Sunday, September 18, 2011

Meet the new Bill, Same as the old Bill

Photo from Christian Science Monitor
I hope The Who doesn't mind me taking a line from one of their songs(with a twist).  However that pretty much sums up the jobs bill being proposed by the Obama Administration.  Immediate short term tax breaks that expire, with future  long term tax hikes that never expire.

Anyone remember 2009 The American Recovery and Reinvestment Act?
No not really?  It is because it didn't work. Plus it's as if they dusted off the legislation and put a new title on it for 2011.
Check out this video montage of 2009's Jobs Bill ...

Call me cynical.  But I don't believe this bill was meant to create jobs.
Its true purpose is to create turmoil for the republicans and talking points for democrats for the 2012 election.  I'll explain that later on, but before anyone snickers at that theory, I can tell you, being an entrepreneur for the past 22 years, what it really takes to make jobs and this bill does not do it.

Give me a dollar tax break now only to take 10 dollars from me later?  Why would anyone vote for that?  In fact political pundits are dubbing it Stimulus III. With the first two stimulus' doing so poorly at actually stimulating anything this moniker is not very flattering, and indeed, there are calls from Democratic leaders such as Congresswoman Nancy Pelosi (D-CA) to stop using the word "stimulus" in any discussion related to the Administrations jobs bill.  The "S" words stigma is too great.
Read: Nancy Pelosi Bans the "S" word - LA Times

Details of the Jobs Bill

First, lets discuss the details of the jobs bill.  The bill actually has its own website.  Google'ing "obama jobs bill 2011" shows a list of links with the actual website for the bill first (courtesy of a paid google ad of course).  It makes me wonder why they need the propaganda.
From the official website (paid for by the democratic national committee) here are the bullet points:
  • Create incentives for small businesses to hire and grow from now into 2012.
  • Make investments that would prevent layoffs of as many as 280,000 teachers, provide opportunities for long-term unemployed veterans, and put Americans to work rebuilding roads, railways, bridges, and schools in need of repair.
  • Implement the most sweeping reforms to the unemployment insurance system in 40 years to help those without jobs transition to the workplace.
  • Expand the payroll tax cut, cutting workers payroll taxes in half next year. This provision will provide a tax cut of $1,500 to the typical family.
  • Be fully paid for as part of the President's long-term deficit reduction plan.
Lets take a deeper look at the the details (the following details courtesy Bloomberg Media -  link below)...
  1. The bill will cost $447 Billion dollars to fund
  2. Increases taxes on high earners to help fund it.
  3. Taxing the carried interest, or profits-based compensation, of private equity managers, real estate investors and venture capitalists as ordinary income, instead of more lightly taxed capital gains. 
  4. The biggest revenue-raising proposal in the jobs package -- about $400 billion -- would cap at 28 percent itemized deductions and some exclusions for individuals earning more than $200,000 a year and married couples earning more than $250,000.
The Fallout

So there you have it.  Tax anyone making $250,000 or more, permanently.
The problem with that thinking is everyone forgets that the vast majority of small businesses fall into that category.  These small businesses hire 80% of the workforce.  When faced with higher taxes and smaller income, business tend to NOT hire or lay folks off.  Just read the headlines about the financial sector and the government suing all the major U.S. banks.  They are laying off tens of thousands of workers a year, in no small part to hedge against the coming liabilities.
What is the true reason for this Jobs Bill?

Well, its not to create jobs.  It is a bill put out in an election year designed to force republicans to vote against it.  No conservative would think about raising taxes in an election year.  That fact alone will give democrats a talking point that says something like this ... "We wanted to make more jobs but the republicans voted us down.  Its their fault the recession has not turned around."
But will this work?  If the Nevada and New York special elections this week are indicators of what is to come in 2012, it appears the electorate is not going to buy these excuses.  They want action, they want results, and they want relief.

Hang on to your keyboards folks, this election cycle is going to be a rough one.

Bloomberg Media - Details of Obama Jobs Bill
Official American Jobs Act Website
Obama Gets Aggressive on Jobs - Christian Science Monitor
Read: Nancy Pelosi Bans the "S" word - LA Times

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