President Obama and his “supposed” jobs bill
President Obama proposed a large plan that was a combination of tax cuts and stimulus spending. He knew his plan could never pass; however, he proposed the plan as part of his re-election campaign. The original plan had some good ideas and some bad ideas; however, it was not relevant because it could not pass. It was a plan I certainly opposed because the Federal Government is broke and needs to stop borrowing money from China to pay for current spending.
Now the Democrats plan on breaking this large and unaffordable plan into much smaller pieces and then trying to pass those smaller plans. This is a much better strategy for the Democrats and I like smaller bills that we can understand.
For the last several years the Democrats have wanted to raise taxes on those making more than $250,000 per year. In a BRILLIANT political move the Democrats (Harry Reid actually) have changed this plan and now they only plan on increasing taxes if you make MORE than a million dollars a year. In fact the additional taxes would be paid ONLY on ones annual income over one million dollars.
This is a winning issue for the Democrats and will put the Republicans in a very tough spot. This tax increase would only effect maybe 1 out of every 200 tax returns filed. It is roughly hitting those with incomes in the top one half of one percent.
So now the smaller pieces of the bill will be proposed. The first one up in the Senate is S1723. This bill proposes that the Federal Government give the states $35 billion. Further the bill does its best to ensure that the states turn around and spend $5 billion on first responders and the balance on teachers and education K-12. Further the bill TRIES to force the states to spend the money quickly to hire or retain teachers and 1st responders.
The bill has not been fully analyzed by the JCT or CBO; however, by some estimates this bill might allow states to employ 400,000 teachers and first responders over a one year time period. I imagine these estimates are too high because you have to understand that the fifty states have budget problems and they will do their best to take this Federal money and spend it on other things. For example maybe a state will take the Federal money and then turn around and allot less of its own tax dollars to education… This happens all of the time and happened in the last big stimulus bill in 2009.
If these estimates are true then this bill would require the Federal Government to borrow 35 billion dollars it does not have and then turn around and give it to the states. Federal taxpayers would have to pay this 35 billion back with interest. If these estimates are right then it will cost the Federal Government $87,500 per job to create or retain 400,000 jobs for ONE year.
The 35 billion is not fully paid for. Instead a new “sur tax” will be levied on those who make over a million dollars. This tax will only effect the income over one million dollars and the tax is .5%. So a person making two million dollars would pay an extra $5000 in taxes due to this “sur tax.” The new tax would start on January 1st, 2013. After ten years this tax would generate enough tax dollars to pay back the 35 billion plus interest. So the spending all happens now and the taxes to pay for it would be collected from 1/1/13 - 12/31/22. I am not sure if the tax would remain in place (I assume so) after 12/31/22.
This bill is a brilliant move by the Democrats from a political standpoint. It is brilliant because most Americans do not make more than a million dollars per year and it will be easy for the Democrats to sell this plan to the public.
Even though I acknowledge this bill is a brilliant political move by the Democrats I oppose the bill for three reasons:
- The fifty states are each responsible to hire and pay for their own teachers and first responders. The Federal Government has no business doing this.
- These jobs would be for just one year. Once the 35 billion is spent then the states will have to lay off all of these people OR they will have to find the funds to pay their new salaries and benefits. So these jobs are temporary and just intended to help President Obama get re-elected.
- The Federal Government has no business borrowing more money. So far in 2011 we have already spent 5% more money than we had spent to this point in 2010. The Federal Government just grows and grows with no end in sight.
Mike
So many lies, so little time to debunk them
In this post I am going to debunk some lies. I am sick and tired of the politicians lying like crazy and the media allowing them to do it…
Lie #1. The House Republicans keep talking about how have cut or will cut spending.
Investors Business Daily has an interesting piece you should read. Basically in the first 9 months of 2011 total state and Federal spending is up 5% over the first 9 months of 2010. Considering how many state legislatures the Republicans gained the majority in and how many seat they gained in Congress this statistic is discouraging to say the least.
Lie #2. President Obama and many Democrats are saying that the austerity the Republicans have imposed on the Government is hurting the economy. In fact they are now accusing the Republicans of wanting our water to be unclean and other similar fabrications.
See the answer to lie #1 above. That answer debunks this lie as well. We do NOT have austerity. We are spending even more this year than last year and last year we spent way too much money…
Interestingly enough BOTH parties are lying about spending levels and the media is, as usual asleep at the switch…
Good grief…
Mike Sylvester
President Obama really reminds me of President Bush at times
The United States Government purposefully killed an American citizen named Anwar Awkali. His death was approved by the Obama Administration and he was killed with a pair of hellfire missiles delivered from an unmanned drone in the country of Yemen.
Can you imagine the whining we would have heard from the liberals in this Country is President Bush had done this?
I remember all of the energy the Democrats spent accusing President Bush of abusing his power while pursuing the supposed war on terror.
There are a FEW Democrats who are unhappy with the killing of Anwar Awkali; however, the vast majority of Democrats are absolute hypocrites on this issue.
I am sick and tired of the supposed “War on Terror.”
I think the last several Presidents we have had have abused their power and Congress has allowed them to do it.
So much for President Obama and his “Hope and Change” theme. It turns out he is abusing his power at least as much as his predecessor did…
President Obama will be defeated next November in a landslide. He is utterly clueless…
Mike
President Obama and his American Jobs Act
This is an update to a previous post.
Over five weeks ago President Obama unveiled a stimulus plan that was a combination of short term spending increases, tax cuts, and long term spending decreases that may or may not ever happen.
President Obama’s plan is large and unwieldy. His plan certainly does not have the support of the Republican Party in its current form due to the many large tax increases. His plan does not have support from the Democratic Party either.
The truth of the matter is this American Jobs Plan is his re-election strategy. He expects it not to pass and he expects to be able to blame the Republicans for ensuring it does not pass.
I think President Obama has miscalculated this rather badly. I think he miscalculated because he “assumed” the Democratic Party would automatically support his plan.
Harry Reid is the number one Senate Democrat and leads the Democratic Senate. He still has not even scheduled a vote. Further Dick Durbin, the number two Democrat in the Senate has stated that he does not think the bill can pass the Democratically controlled Senate…
President Obama does not even understand his own political party and it is very hard to watch him stumble so often…
The American Jobs Act was dead the minute President Obama announced it. That being said President Obama is running around the country trying to drum up support with the public. He would be far better served by talking the Democrats in Congress and trying to ensure he has enough votes to avoid another embarassing legislative defeat for President Obama.
Mike Sylvester
President Obama and his most recent stimulus plan
President Obama wants to spend another 447 billion dollars we do not have in a combination of tax breaks and tax cuts. He calls this plan a middle classed jobs bill…
I want to bring up several points about the politics behind the President’s recently unveiled plan:
- 1st off this is the opening salvo of his 2012 Presidential campaign; the President knows that his plan as written can never pass either the Republican House nor the Democratic Senate.
- The President (A Democrat) is flying all around the country and asking Congress to pass his bill RIGHT Now. Today. Tomorrow. As soon as possible.
- The Democrats control the United States Senate. That being said the Democratic Senate has NOT EVEN SCHEDULED a vote on this bill. So while the President is flying around the country demanding that his most recent legislation be immediately passed the chamber that his Party controls is so disinterested in the President’s Bill that they have not scheduled a vote on this very bill.
- The President’s most recent bill does not have even ONE Democratic Senator sponsoring it.
President Obama is utterly lost and has NO IDEA what he is doing. It is painful to watch our President. Very painful.
Mike Sylvester
The American Jobs Act, post 2
As mentioned in a previous post this plan will be paid for by increasing the National debt by 447 billion dollars. It will stimulate the economy in the short run and hurt the economy in the long run; this happens each and every time the government deficit spends.
70 billion of the 447 billion (15.7% of the total) is targeted towards tax cuts for businesses. We will discuss these first. For each I will explain the proposal, discuss which Party tends to support this type of proposal, discuss the supposed cost, and then give you my opinion of it.
The smallest portion of this section of the plan is a provision that allows businesses to immediately expense capital property purchased in 2012. In other words rather than depreciate the property over its useful life companies can write the entire cost off on their next Federal income tax return. The Federal government has passed various provisions allowing accelerated depreciation for well over a decade now. Most states refuse to allow them and these provisions make me and other tax professionals a lot of money because they make the tax code more complicated. The politicians argue that businesses will go out and spend more money if they get an immediate tax benefit. Studies have shown that accelerated depreciation does in some cases cause businesses to speed up purchases; however, this just pushes demand from one period to another. Republicans and Democrats both love accelerated depreciation and have passed similar measures for a long time. The small effect this has on demand is likely far less now than it originally was since accelerated depreciation has been the “norm” for so long. Businesses are used to being able to do this and pretty much expect it at this point. This will cost 5 billion dollars. This is due to the time value of money. I obviously oppose this stupid provision.
The second provision is an employer payroll tax cut. Currently employers have to pay 6.2% of their employees wages (Up to the cap of $106,800 per year) in taxes to the IRS who then sends it to the Social Security Administration. This is a business expense that comes out of the employers funds and the employee gets credit for this as taxes they paid into the Social Security system. This plan would drop the tax down from 6.2% to 3.1% for 2012 only. This provision only applies to the first five million in wages paid by each company. This may be best shown with an example. Let’s say you are a small business and have one employee who makes $100,000 per year and then 10 more who each make $50,000 per year. Normally the employer would pay $37,200 in Social Security taxes on behalf of their employees. With this proposal that would drop by $18,600 to $18,600. So the net savings to the employer is $18,600. Since Social Security will get less money than it is supposed to get the General Fund of the Federal Government will go further in debt and drop an IOU into the Social Security Trust Fund. President Obama is hoping that small businesses will turn around and use this money to hire more workers. Generally speaking this is a provision that I would expect Republicans to support. Generally speaking this is a provision I would expect Democrats to oppose somewhat. I oppose this provision because it is temporary and increases the national debt. I also oppose it because it will be hard to ever end. There is no such things as a temporary tax. There also is no such thing as a temporary tax cut it seems.
The above employer payroll tax cut is combined with another provision. Basically the President wants to encourage companies to net hire more workers in 2012 or pay their existing workers more in 2012 than they did in 2011. Basically for this tax break each business will need to compare the total wages they paid workers in both 2011 and 2012. If wages paid in 2012 is greater than 2011 (Due to new hires or hiring more workers) then the company will be allowed to pay even less in employer payroll taxes. Basically each company will be forgiven the remaining 3.1% Social Security match they normally would pay on their employee wages on those additional wages paid in 2012 up to a maximum of 50 million dollars in wages. The Federal government general fund will drop another IOU into Social Security. This is best shown with an example. Lets say SBS CPA Group paid $200,000 in wages in 2011. Then it pays $250,000 in 2011. It will be allowed to pay $1,550 less in Social Security taxes as the employer match and the Federal Government will drop an IOU into the Social Security Trust fund for that amount. To my knowledge nothing like this has been proposed before. In this example my firm would save $1,550 dollars in 2012. Our profits would increase by this amount. Out income taxes would increase. It is ABSURD to think we would spend this money to hire another worker…
The combined cost of the above two employer payroll tax cuts come at a one year cost of 65 billion dollars. I oppose this provision because temporary stimulus at the cost of increasing the National Debt does not solve our problem. Instead it defers our problem so that it will have to be dealt with in future years. I also oppose it because I can just hear the screaming that will occur if it is EVER allowed to expire. Allowing it to expire will be a HUGE tax increase on small businesses and the Chamber of Commerce will go nuts…
I imagine that the 70 billion dollars that this costs will create some jobs in the short term. I think that some companies will likely go out and buy some capital equipment in 2012 that they normally would have bought in 2013. The money will flow to the equipment manufacturer and help their business which in turn will stimulate the economy in 2012… The employer payroll tax cuts will certainly be appreciated by America’s small and medium sized businesses. It will lower their cost of doing business for 2012. This may save a few from closing who are near the “edge.” Further it will increase corporate profits of these companies somewhat in 2012 and that increase in corporate profits will trigger some short term spending.
I doubt these provisions will really create very many jobs. I agree they will create some jobs in the short run because spending will increase; however, I do not see how it can create very many. I will use my firm as an example. We have three full time employees right now and two part time employees right now. Wed, Thur, and Friday of this week I interviewed seven candidates for a new full time position. We will hire a new full time employee who will start October 3rd. This decision was made a couple of months ago and this decision has NOTHING to do with President Obama’s speech. Since we are adding an employee and since we are likely to give our employees a pay raise starting January 1st 2012 (Which also has NOTHING to do with President Obama’s speech) these employer tax cuts will result in my firm paying less in employer payroll taxes. This means our corporate profits will increase. In turn we will pay more in income taxes. The balance will be distributed to the owners to do with as they see fit. My company is small; however, these payroll tax cuts will likely net result in $4,000 more being pocketed by the owners in 2012 net of income taxes… Knowing the owners of my company the vast majority of this money will be saved and not spent…
This tax cut will NOT cause us to hire another employee.
Mike Sylvester
The American Jobs Act, post 1
I watched the President address a joint session of Congress last night. After that I watched the NFL season kick off.
I thought the President made a good speech. It was not a great speech because he could not keep his normal class warfare rhetoric completely in check; however, it was a good speech.
I think the major points of his re-election speech were:
- This is a plan with a lot of Republican ideas in it (True)
- If Congress does not pass this plan he is going to try to use this against Republicans in Congress in his 2012 campaign (True)
- The plan needs to be passed right away (His opinion)
Sarah Palin
There is no doubt that the main stream media in the United States did everything in their power to attack Sarah Palin once she was selected as the Vice Presidential nominee during the last Presidential election. In my entire life I have never seen the media attack someone in that fashion. It was absurd…
Sarah Palin stepped down as Governor of Alaska two years into her first four year term. She stepped down because she quickly realized that she could make A LOT of money as a speaker and “pundit.”
I in no way begrudge her the money. That being said the day she resigned half way through her first term she became a person I could not support for political office. Period.
For some reason she keeps “teasing” her supporters and she keeps acting like she may get into the Presidential race. I do not understand why she is doing this. I think her actions have hurt her “brand” and make her look like a fool.
There is no way that Sarah Palin could join the race this late and win the Republican nomination. In fact, I do not think she could beat Michelle Bachman at this point.
Mike
The mortgage problems are worse than you think
I have a client who talked to me about their mortgage. Last year they fell behind 3 months on their mortgage payments. Obviously the bank holding the mortgage (and in this case it was a LARGE bank) was angry and threatened him with legal actions; as one would expect.
So after missing three mortgage payments he was able to pull together enough money to pay two of those three mortgage payments soon after the 3rd payment was due. So he sent the bank a check.
The big bank holding the mortgage did not cash his check and sent his check back to him. In writing they told him he could only settle the problem by sending a check that would pay all three mortgage payments…
Wow.
Is it any wonder the big banks are losing money hand over fist…
Mike
President Obama and his failed stimulus package
The massive Federal Stimulus package that was passed to “save the economy” cost the taxpayers well over 800 billion dollars. This money was borrowed and will have to be paid back with interest.
There is no doubt that this program created or “saved” 2-3 million temporary jobs. Most of the impact of the stimulus plan has already been realized.
I opposed the Federal stimulus plan for several reasons:
- I hate temporary measures like this.
- We are broke and need to stop borrowing and printing money.
- The plan creates winners and losers in the private sector and that is wrong.
- The jobs were temporary jobs and come at an incredible cost
The Federal Stimulus plan was supported by President Bush, President Obama, the entire Democratic leadership in Congress AND the entire Republican leadership in Congress. About 3/4 of the Democratic members of Congress supported it and about 1/3 of the Republicans in Congress supported it.
Much of this money went to promote ‘green” jobs. President Obama and his “green” jobs plan is an absolute failure. One of my favorite blogs has a great post about this that is well worth your time. In this example The Federal government provided loan guarantees on 535 million dollars. The firm was showcased by President Obama as a success story. The firm is now filing bankruptcy and the taxpayers will lose the money invested in this company… 1100 employees retained their jobs for eighteen months and now will have to find new jobs…
The Government has no business picking winners and losers in the private sector.
Mike
