frequently as this occurs. … Recent research shows that an increased likelihood of layoffs is not the main reason that unemployment rises during economic slumps. … The main reason unemployment rises during economic downturns is that job creation falls while the labor force continues to grow, making available jobs scarcer. As a result, many without work stay unemployed longer, driving up the unemployment rate.
If our economy is going to avoid double digit unemployment, the private sector is going to have to start hiring people again. Unfortunately, every agenda item emanating from the White House will only hamper, not allow for, private sector job growth.
The Stimulus: President Obama’s $787 billion stimulus has been a boon for public sector unions and the economy of Washington, DC but it has completely failed to spur private sector job growth. The Wall Street Journal reports: “Dave Anderson, chief financial officer of Honeywell International Inc., said the stimulus package actually froze business activity at first as firms tried to figure out how they could benefit from the government spending. The $787 billion package ‘created actually a slowdown in order activity in terms of the flow that we would normally have anticipated.’”
Health Care: Our nation needs health care reform that lets Americans reduce their exploding health care costs. The best way to do this is to reform the tax code and remove regulations that are preventing a true health insurance market from functioning. But the President only wants to expand the status quo by building off the failed models of Medicare and Medicaid that got us into this mess in the first place. Worse, President Obama is set to fund his massive expansion of government-run health care on the backs of businesses. The employer mandates used to fund Obamacare will cost businesses at least $49 billion per year and put 5.2 million low-wage workers at risk of unemployment or reduced working hours. The prospect of fewer job opportunities in the future will put another 10.2 million workers at risk of slower wage growth and cuts in other benefits.
Cap and Trade: President Obama continues to try and sell his cap-and-trade plan as a job creation bill, but the more honest in his own party have admitted otherwise. During a committee hearing on cap-and-trade this year, Rep. John Dingell (D-MI) explained: “Nobody in this country realizes that cap-and-trade is a tax — and it’s a great big one.” According to a Center for Data Analysis study, the economic costs of the Waxman-Markey energy tax bill include net job losses approach 1.9 million in 2012 and could approach 2.5 million by 2035.
Higher Taxes: President Obama wants to raise taxes on U.S. companies by: 1) limiting the ability of American business to defer U.S. tax on their foreign income and 2) reducing the credit American businesses receive for foreign taxes paid. These higher taxes will be a big competitive disadvantage for American firms. Punishing U.S. companies for competing overseas will ultimately kill jobs here at home. For every worker employed by a U.S. subsidiary in a foreign country, 2.3 Americans are employed in the U.S. And a 10 percent increase in foreign investment by businesses has been associated with a 2.6 percent increase in investment in the businesses’ home countries.
Trillion Dollar Deficits: Last week, the Office of Management and Budget released numbers showing that under President Obama’s budget the public national debt–$5.8 trillion as of 2008–is projected to double by 2012 and nearly triple by 2019. Looking at these budget forecasts, investors are demanding higher interest rates to soak up the tremendous flows of debt coming out of the Treasury. This will mean higher interest rates for consumer loans, mortgage loans, business loans, etc. Sherk concludes:
American businesses and the American economy need time to recover and heal from this deep recession before facing new threats from massive government intervention in the economy. Presented with a more certain path forward, businesses will regain their optimism for the future, and will resume making the investments they need in order to expand and to compete in the global marketplace.
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QUICK HITS
- The broadcast networks may be gearing up for the new fall season, but the White House is already in reruns. President Barack Obama’s prime time Congressional address slated for next Wednesday will be the sixth time he has commandeered network airtime in his eight month presidency.
- A set of proposed United Nations sex education guidelines promote access to legal abortion as a right.
- Supreme Court watchers believe that Justice John Paul Stevens’ decision to hire only one law clerk for the 2010 term signals that he may be planning to step down next summer.
- The White House admitted yesterday that they helped the Department of Education draft plans instructing teachers nationwide to assign students a paper on how to “help the president.”
- According to USA Today, environmentalists and others supporting global warming legislation are outspending the measure’s opponents in the television advertising skirmish underway in advance of Senate action this month.
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