jobs

Obamacare: More Broken Promises, More Premium Hikes, More Lost Health Insurance

by Hans Bader on October 22, 2010

in Deregulate to Stimulate, Economy, Healthcare, Legal, Regulation

In The Washington Times, Dr. Milton R. Wolf debunks six “unkeepable Obamacare promises” that have already been shown to be false.  For example, President Obama promised that his health care overhaul would not raise taxes on anyone earning less than $250,000 a year: “I can make a firm pledge. Under my plan, no family making less than $250,000 a year will see any form of tax increase. Not your income tax, not your payroll tax, not your capital gains taxes, not any of your taxes.”

But as Wolf notes, Obamacare’s “new excise taxes on pharmaceuticals and medical products will, of course, by necessity be passed on to the patients who depend on these lifesaving medicines, pacemakers, MRI machines or even tongue depressors.”  And Nancy Pelosi promised that Obamacare would create 4 million new jobs, 400,000 almost immediately, none of which ever materialized.

A political commentator notes that her family’s insurance premiums just went up by 45 percent, while the coverage became worse. One of her readers lost her insurance, after her family’s policy was canceled by the insurer due to Obamacare’s legal prohibitions.

We earlier discussed how Obamacare will create pointless red tape and busywork for doctors, and how it has already led to big premium increases, and the elimination of some popular health plans.  It also includes a $60 billion insurance excise tax that will be passed on to patients, and tax increases on some investors and homeowners starting in 2013.

General Motors’ Losses Hidden by Deferral of Union Pension Obligations

by Hans Bader on October 21, 2010

in Bailout Watch, Economy, Employment, Labor, Regulation

Any General Motors bonds issued this year will be classified as junk by a key ratings agency.  Why?  There’s some risk GM will go bankrupt again, and it hasn’t really returned to profitability, the way it appeared to have. That’s because GM’s recent quarterly profit, which came after years of losses and tens of billions of dollars in taxpayer bailouts, was artificially created by the temporary deferral of billions of dollars in pension obligations that it owes to the United Auto Workers union.  Those unfunded pension obligations have risen by $6 billion since the end of 2009.  As Charles Lane of The Washington Post notes,

[A] little-noticed October 6 report from Fitch, the ratings agency, which highlighted the major unresolved issue of the bailout: pension obligations to its United Auto Workers employees. The union successfully resisted efforts to trim this long-term burden on the company through the bankruptcy process, and they continue to weigh heavily on the company’s future. Specifically, GM’s relatively robust free cash position – one of its major selling points in its pending IPO – is being artificially propped up by the fact that it is not yet legally required to make multi-billion-dollar payments into its ‘heavily underfunded’ U.S. pension funds. How underfunded are they? Well, the U.S. plans alone are $17 billion underfunded as of the end of 2009, Fitch says. When you include global operations, the total is $27 billion. . . GM’s pension obligations are actually $6 billion higher than they appeared at the end of 2009.

These obligations will likely have far more impact on GM’s financial future than the recent revelations that it lied about the Chevy Volt, which it was trumpeting in a “publicity stunt” to curry favor with politicians crusading against global warming.

Earlier, GM lied about whether it had paid back taxpayers for its bailout, which resulted in GM getting $50 billion in taxpayer money, and its finance arm GMAC getting another $17 billion.  (GM also received billions indirectly from taxpayers, through programs like the incredibly wasteful Cash for Clunkers, which cost  used-car and car-parts dealers billions.)

The Obama administration used the bailouts to keep the United Auto Workers’ massive compensation (worth up to $70 an hour), pension benefits, and rigid union work rules largely intact, while giving the UAW a big chunk of General Motors‘ stock, even though the UAW helped bankrupt the company.  The auto bailouts were so wasteful and so biased in favor of the UAW that they disturbed even the liberal Washington Post editorial board.

Another reason for treating GM bonds as junk is the way the Obama administration mistreated GM’s past bondholders.  It engineered the wiping out of General Motors’ bondholders, some of whom were non-union employees who had invested their life savings in the company, so that the GM stock that the Obama administration was giving the UAW would be worth more.

GM also faces increased regulatory burdens, such as CAFE rules ratcheted up in the name of global warming  (the initial tightening of those rules will wipe out at least 50,000 jobs in the auto industry), that will make it hard for it to expand its anemic 19 percent market share.  Other EPA global warming rules are expected to wipe out at least 800,000 American jobs and impose heavy costs on suppliers of materials used in manufacturing automobiles.  The EPA’s proposed ozone rules would wipe out 7.3 million jobs, according to one study.

Jobs: Created, Not Made

by Kathryn Ciano on October 12, 2010

in Bailout Watch, Economy, Employment

Welcome to October, the start of a new government fiscal year. 2010 was the year of “jobs created or saved.” Bank and business bailouts may have begun long before this year, but 2010 saw what effects flow from nationalizing big business.

Now that the budget says 2011, what has the government done for the individual this year? Despite hundreds of billions of stimulus dollars flooding the economy, unemployment remains in double digits.

In February Treasury Secretary Tim Geithner called the government’s economic efforts “inadequate,” noting that the administration needed to “fundamentally reshap[e] the government’s program to repair the financial system.”  Geithner, a human Laffer curve of robust tax irresponsibility, is the most egregious bailout proponent remaining in Obama’s cabinet.
Business is not like government.

Geithner’s mentality lends itself well to growing government. Geithner’s mentality would not last a year in business.

Government is comprised of millions of people with billions of priorities. Business reflects a single priority: Maximizing the bottom line.

Groups involved with government cooperate only inasmuch as they can agree. Groups involved with business quickly learn to cooperate at all times, because the moment it costs a business more to keep an employee than to fire him, he will be fired.

Similarly, for a business to hire a new employee, that company’s bottom line must benefit from the hire. If it costs $20,000 to hire a new employee, the business will only hire if it anticipates earning $20,001. If the bottom line cannot support the cost of a new worker, she simply will not be hired.

Funds alone cannot generate jobs. As with any financial interaction, money is only as good as the probability of your being able to use it. When dollar hopefuls are very uncertain about their ability to use money in the future, they save it. Businesses are not like government; they are risk averse.

If the government wants more people to be employed, it should get as far away from the hiring process as possible. Only when a business can assess its finances and capabilities can it make a real determination as to how much a potential new employee is worth.

When government keeps fiddling with the works — flooding business competitors with funds, levying ominous health care costs on certain business sizes, and nationalizing some sectors but not others, businesses have no choice but to freeze.

Market uncertainty makes it impossible for businesses to make decisions. The convoluted health care revolution is convoluted enough on its own to freeze the private sector pipes; add pending financial regulations, taxes, and laws that are indecipherable even to the regulators who write them. Even Nancy Pelosi admits we need to pass the bill, subjecting it to interpretation, before we can “find out what’s in it.”

Just like so much sausage, even once we pass the bill we don’t know where it comes from. To “stimulate” the economy with one dollar, the government must first take it from the people.

Printing new money for economic stimulus is even worse — this deflates the value of each dollar, so prices rise the middle class disintegrates. Printing money was a favorite of the depression-era German government, and led to Germans pushing wheelbarrows full of marks and boiling wallpaper for dinner in the early 1930’s. This hardly fosters job growth or stable politics, though Germany is okay now, I suppose.

Since the Obama administration recognized a recession in early 2009, the government has taken nearly $3 trillion dollars out of the economy and has promised nearly $11 trillion more in government programs. In that time the American economy has shrunk by over nine million jobs.

Government by definition operates at a loss, funded by takings and the future. Businesses do not have that luxury. Government attempted to save the private sector by tapping individuals’ wallets. When that was not enough, government nationalized businesses to tap their savings too.

Until businesses can make reasonable predictions about the future, they will not invest in new hires. The best thing the government can do to help the economy is to get out of the way.

CEI Podcast – October 7, 2010: Trade, Jobs, and Korea

by Ryan Young on October 7, 2010

in Economy, Podcast, Trade

Have a listen here.

CEI Adjunct Fellow Fran Smith talks about the EU-Korea free-trade agreement that takes effect next year, and why the U.S.-Korea FTA stalled, to the economy’s detriment. Fran also talks about NAFTA’s impact on jobs, and why imports are a good thing.

New EPA Rules Will Cost More than 800,000 Jobs

by Hans Bader on September 28, 2010 · 2 comments

in Deregulate to Stimulate, Economy, Employment, Energy, Environment, Global Warming, International, Politics as Usual, Regulation, Zeitgeist

New EPA rules will cost more than 800,000 jobs, probably far more, according to a newly released congressional report.  That includes the EPA’s first set of rules “for Greenhouse Gas Emissions,” and “new standards for commercial and industrial boilers.”  Indeed, the boiler rules alone could cost close to 800,000 jobs.

This shouldn’t be a surprise.  In 2008, President Obama admitted that under his greenhouse gas regulations, people’s utility bills would “skyrocket,” and coal-fired power plants would go “bankrupt.”  The EPA’s own internal documents show that the administration’s global warming regulations will result in a massive “loss of steel, paper, aluminum, chemical, and cement manufacturing jobs.”

It’s not just the administration’s global warming regulations that will wipe out jobs. The stimulus package contained so-called “green jobs” funding, 79 percent of which went to foreign firms, replacing American jobs with foreign green jobs.  A recent biofuel program actually wiped out jobs rather than creating them as intended, while costing taxpayers a lot of money.

The administration’s energy policies presume that central planners know better than private citizens and companies about how to create jobs and allocate capital.  But government officials, unlike private companies, have little incentive to make economically wise decisions, since they don’t pay the cost of their own mistakes, but rather pass them on to taxpayers.  The Justice Department, for example, often ignores the misconduct and constitutional violations committed by its own employees, while the federal Energy Department is one of the biggest violators of America’s environmental laws.

Clearing the Way for High-Tech Jobs

by Ryan Young on September 15, 2010

in Deregulate to Stimulate, Economy, Regulation, Tech & Telecom

Over at RealClearMarkets.com, my CEI colleague Ryan Radia offer some ideas for how to create more high-tech jobs. Our main points:

-Do more with less. This often involves cutting workers who aren’t productive enough to offset their wages. Sounds like bad news. But it’s actually crucial to job creation. That’s because in the long run, automation frees up resources — and employees — for new opportunities.

-Hiring new employees means jumping through countless regulatory hoops. According to a 2005 study by economist W. Mark Crain, compliance costs average $5,282 per employee at large companies. Small businesses pay $7,647 per employee. Some of those resources could have been spent hiring more employees. Over-regulation causes unemployment.

-Politicians can’t create jobs. But they can help to foster better conditions for wealth and job creation. Regulations cost businesses and consumers $1.17 trillion last year alone. Congress should roll them back. Some companies fear potential clampdowns on their businesses. Congress should leave them alone. Some failing businesses are eating up resources that could be better used elsewhere. Congress should stop bailing them out.

One Way to Create High-Tech Jobs

by Ryan Young on September 14, 2010

in Economy

My colleague Ryan Radia and I recently sent this letter to The New York Times:

Editor, New York Times:

Catherine Rampell’s September 7 article, “Once a Dynamo, the Tech Sector Is Slow to Hire,” mourns the recent decline in U.S. data processing jobs. She blames much of the decline on the automation of previously tedious tasks.

May we suggest one way to get those jobs back: No more automation. Ban the use of computers for data processing. Imagine how much information flows through today’s global economy in an average day. Computers handle most of the load. That costs millions of jobs.

The effects would reverberate far beyond the tech sector. The paper, pen, and pencil industries would also boom.

Companies are dead-set on doing more with less. True, that creates more jobs in the long run by freeing up resources — and employees — for new ventures. But if only they would consider doing less with more, they could create more data processing jobs.

Ryan Young and Ryan Radia
Competitive Enterprise Institute
Washington, D.C.

Expensive Jobs

by Ryan Young on August 27, 2010

in Deregulate to Stimulate, Economy, Stimulus to Nowhere

Through June, the government spent about $620 billion of stimulus money. The Obama administration claims that the spending has saved or created 2.3 to 2.8 million jobs.

For the sake of argument, let’s assume those job creation numbers are true. In fact, let’s pick the rosiest number — 2.8 million jobs.

At a price of $620 billion, that comes out to $221,428.57 per job. Startlingly inefficient.

Now consider that that $620 billion had to come from somewhere else. Some of that money came from taxes. That leaves less money left over for consumers and businesses to spend. Some of the stimulus money was borrowed. That leaves less capital for private companies borrow.

The private sector tends to spend less than the government to create a job. Since stimulus spending is spending more money to create fewer jobs than the private sector, it is actually causing net harm to the job market.

In place of the spending stimulus, I humbly offer a deregulatory stimulus. CEI VP Wayne Crews and I offer some specific proposals here.

LibertyWeek 92: FCC Power Grab

by Richard Morrison on May 10, 2010

in CEI Projects, Features, Podcast, Zeitgeist

Richard Morrison and Marc Scribner team up with William Yeatman, Ryan Radia and Iain Murray, to bring you Episode 92 of the LibertyWeek podcast. We take on the prospects for cap-and-trade climate legislation, the FCC’s broadband power grab, tales from a hung parliament and an exciting new job opportunity in Venezuela.

“Nearly Two-Thirds of Americans Say the Stimulus Isn’t Working”

by Hans Bader on April 29, 2010

in Economy, Employment, Politics as Usual, Sanctimony, Stimulus to Nowhere

“Nearly two-thirds of Americans do not believe the $787 billion stimulus package the president passed last year has helped create jobs, according to a new Pew Research Center poll.”

As the Washington Examiner notes, “a recent survey of business economists showed they didn’t think the stimulus was creating jobs, either.”  President Obama falsely claimed that virtually all economists supported his stimulus package, but this was patently untrue at the time he made this claim, when at least 200 economists publicly opposed it, and it  is even more untrue now.

Obama falsely claimed that the $787 billion stimulus package was needed to prevent “irreversible decline,” but the Congressional Budget Office admitted that it would actually shrink the economy “in the long run”.  The stimulus package has since destroyed thousands of jobs in America’s export sector, and subsidized countless examples of government waste and corruption.

Unemployment has skyrocketed past European levels, as big-spending countries have fared worse than thrifty ones.  As the Examiner notes, “If his stimulus program was approved, Obama promised, unemployment would not go above 8 percent . . . The reality is that it passed 10.3 percent.”

Nobel Prize-winning economist Gary Becker says that Obama’s policies are delaying economic recovery.

“How is stimulus money allocated? Unemployment isn’t a factor, but politics is,” found George Mason University researcher Veronique de Rugy in a recent study.

Districts where people are struggling and unemployment is high are not receiving any more money than those in which unemployment is low, even though a stated purpose of the $800 billion stimulus package was to help the unemployed.  But politics mattered in doling out federal funds.  And “Democratic districts also received two-and-a-half times more stimulus dollars than Republican districts.”

There are three trillion dollars in tax increases in Obama’s proposed budget, yet it would still borrow 42 cents on the dollar, resulting in colossal deficits.

Obama’s policies would raise the national debt by $9.7 trillion, noted the Congressional Budget Office.

Earlier, one of Obama’s own advisers worried that the “barrage of tax increases” in his budgets could harm the economy and prevent a “sustained” economic recovery.

In 2008, Obama promised a “net spending cut,” but as soon as he was elected, he proposed massive spending increases.

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