Obama's New Stimulus Proposal

In his latest attempt to jump-start the floundering US economy, President Obama actually suggests something that makes sense.

His proposal would allow businesses to immediately write-off 100% of capital equipment purchased by the end of 2011.

"President Barack Obama will call on Congress to pass new tax breaks that would allow businesses to write off 100 percent of their new capital investments through 2011, the latest in a series of proposals the White House is rolling out in hopes of showing action on the economy ahead of the November elections.

An administration official said the tax breaks would save businesses $200 billion over two years, allowing companies to have more cash on hand. The president will outline the proposal during a speech on the economy in Cleveland Wednesday.

Amid an uptick in unemployment to 9.6 percent, and polls showing that the November election could be dismal for Democrats, Obama has promised to propose new steps to stimulate the economy. In addition to the business investment tax breaks, he will also call for a $50 billion infrastructure investment and a permanent expansion of research and development tax credits for companies."

Allowing companies to immediately expense their costs is a start towards improving the current economic climate, and is worth pursuing. In addition, making the R&D credit permanent is also a good idea and will be embraced by American businesses.

None of these changes will directly affect the current unemployment picture, however.

Major changes are needed at this point to reduce sky-high unemployment, to include relaxing federal regulations concerning who businesses can hire and how much they have to be paid and ending unemployment benefits after a short period of time to discourage people from staying on the dole well beyond when they normally and historically would have.

Of course, further uses of tax policy as a tactic, such as slashing (or even eliminating) the corporate income tax and reducing payroll taxes (offset by current or future entitlement decreases) would be a major, major boon to the economy.

Why Isn't Tax Policy Being Used to Reduce Unemployment?

The national unemployment rate has been stubbornly high for the last two years, generally around 10%. This is much higher than it was in the preceding years, when anything even near 6% seemed way too high.

And it is now widely being accepted as the new "normal" far too easily by those in power.

"The United States will suffer high unemployment for some time as it slowly recovers from the deep recession that ended in 2009, a former second in command at the Federal Reserve said on Wednesday.

"I see a very slow, uneven recovery. It will not be fast enough to put a dent in the painfully high unemployment rate for some time," Roger Ferguson, the Federal Reserve's vice chairman from 1999 to 2006, told Reuters after a speech in Cambridge, Massachusetts.

Ferguson's prepared remarks at a National Bureau of Economic Research event focused on the fragile state of Americans' retirement savings and the concerns it poses for policymakers.

"For too many people, financial security that lasts a lifetime is beyond their reach," said Ferguson, now chief executive at the financial services company TIAA-CREF."

With the Democrats now in charge at all levels of the federal government, their pathetic and weak response to the recent economic crisis has mainly been to increase the amount of federal welfare provided to those out of work (in the form of extended unemployment benefits), as opposed to creating real incentives for employers to hire more employees and for helping foster an economic environment where entrepreneurs start businesses and hire more people.

It's time for those in power to use tax policy to lead the way.

This would include tried and true methods of incentivizing businesses and entrepreneurs through lower business and personal tax rates, to be matched by reduced spending by the federal government.

Let's stop treating the currently unemployed as permanently unemployed, give people a real reason to hire again and get the economy moving again.

Where Have All The Jobs Gone?

A CNNMoney.com article suggests that 7.9 million jobs have been lost in the recession and are gone forever. Americans patiently waiting for an economic recovery should be asking themselves when this madness will stop.

"The recession killed off 7.9 million jobs. It's increasingly likely that many will never come back.

The government jobs report issued Friday shows that businesses have slowed their pace of hiring to a relative trickle.

"The job losses during the Great Recession were so off the chart, that even though we've gained about 600,000 private sector jobs back, we've got nearly 8 million jobs to go," said Lakshman Achuthan, managing director of Economic Cycle Research Institute."

At some point, in order get the economy rolling again, the government has to unshackle business people by reducing taxes and putting a halt to their current pastime of demagoguing business persons (if Congress were half as critical of their own actions as they are of the average business person, they'd be holding subcommittee hearings into their own missteps pretty much every day).

It's simply not acceptable that a national economy that until recently sported an unemployment rate under 5% now features an unemployment rate hovering around 10% (which would be even higher than that if the people who have grown frustrated from searching for a job and have given up were actually counted in that statistic).

A reduction in the corporate tax rate to 20%, changing the tax code to permanently allow the immediate expensing of all business equipment and property acquired, extending the Bush individual tax cuts another 10 years, AND paying for all these changes with a commensurate reduction in federal government spending would have this economy rolling again in no time.

For those wondering what aspects of federal government spending could possibly be cut, the defense budget would be a wonderful place to start, followed by changes to social security system (increasing retirement age, means testing, etc.), eliminating or dramatically scaling-back unnecessary or redundant federal departments (Education, Agriculture, etc.) and surely a lot of other areas.

Continuing to mire in a job-less recession is increasingly looking like a political decision by those who want the government to continue spending money it does not have, while the people who truly can kick-start the economy (yes, business people) and put people back to work are hamstrung by an onerous business environment.

Unemployment Benefits Extension Looks Unlikely

The US Senate has been grappling for weeks over a bill sent to it by the US House which, among other things, provides for an extension of unemployment benefits.

"A Republican filibuster appears increasingly likely to kill long-sought legislation extending jobless benefits and a host of other spending and tax measures, despite a new round of cuts to the measure Wednesday that reduced its deficit impact even further.

Failure to pass the bill would mean about 200,000 jobless people a week would lose benefits that average more than $300 a week because they would be unable to reapply for additional tiers of benefits enacted since 2008. Governors denied help with their budget woes are likely to lay off tens of thousands of state workers."

Government-provided unemployment benefits are a mixed bag. Although a (rather weak) argument can perhaps be made that providing these benefits is a proper role of a federal government, it's undeniable that these same benefits should be fairly short-lived and have a declining pay-out ratio to those receiving them. In addition, there should be a means-test employed as well, so those that have assets that could be sold to provide an income aren't provided a stipend from the government when one is not clearly needed.

Back to the issue currently before Congress though - continuing to extend these same benefits sends the wrong message to the recipients - that the government, not themselves, are responsible for their own well-being.

It's time for all Americans to grow up and realize that, given the state of our national finances, there's no such thing as a free lunch. A proper role of a legitimate government is not to redistribute income and property from one group to another. If one group believes another is worthy of their charity, they will freely and willingly give to that other group or person.

Government Workers are Endangered?

A CNNMONEY.com article laments the fact that even workers for the government are losing their jobs these days.

"Once upon a time, there was job security in a government job.

That's no longer the case. The layoff ax has hit public sector payrolls with force as states wrestle with massive budget shortfalls. Since August 2008, some 231,000 state and local government jobs have disappeared -- 22,000 last month alone," according to federal data.

The majority of the cuts are on the local level, which at 14.4 million workers is nearly three times the size of the state workforce. Plus, unlike at the federal level, most of these cuts come from the ranks of teachers, cops, firefighters and social service workers.

And more pain is coming down the pike. Some 19 states say they plan to implement layoffs to narrow budget gaps, according to a recent survey."

The increasing percentage of workers employed by government has been an increasing drain on the overall economy for years, since the salaries of government workers are generally paid by the taxes of those that work in the private sectors.

Since the payroll of the federal and state governments needs to be dramatically scaled back in order for the economy of this country to recover, headlines such as these suggest that, at least on some levels, the economy may be heading in the right direction.

The Flip Side of the Offshore Drilling Ban

The US government has instituted a six month ban on deepwater offshore water drilling in response to the BP oil spill, which will have its own ramifications.

"President Barack Obama's six-month moratorium on deepwater drilling in the Gulf has sent shudders across the coast's offshore oil industry — where no one knows just how extensive or long-lasting the damage to jobs may be.

Louisiana has long been indebted to the oil industry. Its thousands of good-paying jobs — offshore workers frequently earn $50,000 a year or more — counterbalance the low-wage tourism industry in the state's southern tier of parishes.

But that changed — at least temporarily — after the oil rig exploded in the Gulf of Mexico, spewing the black gold into the waters. Now, many of those who counted on making it in the oil patch are out stumping for jobs."

Given the excessively high unemployment rate in the US and the fact that a lot of other drillers have been insisting that BP has been using rogue practices in their drilling (i.e., the risk of another giant oil spill is not as great as the government suggests), the drilling ban will only further depress the economy, increase the unemployment rate and increase our budget deficits as claims for unemployment payments increase.