Does President Obama have the foggiest idea how jobs are created in America? There’s not much evidence he does, beyond lip service to the helpfulness of the private sector.
When the president begins a speech these days with praise for free markets, look out! What comes next are proposals for more government intervention in the economy and higher taxes. That’s the recipe, Obama says, to “encourage our long-term economic growth and stabilize our budget.”
He said so in his Republicans-are-Social-Darwinists speech in Washington two weeks ago to newspaper editors. Near the outset, Obama declared: “I know that the true engine of job creation in this country is the private sector, not Washington, which is why I’ve cut taxes for small-business owners 17 times over the last three years.”
Those cuts have had minimal effect, and not surprisingly. They were tiny and temporary, and few small-business owners bothered to claim them, if indeed they were eligible to do so. Meanwhile, the president has persistently sought to raise their income taxes.
In Washington, Obama didn’t suggest, much less propose, a single incentive or spur to private investment, yet he insisted “we continue to make investments in growth today.” These consist solely of government-funded jobs, such as “putting some of our construction workers back to work” and “helping states to rehire teachers.”
Obama yearns for a hefty increase in hiring by state and local governments. If hiring were “on par to past recoveries, the unemployment rate would probably be about a point lower than it is right now.” Restoring “huge cuts in state and local government” is “part of the challenge we have in terms of growth.”
The lesson here is that Obama has learned no lesson from what Edward Lazear of the Hoover Institution has called the “worst economic recovery in history”—that is, the Obama recovery. The economy has grown at a rate of 2.4 percent since the recession ended in June 2009, a full percentage point below average long-term growth. But the president is sticking with his plan for a government-led economic boom. This is Obamanomics: If it doesn’t work, then double down.
Obama once told a group of investors that the private sector didn’t need incentives to invest because his administration’s massive subsidies of green technology would lead the way. Now the mention of “green jobs” has become a laugh line. The main news from the green sector is another company bankrolled by Obama going belly-up.
In The Escape Artists: How Obama’s Team Fumbled the Recovery, Noam Scheiber describes the president’s “obsession” with green jobs. Eco-nomic adviser Christina Romer “would march in with an estimate of the jobs all the investments in clean energy would produce; week after week, Obama would send her back to check the numbers. ‘I don’t get it,’ he’d say. ‘We make these large-scale investments in infrastructure. What do you mean there are no jobs?’ But the numbers rarely budged.”
Obama’s latest fixation is the Buffett Rule, named after billionaire Warren Buffett. “We can’t afford to keep spending more money on tax cuts for wealthy Americans,” the president said last week. (Note: Under Obamanomics, untaxed earnings of private citizens are “spending.”) The new rule would force those earning more than $1 million to pay at least 30 percent of their annual income, whether earnings (already taxed at a marginal rate of 35 percent) or capital gains (now taxed at 15 percent), in income tax. “This is not just about fairness,” the president said. “This is also about growth.” And thus about jobs, and more.
But not deficit reduction, according to Jason Furman, the deputy director of the White House National Economic Council. He said the 30 percent tax was “never our plan to bring the deficit down and get the debt under control.” It would raise only $4 billion to $5 billion a year, a peewee bite out of Obama’s $1.3 trillion deficit for fiscal year 2012.
Obama and Vice President Biden claim deficit reductions anyway. The new tax floor is “about we as a country being willing to pay for those [government] investments and closing our deficits,” Obama said. “That’s what this is about.” Biden defended the tax hike with a question. “Do we pay down those deficits, cutting wherever we can, as we’ve been doing, while at the same time investing in things we know we must invest in, in order for the economy to grow and create good middle-class jobs?”
One response to the Buffett Rule has been to dismiss it as a campaign gimmick. Yes, it is that, but it’s much more. Obama, Biden, and their allies believe raising taxes will boost the economy by paying for increased government spending. They believe the investor class of millionaires and billionaires will invest as robustly as ever, producing growth and jobs, even if subjected to higher income tax rates and a doubled rate on capital gains. They’re wrong on both counts.
Obama has taken recently to quoting Ronald Reagan, while ignoring Reagan’s formula for recovering from the deep recession in 1981 and 1982. It consisted of tax and spending cuts, the exact opposite of Obama’s policy. By mid-1984, Reagan noted happily in a letter that job growth had exceeded 300,000 a month for more than a year. The Obama economy, which the president says is “gaining speed” and “getting strong,” hasn’t come close to that.
Obama has his excuses. State and local governments are supposedly at fault for not hiring more. And if the construction industry were functioning normally, that would shave another percentage point off the jobless rate, he claims. In March, the rate of unemployment was 8.2 percent. But by Obama’s figuring, it should be 6.2 percent.
The president doesn’t realize how lucky he is. There have been twice as many dropouts from the economy as jobs added since he became president. Were the dropouts counted as unemployed, the jobless rate would be well above 11 percent. And Obama would be hard put to come up with an excuse.
Fred Barnes is executive editor of The Weekly Standard.