Tag Archives: jobs

Gimme

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Collis P Huntington, President of the Southern Pacific Railroad (among others) is reputed to have said

Whatever is not nailed down is mine.  What I can pry loose is not nailed down.

Via Spirit of Enterprise comes this AEIDeas article of charts illustrating the attitude from a different perspective.  Below, some of those charts.

The rate of entitlement growth per capita has been nearly twice as fast as per capita income growth for the last fifty years

Note: Derived by author on the basis of data on official transfers, price changes, and population change. Sources: US Bureau of Economic Analysis, US Dept. of Labor, US Census International Data Base

And

In the 1960s, the federal government spent $2 on governing for each $1 it spent on entitlement transfers. Today that ratio has completely flipped:

Sources: Derived from: Federal government entitlement transfers: Bureau of Economic Analysis, Federal Budget Outlays: White House Fiscal Year 2012 Historical Tables

And

Here’s where the money goes:

Sources: Bureau of Economic Analysis, US Department of Labor, Bureau of Labor Statistics, consumer price index

And

As the Welfare State has expanded, Americans are working less.

Source: Bureau of Labor Statistics, One Screen database, Labor Force Statistics, Series “LNU01300001”, “LNS12300001”

And there’s this from The Daily Caller:

After accounting for federal taxes, the median hourly wage drops to between $21.50 and $23.45, depending on a household’s deductions and filing status.  State and local taxes further reduce the median household’s hourly earnings. By contrast, welfare benefits are not taxed.

Now it’s the culture of dependency which the Progressives have created that is making the demand.  And President Barack Obama is prying ever more loose, actively abetted by an increasingly pliant Republican Party.

Welfare and Work Incentives

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Casey Mulligan has a book out that looks hard at the Panic of 2008 and explores its causes.  The book is called The Redistribution Recession, and I strongly recommend it.  Here are some highlights.

In this way, the simple supply and demand model…explains 81 percent of the labor market contraction from 2007-Q4 and 2009-Q4, as long as it incorporates the labor supply effects of the expanding social safety net.  The remaining 19 percent of the contraction is “explained” by unmeasured market distortions—that is, still unexplained by the measured factors present in the model.

And

The (theoretical) effects of the reward to working can also be seen from the perspective of wages.  The more that the safety net pays for not working, the less reason people in low-wage jobs have to keep their job and the less reason unemployed people have to accept a low-wage job.  In this way, the safety net raises wages, to which employers respond by hiring less.”

And

When food stamp or unemployment programs pay more, the sacrifices that jobs require do not disappear.  The commuting hassle is still there, the possibility for injury on the job is still there, and jobs still take time away from family, hobbies, sleep, etc.  But the reward to working declines, because some of the money earned on the job is now available even when not working.

Note that, as long as the government involves itself in the economy through its penchant for social engineering/safety nets, this creates a feedback loop.  The safety net (the parts of which Mulligan enumerates, but which I use here expansively to include the entire suite of components) reduces the incentive to work by replacing monies lost from not working, thus driving up costs to employers of attracting workers he otherwise would be interesting in hiring, reducing employers’ hire rates, leading the government to try to further expand the safety net, further reducing work-seeking incentive, driving up labor costs,….

And

…studies: Hoynes and Schanzenbach (2012) show how potential participants stopped working or reduced their work hours when the food stamp program was introduced.  Studies of unemployment insurance find that program rules have a statistically significant effect on how many people are employed, and how long unemployment lasts.  Yelowitz’s research (2000) shows how a number of young single mothers found employment exactly when, and where, state-level Medicaid reforms increased their reward from working.

And so on.  Note that none of this is to disparage people who make use of the safety net; they’re behaving entirely rationally in an economic sense.  Mulligan’s purpose is only to show how incentives of safety nets work.

The Obama Tax Increases

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Here’s a partial enumeration of the taxes which President Barack Obama is willing to blow up our economy in order to get.

Income tax: Across the board.  Top rate rises to 39.6% from current 35%, bottom 15% rate disappears.  Obama claims to be interested only in the top rates, but his evident lack of seriousness in his proposals counters this claim.  See the table below

Self-employment tax:  Rise from 2.9% to 3.8%.

Exemption Phase-Out: Otherwise allowable exemption amounts will be reduced by 2% for each $2,500 or part of $2,500 ($1,250 for married filing separately) that the taxpayer’s AGI exceeds the AGI threshold for the year based on the taxpayer’s filing status.

Itemized Deduction Phase-Out: Resumed income-based phase-out of these deductions: taxes, interest (except investment interest), charitable contributions, employee job expenses and other miscellaneous itemized deductions, etc.  Additionally, and independent of income (in the sense of a phase-out), the threshold for deductibility of medically related items rises from 7.5% to 10% of AGI.

Long-Term Capital Gains Rates Increase: See the table below

Coverdell Education Accounts: Dollar limit on contributions for any one beneficiary is reduced to $500 from $2,000, contributions can be made only by individuals; the income phase-out range for the annual contribution limit rises from twice the amounts for single filers to a hard $150,000-$160,000 for joint filers instead of simply; contributions for special needs students age 18 or over no longer allowed; qualifying expenses elementary or secondary school expenses no longer allowed; contributions to a Coverdell account and a Sec 529 Qualified Tuition Program no longer allowed in the same year; education credits in a year in which a Coverdell withdrawal is made no longer allowed.

American Opportunity Tax Credit: Disappears.

Child & Dependent Care Credit: Falls from $3,000 ($6,000 for two or more qualifiers) to 2,400 ($4,800 for two or more qualifiers).

Estate tax: Rise to 45% from current 35% (and from 0% just a couple of years ago) on everything above $3.5 million estate value, down from current $5.12 million exclusion.

Investment surcharge: An Obamacare tax for 2013 and beyond—higher-income individuals hit with an additional 3.8% Medicare tax on net investment income, including long-term gains and dividends.

Medical device tax: 2.3% on top-line revenues of companies making devices such as prosthetic limbs, pacemakers, and operating tables.  This is levied even if the respective company doesn’t earn a profit.

Employer Health FLEX-Spending Plan Contributions: Maximum amount available for reimbursement of incurred medical expenses in an FSA for a plan year cannot exceed $2,500, down from…unlimited.

Codification of the “economic substance doctrine“: Allows IRS to disallow tax deductions and other tax-minimizing plans solely on the IRS opinion that the matter lacks “substance.”

Negotiating?

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The Progressives in our Federal government insist, with a straight face, that the Republicans have put forward no concrete proposals in the present budget…negotiations.  They carefully ignore the fact that the Republicans already have put forward three concrete proposals: two House-passed budgets (for 2011 and 2012, which contained explicit spending, taxing, and entitlement reform steps), and the proposal on which they campaigned last fall.

Oh, wait—the Progressives studiously ignored those, too—in the Senate, where they refused even to permit debate on the budgets and ever since, with their pretense that the spending, tax, and entitlement reforms of the campaign don’t exist.

The Progressives’ current position?  As The Wall Street Journal reports,

[M]any Democrats have ruled out any changes to Social Security during the current fiscal talks.

And

A senior administration official said the White House would make no new offers until Republicans changed their opposition to raising top tax rates.

Throughout this entire shabby charade, President Barack Obama has been accusing the Republicans of holding middle-class America hostage against their refusal to agree to tax rate hikes on his hated Americans.  Yet the Republicans and Progressives already agree on making permanent current tax rates on 98% of Americans.  It’s Obama who is threatening to blow up our economy on his ego trip of demanding 100% of a tax deal for which he already has 98%.

It’s Obama who’s threatening to blow up our economy by refusing to discuss spending cuts and entitlement reform at all—after agreeing that they should be on the table shortly after the election.

It’s Obama who’s threatening to blow up our economy with his insult of demanding sole debt ceiling authority in utter disregard of the Constitutional role of Congress—and not the President—in setting spending.

Update: Speaker John Boehner (R, OH) and a number fellow members of the Republican leadership made a counterproposal Tuesday that included much of Obama’s precious tax revenue increases–not as rate increases–to the tune of $800 billion, and $1.2 trillion in spending cuts.  Obama blew this off within the hour.  So much for negotiating.

Ex-Senator Rick Santorum, last night on Greta van Susteren’s On the Record,  said that Obama’s fallback–his Plan A–of Sequestration and tax rate increases across the board makes him entirely willing to take our economy over the cliff: Obama gets his tax rate increases, and he gets the Progressives’ decades-long fought-for cut in defense spending, a $500 billion reduction.  Obama sees this as a heads, I win; tails, you lose situation.

I think Santorum is right.

Republicans and Talking to Folks

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Neil King and Victoria McGrane have some thoughts.  They cite various conservatives, for instance:

[A]ctivists—including tea-party activists but also some mainline Republicans—say the party should adopt a more populist tone, one that places more emphasis on ways Republican policies would help the middle class.

And

The critique from these Republicans suggests that the party should change some policies—such as adopting a more skeptical posture toward big banks—as well as the way it talks about economic issues.

And

Mr. Romney’s lopsided loss among the country’s expanding universe of minority voters has fanned fears within the party that its main challenge is demographic, though others dismiss that worry as secondary.

But these are short-sighted and outright wrong.  The “others” are right; the problem is Republicans’ and conservatives’ general failure to talk to all Americans, regardless of ethnicity.  Republicans and conservative need to get out and talk to people in the neighborhoods in which they live—all of those neighborhoods—as I pointed out here and here.

Ex-Mississippi Governor and erstwhile GOP Chairman Haley Barbour has the right of it.  He understands that conservative policies aren’t the problem.

We do very well when our policies for economic growth and job creation are put in place.  But we often don’t talk about those policies in ways that the middle class and working class see as in their interest.

And they don’t talk at all about those policies where Americans physically live.

The other critiquers, though (the ones who are concerned with the content of the message as well as where it’s delivered), also have a point—apart from attempts to change those policies.

The Republicans’ approach to dealing with the nation’s largest financial firms illustrates the tension.  GOP leaders oppose the Dodd-Frank financial-overhaul law as regulatory overreach and want it scrapped, partly because they say it codifies certain institutions as being too big to fail.  But so far, they haven’t rallied around an alternative means to reining in the big banks.

Or establishing the need for government to “rein in” the big banks.  Which points up another aspect of message content.  In addition to their failure clearly to articulate what they would do differently vis-à-vis Dodd-Frank, their mantra concerning Obamacare is woefully inadequate:  “Repeal and replace.”  Replace with what?