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Shock Therapy for Jobs
· Saturday, December 4, 2010
Unemployment jumped to 9.8 percent in a very disappointing November jobs report. Non-farm payrolls increased by only 39,000, and private jobs expanded by just 50,000. This is way below what the economy needs.
Most discouraging, the smaller-business household employment number fell for the second time in a row, down 173,000 in November after a 330,000 drop in October. This is the 19th straight month with unemployment above 9 percent.
Now, after the severe financial panic of two years ago, it seems clear that too many tax and regulatory obstacles are blocking satisfactory job creation. And it also seems clear that a number of fresh new incentives will be necessary to spur the kind of prosperity that Americans desire. Following the deep recession, we need shock-therapy, pro-growth, tax-cut and deregulatory incentives.
Post-election, is the Washington war on business really over? Has the war on successful earners and investors truly ended? Is the class war against capital still being waged by the White House?
Will Barack Obama bring senior businesspeople into his inner circle? Are we going to get pro-growth tax reform for individuals and corporations? Are we truly going to limit government spending in order to reduce the onerous budget deficit? Is King Dollar currency stability on the table?
These are all key questions for the economy's future and the murky unemployment outlook.
Perhaps the only saving grace from the poor jobs report is that it will spur a quick resolution to extend all the George W. Bush tax cuts.
Democrats keep shilly-shallying with all these silly class-warfare amendments, like a $250,000 limit, or a $1 million limit. This has everything to do with left-wing redistributionist social policy and nothing to do with economic growth. The fact is passing the bill to freeze the tax rates will help business confidence. Why don't Democrats understand this?
But there's more.
Large and small companies remain worried about the high regulatory and tax costs of Obamacare, which is the No. 1 jobs-stopper. How expensive will it be over the next five to 10 years for the new hire? Companies also have to deal with a crazy quilt of new financial regulations that may block access to new bank loans when private credit demand kicks up.
But the Bush tax cuts will not do the job alone. Full-fledged flat-tax reform -- of the sort embodied in the best of the Bowles-Simpson fiscal recommendations -- will be necessary for full-fledged economic recovery.
Lowering the top personal and corporate tax rates will increase after-tax returns for work and investment. That's the kind of strong new incentive that will be necessary to ignite rapid economic growth in the post-meltdown period. Broaden the tax base, and lower marginal rates across-the-board.
And full-throated spending reduction will be necessary to drive deficits lower, and reduce the threat that future taxes may have to go up if the bond vigilantes come after the U.S. Treasury market the way they have attacked various countries in Europe.
Meanwhile, the Fed can produce money, but we are learning again that it cannot produce jobs. It also can produce inflation and a devalued dollar.
In other words, the basic building blocks for growth must be restored: limited government, lower tax rates and a steady currency.
However, all is not doom and gloom on the economy. There is some optimism. In fact, there's a mystery to Friday's jobs report, since it just doesn't tally with all the other good economic news.
Retail sales are up four straight months, and chain-store sales for the early holidays surprised on the upside. Manufacturing reports have been solid. Even for November, the Institute for Supply Management's surveys for manufacturing and services were solid. The ISMs are basically real-time economic indicators. And oddly enough, the employment component of each looks fairly strong.
Meanwhile, core business investment is rising at a double-digit pace. Profits are at a record high. Commodity indexes are rising at a better than 10 percent rate, year-on-year. The M2 money supply is growing around 8 percent annually. Business loans from commercial banks are finally bottoming. The Treasury yield curve is positively sloped. Oil prices, closing in on $90 a barrel, are too strong. And the stock market's strong run continues.
In sum, the economy is actually rising at a roughly 3 percent rate. But economic growth should be double that.
There is so much work to be done by the new Republicans in Washington. Let's hope the tea party message is alive and well in the GOP. Smaller government, lower tax rates, deregulation and free-market economic freedom. We need it now more than ever.
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Doktor Riktor Von Zhades
Mr. Kudlow;
I live in "flyover" country here in Western KY, in an area that is traditionally conservative, hardworking southerners who take nothing for free as it all has to be earned. (BTW, don't confuse this with the acceptance of charity, there is a difference.)
Recently, my local TV station did a quick survey on the "Commission" that had been appointed by President Obama, to study ways to re-start the economy. Many of the respondents were for allowing the Bush Tax Cuts aka "tax cuts for the rich" to expire. It does not occur to them that their own taxes would increase as well as those on the rich.
I cannot understand, nor explain that mindset. Here we have a congress that his heck-bent on destroying the US Economy, so as to actually become the beneficiaries of the wealth of others, and my local fellow citizens are still believing the lie that tax cuts benefit only the wealthy. They (and with some understanding I will admit), see the said cuts as being for corporations only and not for the mom and pop businesses (those earning a bit above or below the 250k threshold), that are the backbone of our nation. One person actually suggested increasing the rates that are already in place.
Of all the quotes the one most often repeated was;
"The rich can afford to pay more"
I am appalled by the fact that they even think this way. I kept after some of them with the simple question as to what happens if you tax the rich so as to force them to either, hide their wealth further, leave the country, or worse, tax them out of existence. Many of the answers ranged from an "I don't know" to "who cares?".
All of this coming on the heels of a proposed increase in the death tax, wherein the government has decided to increase that rate to around 55% I believe it was stated. I suppose getting half of what someone else had earned wasn't enough for them to spend. Additionally I read (I beleive it was on this very site), that there is an proposal to do away with claiming interest on one's home when filing tax returns.
How is it that the neocommies in power can point fingers at the wealthy, the corporations, in fact basically anyone that wants to succeed financially, as being greedy and evil, but never looks into the mirror and says "we have met the enemy, and he is us"?
Posted December 4, 2010 at 8:03:45 AM
g.wegmann
Obama is the Hoover of the 21st century, even though he is trying to be FDR!
Posted December 4, 2010 at 9:11:04 AM
Big D
To fix the economy.
1 Build confidence the American way – Lead the way!
2 Rally the public around a double barreled solution
A Turn our vast reserve in coal into oil CLEANLY!
B Sell this oil to the world
I Reverse trade deficit
II Lower energy prices
III Increase revenue to Govt.
IV Create jobs
Use this to energize the public, show the world that this is still America
And we can do it…
Posted December 4, 2010 at 10:00:38 AM
MARINE
Obama cares not for business or jobs. He cares about taking total control of everything, and making the US come under International rule. If you paid attention to Europe when they all agreed to change thier money to the Euro, you will understand what is happening here and now. The dollar keeps going down. The results is a collapse of our economy and an economic emergency, where the Govt. takes control of everything and Martial Law is declared. Obama will sieze control of the gold supply--Fort Knox--and have absolute power. He signed the Pres. Order in January 2009. One only has to look at what Hitler did to Austria in 1939. He promissed the people the same things Obama is promissing you now. They were in economic turmoil then and when the voted him to take over, the country collapsed within five years. You were warned by Pres. Reagan in 1981 about National Healthcare, but the congress shoved it down your throat anyway. The Dem. Party has been hell bent on destroying this Nation since Pres. Jackson. Agreed that the GOP isn't a whole lot better, but Nov.2 showed the signs that the American people may want to get back in the game. I hope so, because if we don't, all hell will break loose. The only protection you have is to pay attention to what is going on. Watch the value of the dollar. If it gets close to 70 cents, get ready. China and Russia have already began moving away from it. If it fails it will only be good for starting the fire-place, if you have one.
As for the Tax cuts, let them expire. The only way to get the attention of the people is to hit them in the wallet. It may spark a national movement, say stikes, or not paying taxes, like what is happening in Europe now. If you choose to linger on in agony saying they wouldn't do that, you may suffer more in the long run than if you break it now and start over. It ain't about jobs or economy, it's all about control.
Posted December 4, 2010 at 10:30:45 AM
Just saying
And the Democrats are winning! From all the comments I hear/read from the people, the sad majority wants the rich to pay more taxes. The evil ones in Congress are banking on the stupidity of the masses, and they are winning. People still don't think, and they are still on automated pilot. It is 1984, happening before our very eyes. These are the proles, all right, who are going to make possible the Big Brother.
Posted December 5, 2010 at 5:57:36 PM
Mike in Indianapolis
In my early years I worked in the retail field. We saw a number of Christmas shopping seasons where the economy was in or near the tank, but Christmas sales were brisk BECAUSE the economy sucked. Many of the shoppers I encountered were fearful that anything would ever improve for them in either the near- or distant-term. They went overboard to try to give their families "one last decent Christmas," before it all came crashing down. Using the government's profligacy as an example, they spend way beyond their means without regard to the consequences - just one more time.
Posted December 6, 2010 at 9:04:54 AM
Emeril
Never met a poor man who wrote a payroll check.
But if anyone still believes this government actually intends to create or save jobs, they belong among the unemployed. Because that's where barry soetoro, harry reid, and nancy pelosi would have us all line up against the wall.
Posted December 6, 2010 at 9:11:39 AM
Richard Ryan
g.wegmann states that Obama is Hoover,while trying to be FDR. What g.wegmann dosen`t seem to understand, is that Hoover and FDR were basically molded from the same form. FDR was just Hoover on steroids.
Richard Ryan
Lamar, Missouri (Birthplace of Harry S Truman)
Posted December 6, 2010 at 12:56:35 PM