(Dan Schwartz) – President Obama is adrift in a sea of unprecedented national debt and ever-expanding deficits, yet he has proposed an array of government programs that would make even Lyndon Johnson blush.
The Administration suggests a host of tax increases to pay for his agenda, but the bottom line of the 155-page bill can be found in the last subsection of the last section on the last page. The President has asked Congress to increase the target for the annual deficit to nearly $2.0 trillion—up from its current $1.5 trillion. Apparently, even Obama doesn’t believe his own bluster and wants more debt to cover the costs—just in case!
One reason the Democratic leadership passed Obamacare is that few legislators actually read the bill. At 2,409 pages, can’t say that we don’t blame them. To scythe through the current jobs bill is to journey through a thicket of new programs; new federal agencies (located in Washington, of course); a 52-week extension of Federal unemployment benefits; changes in the tax law that create exceptions to the exceptions to the exceptions; and more.
The Jobs Act offers programs for teachers, veterans, construction workers, high-speed rail, airports, wireless, summer employees, Native Americans, the long term unemployed, and just about everyone except for the people who pay the vast majority of American taxes—those earning more than $250,000 per year.
It is easy for the Democrats to say let’s tax the rich to pay for all the new programs, agencies, and handouts. And, yes, exemptions for corporate jets, carried interest, and oil and gas drilling (amongst others) should all be reviewed. But, according to the (liberal) Tax Policy Center, those earning over $200,000 annually already paid 60% of the country’s $1 trillion in taxes in 2009.
The real culprit, of course, is the tax code, a law riddled with exceptions, complexities, and regulatory minutiae that defies rational analysis or comprehension.
What President Obama has laid out is no different than what got us into the current mess in the first place—borrowing to create a supply of goods and services for which there is no customer, and, then hiring more government employees to oversee it.
Nevada is one of many states that bear the brunt of these policies: abandoned casinos, vacant land, and the nation’s highest unemployment created by money borrowed for demand that never existed. Creating new programs and subsidizing more workers are easy, but who will purchase the goods and services that result? No one—the buyers are simply not there. Meanwhile, the country is stuck with another $500 billion in debt.
We live in a free market economy governed by a national-state partnership. Somewhere we need to stop destroying the very core of our economy—private enterprise and individual initiative.
Instead of devoting his first two years in office to cramming down health care and financial regulatory bills, the President (not to mention, a raft of Nevada officials who have been silent as the state suffers) should have focused on the economy from Day One. He (and they) didn’t.
By now, this crew is out of options except to resurrect an approach that simply kicks the can down the road.
To be sure, solving the jobs issue is tough. How can we squeeze jobs out of an economy that has stopped growing, lost its competitive edge to overseas manufacturers, and been great at replacing workers with machines? How do you pay for federal programs when the Treasury is bust, the Federal Reserve Bank has printed trillions out of thin air, and interest rates are at historic lows?
You don’t. But, our country is home to two markets: capital markets and primary markets. At this stage, our jobs issue can only be solved within the primary markets—those that create goods and services. The Treasury and Fed are simply out of bullets.
How do we begin to solve the unemployment problem? It may mean fundamental changes in the way our economy is organized and how we perceive our place in the world.
More next time . . .
(Dan Schwartz is Chairman Emeritus of the Asian Venture Capital Journal and has published, The Future of Finance: How Private Equity and Venture Capital Will Shape the Global Economy.)