Time to De-Stimulate
A Commentary By Lawrence Kudlow
After the arrival of a disappointing December jobs report, my thought on putting America back to work is simple: de-stimulate.
That's right. Get rid of the Obama stimulus monster, including the government takeover of health care, cap-and-trade and all this nonsensical talk of creating green jobs. Get rid of the increase in marginal personal tax rates and capital-gains tax rates. Get rid of the payroll tax hike from the health care talks. Get rid of the spending that is a counterweight to growth. Get rid of it, every part of it. It's creating so much uncertainty that even profitable businesses are afraid to hire new workers and expand.
It's like business is on hold as it waits for the next Washington shoe to fall.
Check this out. On Friday, the day of the sub-par jobs release, President Obama comes out with a new green-jobs program that will cost taxpayers $2.3 billion. He predicts targeted tax credits for all of his faddish "energy savers" -- presumably determined by hoards of EPA bureaucrats -- will create 17,000 new jobs. This is out of a total workforce of 153 million.
And wait, it gets better. The average cost of these alleged new green jobs will be $135,000 per job. It's sorta like the $780 billion stimulus plan, half of which has supposedly saved 1 million jobs at roughly $200,000 per job.
And on the subject of energy-related jobs, the EPA is now going to penalize manufacturing America -- or what's left of it -- with tougher standards to reduce smog. Of course, smog has already fallen 25 percent in the last three decades. And the EPA's projected smog savings are so miniscule compared to the new costs for business that the National Association of Manufacturers, the petrochemical makers and others are screaming bloody murder.
This little EPA beauty could cost up to $90 billion annually. All of this with a 10 percent unemployment rate, mind you. It's another triumph for left-wing social policy over economic-growth policy.
And get this. Interior Secretary Ken Salazar recently announced that he is closing down federal lands for oil and gas drilling. This with the price of oil hovering around $83 a barrel and retail gas at the pump moving in the direction of $3 per gallon. Huh? Does anybody in Washington have any common sense at all?
Steve Moore of The Wall Street Journal just wrote a good column about tax chaos in the new year, with small-business write-offs for capital purchases expiring, the alternative minimum tax (AMT) un-indexed for inflation and no fix in place for the estate tax, which is set to rocket from zero back to 55 percent.
And let's not forget, as Harvard economist Greg Mankiw reminds us on his excellent blog, that the $780 billion stimulus plan was supposed to generate a peak of only 8 percent unemployment. Not happening -- at least not yet.
So my point is this: Get rid of all this government spending, taxing, regulating and meddling. De-stimulate. Let us keep our own money as workers, small-business owners and corporate employees. Stop any future tax hikes. Stop them. And bring down business tax rates for large and small companies, from 40 percent (federal, state and local) to something around 25 percent. And take a cue from FedEx CEO Fred Smith, who wants to revive the manufacturing and transportation industries with immediate cash-expensing tax write-offs for investment in new equipment.
President Obama has talked about a zero cap-gains tax for small investors. But why not provide more capital access for everybody, small- and large-business investors?
In light of all the tax-and-regulatory threats, it's too expensive to hire right now. So get rid of all the so-called stimulus plans and social policies to transform the government's relation to the private economy. Remove these obstacles.
Now, even with an 85,000 drop in corporate payrolls in December, labor-market conditions are gradually improving, however slowly. Leading indicators like temporary-help workers, manufacturing overtime hours and jobless claims are pointing to better job creation in 2010. But it's painfully slow. And that's why the tax-and-regulatory obstacles from Washington must be removed to speed up the employment-recovery process.
The economy has more than enough monetary stimulus, and corporations are profitable. The stock market rose nearly 3 percent in the first week of the new year, and is up 70 percent from the March 2009 low. The recession is over. But America must go back to work to truly get the country moving again. Unfortunately, Washington is standing in the way.
There's a populist wave coming, but it's from the right, not the left. Free-market populism emanating from the tea-party movement wants government out of our businesses and out of our pockets. These folks are right.
Right now, Washington is completely wrong.
Views expressed in this column are those of the author, not those of Rasmussen Reports.
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