How to boost America’s economy now Reply


By Tom Quiner

Time to get America's economy back on track!

This Labor Day, 2010, our economy is hurting.  Everything the President and his party has tried has failed.

Unemployment is way up.  Economic growth is stagnant. Net job creation doesn’t exist.  The stock market is going nowhere fast.

The underlying premise of the President is that only government can get the economy back on track.  I would suggest that, if anything, the federal government has made things worse in many (but not all) respects.

Here are some concrete suggestions on how to get America back on track:

1. Renew the Bush tax cuts.  The last thing we need now is a tax increase on America’s most productive Americans. In addition, we need to reduce the uncertainty that is paralyzing economic decision-making.  Renew the tax cuts and get out of the way!

2. Sign the Korea-Free Trade Agreement.  Senator Grassley has been a huge advocate of this agreement.  The Bush administration got the agreement negotiated, the Obama administration essentially has killed it.  And yet the upside to the agreement is enormous.

Did you know Korea is the sixth largest export market for pork?  Japan is number one.  But according to the Iowa Pork Producer’s website, pork exports to Korea could surpass Japan’s once the treaty is fully implemented.  Even more, they project the agreement would give our pork producers an increase of $10 per hog marketed.

3. Allow individuals and families to shop for health insurance products across state lines.  This is one of the few products where interstate commerce is prohibited. Increased competition would generate more choice and lower prices for consumers.

4. Along that line, provide a refundable tax credit – $2,300 for individuals and $5,700 for families – to purchase coverage in any State, and keep it with them if they move or change jobs.  This is a key component of the Republican’s “Roadmap for America’s future” as authored by Wisconsin Congressman, Paul Ryan.

5. Rescind the requirement for Project Labor Agreements (PLAs) on Federal construction projects.  As former Administrator for the General Services Administration, Lurita Doan, said:

[PLAs] “punish non-union, small construction businesses and often prevents them from bidding or performing federal construction work in their communities.”

6. Suspend the Minimum Wage (MW) until the national unemployment rate falls below 7 percent.  As discussed in previous posts, the minimum wage punishes workers with low skills.  It takes a devastating toll on teens, especially black teen aged males. The MW forces employers to pay some workers more than they’re worth, which suppresses employment.  Lack of job opportunity drives some of these young men into gangs.

The minimum wage affects the nation’s economy in other ways.  For example, it has encouraged illegal immigration.  Employers who had jobs that weren’t worth the minimum wage filled those positions with illegals who were willing to work for what the job was really worth.  By suspending the MW, we discourage illegal immigration.

Milton Friedman explains the fallacy of a minimum wage 3


By Tom Quiner

The late Nobel Laureate economist, Milton Friedman, explains why minimum wage legislation is counterproductive. He explains it better than anyone.  The clip above was made when the minimum wage was around $2.50, which dates the interview around 1977.  Unemployment for teens, and especially black teens, has only gotten worse, as I highlighted in my previous post.

Two reasons Obamanomics isn’t creating jobs 2


By Tom Quiner

This is how ObamaCare works.

As many of you know, jobs are hard to come by.  The unemployment rate continues to hover near ten percent despite stimulus spending by the Federal Government which will surpass the cost of the Iraq War (see previous post).

Nothing the Democrats have done is working.  In fact, the case can be made that it has made things worse.

Why?

It boils down to two big concerns with business owners:  cost and uncertainty.  They go hand-in-hand.  Obamanomics is increasing the cost of hiring new employees, but business owners aren’t sure by how much.

Consider ObamaCare.  It has created 159 new government bureaucracies in 2700 pages of legislation which wasn’t read by the people voting for it.  Unelected bureaucrats will figure out how the whole thing works.  Just look at the chart above which takes a stab at diagraming the intricacies of this mammoth piece of legislation.

ObamaCare will hike taxes by $569 billion dollars.

ObamaCare creates 17 new insurance mandates.

ObamaCare adds 16 million people to tax payer-funded Medicaid.

President Obama has never run a business.  He doesn’t understand the impact that uncertainly has on hiring decisions.

Now let us turn to the new 2,300 page Dodd-Frank finance regulatory act.  The Wall Street Journal reports there will be “no fewer than 243 new formal rule-makings by 11 different agencies.

What will these new rules be?

How much will they cost?

Business owners have other concerns.  Will Congress allow the Bush tax cuts to expire? (Why don’t tax increases ever expire!?)  Will Congress increase the payroll tax?

The only thing that is certain is that it is going to cost businesses more to hire new employees, and that is bad for unemployment in this country.  Democrats have written 5000 pages of new legislation in these two bills alone and America is paying the price.

What would be the best stimulus for our economy?  Elect a Republican Congress this November.

Common sense made difficult 2


By Tom Quiner

The “King of Pork” is dead.

[10byrd0628]

Senator Robert Bird of West Virginia died today.  I will leave it to others to honor (or pillage) his illustrious career.  I would, though, like to analyze the essence of Obamanomics in light of Mr. Byrd’s passing.

Mr. Byrd was an unapologetic supporter of pork barrel spending.  He considered his proudest achievement the billions of dollars he brought to West Virginia in Federal pork barrel spending.  He believed Federal spending was the ultimate stimulus to a state’s economy.  No one brought more “bacon” home to his state than Senator Robert Byrd.

So does federal stimulus spending really stimulate the economy?

No.  Read my post from June 21st (Is more big government really the answer?) for a discussion of federal spending as it applied to the Great Depression.

A new study by three economists from the Harvard Business School sheds new light on the impact of federal pork barrel spending on local economies.  Professors Lauren Cohen, Joshua Coval, and Christopher Malloy were stunned to discover that pork spending hurt more than it helped.

A few specifics:

• When a Senator becomes chair of one the top three congressional committees, his/her state experiences a 40 to 50 percent increase in pork spending.  The average is about 20 percent in the House.

• Rather than boosting capital expenditures, the average firm in those states reduced capital expenditures by roughly fifteen percent once the pork began to flow.  The researchers based their findings on 40 years worth of data.

• Firms significantly cut physical and R & D spending.

• Firms reduced employment.

• Firms experienced lower sales.

How could pork-barrel spending hurt instead of help?  The researchers theorize that the federal stimulus dollars crowd out spending the private sector planned to do itself.  The Tennessee Valley Authority of 1933 is one example.  Federal spending creates uncertainty, too, because the dollars may not be there tomorrow if their powerful Senator retires … or dies.

You can read the entire study here: “Do Powerful Politicians Cause Corporate Downsizing?

The essence of Obamanomics is that government spending creates jobs.  They may create government union jobs, but it comes at the expense of the private sector jobs and economic growth.  New research from Harvard rejects the underpinnings of Obamanomics.

The joke goes that “economics is common sense made difficult.”  With Obamanomics, the joke comes at our expense.

***

My condolences to Senator Byrd’s family on his passing.

Iowa needs tax relief 1


As seen in the Des Moines Register March 21, 2010

I’ve enjoyed a life long love affair with Iowa. I think it’s the best place in America to live.

From the beauty of our land to the down-to-earth  people with good values and common sense, Iowa offers me what I want out of life.

We’re faced with some problems, though.

I’ve had the pleasure of having my oldest son in town on a visit in March. Unfortunately, he decided to leave Iowa upon his graduation from the University of Iowa a few years ago.  Opportunity first led him to Alaska and then to Houston, where he now lives and works.

I hope opportunity leads him back to Iowa some day.  Same goes for my daughter in North Carolina, and my son at Iowa State.

Does Iowa offer opportunity?  Yes it does, but it could offer more.

We need more jobs in Iowa.

Our tax policies may be holding us back according to the Tax Foundation, a Washington D.C. think tank specializing in tax policy.

They produce the Tax Foundation’s State Business Tax Climate Index.  The index ranks states on the basis of five facets of their overall tax systems, including corporate and individual  income tax rates, sales tax, unemployment insurance, and property tax rates.

According to the Tax Foundation, Iowa ranks number 46.  Our neighbor, South Dakota, has the most favorable tax climate for business in the country.  Does tax policy affect employment?

Let’s compare.  From 2000 to 2008, the number of full and part time jobs in South Dakota increased by 9.9% according to the U.S. Department of Commerce.  In Iowa, these jobs only increased by 5.4 percent.

The rate of growth in business ownership is faster in South Dakota than Iowa this past decade.  So is personal income.

The Tax Foundation offers insights as to why.  Here are key findings from their research:

• Local and state taxes can have an adverse impact on employment.

• Corporate income tax rates have the greatest negative affect on job creation.  (South Dakota has no personal or corporate income tax).

• High property tax rates are a major deterrent to new business start ups, because they are paid regardless of the businesses’ profitability.

The bottom three states on the Tax Foundation’s index in order are New Jersey (#50), New York, and California.  What do they have in common?  They’re bleeding jobs.  Why?  An unfavorable tax environment for business is a major reason.

The next governor of Iowa needs to get it right on this issue.  I was able to reach one gubernatorial candidate prior to deadline. Bob Vander Plaats told me the number one issue he hears on the campaign trail from business owners concerns our high property tax rates.  He would like to see property tax relief to spur economic development throughout the state.  Even more, he’d like to get government out of the business of picking winners and losers by dangling carrots in the form of tax credits and incentives.  He advocates a level playing field with lower personal and corporate income tax rates coupled with property tax relief.  In other words, economic development without gimmicks.

Last year, the U.S. News and World Report rated Iowa the second worst state in the county in which to start a business (West Virginia finished last).  They were critical of our high level of government interference in the guise of very high capital gains taxes, high corporate income taxes, and high unemployment taxes on wages.

It doesn’t have to be this way.

We have the best people in American living right here in Iowa.  And yet we’re not realizing our full potential because of unsound economic policy.  Iowa’s policy encourages business decisions on the basis of political forces as much as market forces.

There is more to economic development than tax policy. But in light of our current standing, tax relief is the place to start.