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The Roll of Obama Economy Misery Just Got a Lot Longer

An economic story broke yesterday on a Las Vegas radio station that has reverberated across the country. A small business owner, who wished to remain anonymous, called a local talk show and told the host that because of President Obama’s re-election, he was going to have to lay off 22 employees. Here is a bit of what he had to say.

“I explained to them a month ago that if Obama gets in office that the regulations for Obamacare are gonna hurt our business, and I’m gonna have to make provisions to make sure I have enough money to cover the payroll taxes, the additional health care I’m gonna have to do, and I explained that to them and I said you do what you feel like in your heart you need to do, but I’m just letting you know as a warning this is things I have to think of as a business owner.

“Well unfortunately, and most of my employees are Hispanic — I’m not gonna go into what kind of company I have, but I have mostly Hispanic employees — well unfortunately we know what happened and I can’t wait around anymore, I have to be proactive. I had to lay off 22 people today to make sure that my business is gonna thrive and I’m gonna be around for years to come. I have to build up that nest egg now for the taxes and regulations that are coming my way. Elections do have consequences, but so do choices. A choice you make every day has consequences and you know what, I’ve always put my employees first, but unfortunately today I have to put me and my family first, and you watch what’s gonna happen. I’m just one guy with 114 employees — well was 114 employees — watch what happens in the next six months. The Dow alone lost 314 points today. There’s a tsunami coming and if you didn’t think this election had consequences, just wait.”

Now, I don’t know if this is on the level — we’ll have to wait and see if any companies in that area lay off 22 employees — but it matches the sort of behavior we expect. Is this happening elsewhere, though? I decided to search Twitter for the word “lays off” and see what news stories came up from the stream over the past couple days. Here are the stories I found.

The reasons for these lay offs are varied, but most of them involve government action. The companies have lost business because of decisions made by the government, are anticipating higher costs because of government regulations, or have relied on government and were left short by the vagaries of bureaucracy. Mind you, this search took me about 20 minutes, and I didn’t use a particularly sophisticated method to get my results. Keep in mind also that since these stories came from Twitter, they’re the ones people are talking about inside their own social networks. How many more stories are out there people aren’t yet sharing with each other?

Bigger Debt, Smaller Economy. It’s Just That Simple.

Michael Boskin, Tully Friedman Professor of Economics at Stanford University and Senior Fellow at the Hoover Institution, wrote a paper recently that’s worth a good long look this week. He examined how our national debt, especially the ratio between our debt and our Gross Domestic Product, influences the growth of our economy. You can get a copy of his work here (PDF link) and I highly recommend you do so. Here’s his initial premise.

While temporarily desirable in war and recession, large deficits potentially cause two separate but related problems—shifting the bill for financing the current generation’s consumption to future generations and crowding out of private investment. Thus, deficits are more problematic during economic expansions, if they reduce domestic investment and hence future income, when the national debt is high or rapidly rising relative to GDP, and when they finance consumption, not productive public investment.

In short, our economy has two types of money: government and private. Government money only comes from the private sector and, once removed from it, becomes far less useful because it is disbursed inefficiently (and, often, corruption is endemic). Private money, on the other hand, multiplies itself and flows where the economy most needs it at any given moment.

Our problem right now is that the national debt, especially the ratio of debt to what the entire country produces every year — the Gross Domestic Product — is climbing far past our ability to sustain it. When that ratio increases, it pulls money from the private sector into government. Now, that may seem an obvious point but the transfer of wealth from the private sector to government has a far greater effect than we can see immediately. First, let’s look at the ratio — where it is now and where it’s headed under President Obama’s watch. Right now, the big debt drivers are the large entitlement programs: Medicare, Social Security, and Medicaid. Says Boskin:

OMB provides a baseline long-run estimate based on President Obama’s policies as implemented and proposed, including his tax increases, health policy and, importantly, the absence of cost growth slowing Social Security and Medicare reform.9 After roughly doubling from the end of 2008 to 2014, then briefly leveling off, the ratio exceeds 90 percent in about 20 years, 100 percent soon thereafter, and then keeps rising.

Here, now, is where the concrete numbers are important. Boskin noted a study that found that for every 10 percent increase in the debt/GDP ratio, we lose 0.17% in economic growth per year. He took that figure and extrapolated how large an impact that would have on the economy if we continue the government’s current “everything will be fine if we just raise taxes on rich people” program.

By 2050, the higher debt ratio brings growth to a halt under the “continuation of Administration policy” scenario. The level of GDP is 30 percent lower than if the debt had not soared and the policies had not continued. That’s most of a generation of per capita income gains wiped out or, put another way, it is as large as the gap between American and lower Western European per capita incomes. Under the “reverse course, stabilize debt” policy scenario, the decline in income is “only” 12 percent. That is most of a typical decade’s worth of real per capita income growth.

In other words, if we follow the Democrats’ plan, our economy will be 30% smaller than it would be if we had a smaller, more responsibly-sized government. If we manage to freeze the debt in place, we can limit the damage to a 12 percent smaller economy than we’d ordinarily have. Of course, this strongly implies that if we put a plan into place that reduces the debt in a reasonable number of years (and there is an array of plans from which we can choose), we can cut that GDP reduction even more and perhaps even eliminate it completely.

Mind you, these numbers are not merely abstract. They represent smaller earnings per family. In other words, a high national debt means that you and your family will have less money in the future. The rampant spending of today’s politicians means you spend more today in taxes and earn less in the future because of a slower economy. The debt is a double-whammy of misery that not only affects your children because they will have to pay that money back at some point, but leaves them in a worse position from which to build their lives. I’m sure we’d all appreciate a paycheck 30 percent larger than it is right now. That’s what we could have if we cut government.

But the situation will only get worse unless we stop right now. We have already done a certain amount of damage and we can not repair it. Our debt is large — over $16 trillion dollars — and we’ll need a few years to whittle it down to a manageable size. Likewise, our economy is far from healthy. Economic growth may not reach 4 percent a year, which is really where we need it to be, for a long time. We don’t notice what our debt really costs us because we don’t see the money fling out of our bank account, but it is and it will continue to do so for such time as our debt is as high as it is.

The answer, folks, is pretty simple. Shrink government and unleash the incredible power of private money. Let job creators do what they do best without having to seek permission of government bureaucrats first. Stop trying to manage every aspect of the economy with rules that should have been tossed in history’s dumpster decades ago. Let people manage their own affairs, spend their money as they wish, find their own paths to prosperity and happiness. Turn the economy up to 11 and the government to a number a lot smaller than we have right now and reclaim our future. The alternative is, well, pretty bleak.

Failing to rapidly begin bending the long-run debt-GDP curve down risks a growth disaster, whose severity could be much worse even than the recent deep recession and tragically anemic recovery. Left unchecked, it eventually risks a lost generation of growth, a long-run growth depression.

There’s your future, if we do nothing. I don’t want that. Neither do you. So let’s change it.

President Obama’s Million Dollar Menu Isn’t Good Eats for America

This isn’t exactly an example of fiddling while your country burns, but it’s awfully close, isn’t it?

President Obama has spent far more lavishly on White House state dinners than previous chief executives, including nearly $1 million on a 2010 dinner for Mexico’s president, according to documents obtained by The Washington Examiner.

[...]

The Obama extravaganza two years ago for Mexican President Felipe Calderon, which included a performance by pop star Beyonce, cost $969,793, or more than $4,700 per attendee, the documents show.

The Calderon dinner was held on the South Lawn in a massive tent adorned with decorated walls, hanging chandeliers, carpeting and a stage for Beyonce’s performance.

Guests rode private trolley cars from the White House to the tent. Celebrity guest chef Rick Bayless from Chicago’s Topolobampo restaurant was imported to prepare Oaxacan black mole, black bean tamalon and grilled green beans.

I can understand why President Obama might want to ply the Mexican President with good eats, considering what we’ve learned of Operation Fast and Furious, but I’m pretty sure you can buy diplomatic good will on a smaller budget. There’s more.

The documents also reveal that the Obama White House retained an outside planner for the dinners. Bryan Rafanelli, a Boston-based celebrity event planner who was retained last year, managed former first daughter Chelsea Clinton’s 2010 nupitals. His firm’s website boasts that he produced “State Dinners hosted by President Barack Obama and First Lady Michelle Obama.”

Rafanelli’s business partner, Mark Walsh, is deputy chief of the State Department’s Office of Protocol, which reimburses the White House executive residence for the events.

So, irresponsible extravagance with a side-order of cronyism is on the menu? Sounds about right. Glenn Reynolds provided the appropriate picture to go with the story.

Disabilities Up, Social Security Lifespan Down

Another month, another grim milestone in the horrid, horrid Obama Economy.

The number of American workers collecting federal disability insurance benefits hit yet another record high in October, according to the Social Security Administration.

This month 8,803,335 disabled workers are collecting benefits, up from the previous record of 8,786,049 set in September.

We’ve added over 1.3 million people to the disability rolls since February, 2009, an increase of 975 per day. To put that in perspective, we’ve put enough people on this flavor of government dole to populate the city of San Diego, California.

The Lonely Conservative made an excellent observation.

Unlike unemployment benefits, Social Security disability never runs out, so the vast majority of these people will receive benefits for life.

As it happens, that’s mostly true. Social Security disability will start to run out of cash to the point we’ll see very real payout cuts in three years — 2033. That’s three years sooner than the Social Security Board of Trustees predicted last year and it’s due, in large part, to the glut of new people entering the system thanks to the Obama Economy. What do you want to bet that next year’s report from the Trustees will bring that date a couple more years closer to the present?

Obamacare’s New Tax Credit is a Giant Bust and You’ll Never Guess Why

One of the President’s bragging points about Obamacare is the small business tax credit he claimed would help off-set the program’s costs and bring health insurance to millions. The administration predicted 4 million small businesses would claim the credit while the Government Accounting Office predicted a smaller, but still considerable number of 2.5 million. Recently, the IRS released the number of businesses that claimed the credit in 2010.

170,300.

That’s it. The administration over-shot the real number by, well, almost 4 million. It makes you wonder how many of its other rosy Obamacare claims will prove just as false.

According to testimony from an IRS official, the most common reason businesses haven’t claimed the credit is because the forms and requirements are so complex they practically require the business to hire someone just to handle the paperwork.

Small business employers have no incentive to participate in the tax credit plan. In order to comply, a small business owner has to file Form 8941 with the IRS. This 20-line form requires employers to report the number of employees they have, the average amount they are paying them, the total amount spent in premiums on them, and the average premiums for small-group coverage in their area. And that’s just if you have a simple situation.

Alternatively, employers can simply deduct their insurance premiums as a business expense and be done with it. That’s what most, if not all, small employers will continue to do. No small employer will want to compile those records when they can take the easier path.

Or, as Jim Lakely of the Heartland Institute wrote, if a business can afford to hire a new employee, they should “be sure to include that new employee on Line 34 of Page 134, Subsection D(ii) of the forms you must fill out to comply with a government that knows how to run your business better for the “common good.” Alternately, small businesses can simply stay small, cut their employees’ hours to get under the new “full-time” definitions, and putter along until we elect officials who will tear Obamacare up by the roots and full the hole with weed killer so it can never grow back.

If You Think It’s Tough to Find a Job Now, Wait Until the IRS Defines “Full-Time” for You.

I bet you’ve never really wondered what constitutes a full-time employee? You probably figured, like me, that if you worked 40 hours a week (maybe 35), you were considered full-time. Normally, this wouldn’t be a question with which you’d need to concern yourself. Your working hours and the compensation you receive for your labor is between you and your employer. Sure, there are some basic labor laws to ensure you’re not working in a death-trap and that neither you nor your employer get a patently unfair advantage in the negotiation, but that’s pretty much it. Or it should be.

Now that Obamacare has arrived, the federal government has to decide what a full-time employee is because Obamacare contains a lot of rules, triggers, and fines — ahem, taxes — that depend on the designation. As you can imagine, that definition will go on a bit.

In the latest indication of how complicated putting the Affordable Care Act into action will be, the Department of Health and Human Services and Internal Revenue Service issued 18-pages of regulations just to describe what a “full-time employee” is. Of note, to the Feds a full-time employee works an average of just 30 hours a week, not the normally accepted 40 hours.

Now, here is the why. It’s important because when the federal government gets its mitts on something, it gets to call all the rules. That’s why we responsible government types want it as far from our lives as the Constitution demands.

The IRS rule is key because companies with more than 50 full-time employees must provide health insurance under Obamacare, or be fined. Business groups have been warning that small companies might try to replace full-time workers with part-time help to avoid being forced to offer health insurance in 2014, but the 30-hour full-time definition is likely to undermine those plans.

In other words, businesses will do what makes the most sense and cut their employee’s hours to avoid the onerous requirements of Obamacare. The IRS, anticipating that, intends to change the definition of “full-time” to make it harder for businesses to do so.

Now, if businesses have to pay full-time benefits to what are essentially part-time employees, what do you think will happen?

Wouldn’t It Be Nice to Have a Safety Net Again?

This is simply mind-boggling.

Roughly 100 million people—one-third of the U.S. population—receive aid from at least one means-tested welfare program each month. Average benefits come to around $9,000 per recipient. If converted to cash, means-tested welfare spending is more than five times the amount needed to eliminate all poverty in the United States.

[...]

At the beginning of this year, only four of the 80-plus federal welfare programs had work requirements; the Obama Administration has now suspended the work requirements in two of these. After the Obama Administration suspended the work requirement from the food stamp program in 2009, the number of people on food stamps doubled.

Ponder that first paragraph a moment. If we cut every poor person in a world a check for their “share” of what we spend on welfare, we could eliminate poverty. Poof. Gone.

We’re not doing that, though. We’ve turned what should be a safety net into a giant sheet of flypaper, on which we stick the needy practically forever. These days, the quickest way to fall into a life of poverty is to get on the government dole. There are, as Heritage notes, precious few requirements to get the poor off of welfare and standing on their own and it’s only getting worse.

We’re going the wrong way.

A New Waste Book for Another Wasteful Government Year

Senator Tom Coburn (R-VA) is out with the 2012 edition of his Waste Book, a collection of boondoggles and pork programs approved by Congress every year. He spent the last few days listing some of the more egregious examples of budget banditry on hit Twitter Feed. Here are a few of the best:

entry No. 51: Return of the Jedi? $11,700 federal grant for “Star Wars Day” event at Massachusetts public library.

entry No. 61: $97,000 for floating outhouses for Oregon fishermen

entry No. 46: this year, taxpayers paid $505,000 to promote specialty hair and beauty products for cats and dogs.

entry No. 9: $3.3 million to bail out failing Alaska tourist boat that’s sinking private business

The Senator points out we’re set to spend $3.6 trillion this year and run a deficit of about $1.2 trillion. Much of that — perhaps even most of that — is due to members of Congress who use our money to secure their own job security. It’s long past time we put people in office who treat our money like the precious commodity is it.

Download the 2012 Waste Book. Share the link with your friends. Tell them about the worst examples you can find. Make sure they know their vote next month can put people in office who won’t tolerate runaway government spending.

A Few Quick Thoughts on the Debate, Spending, and the Debt

I watched the entire Presidential debate last night and, well, it was certainly interesting, wasn’t it? You can get my long-form thoughts here (along with links to several other very good commentaries). Frank Fleming’s roundup of reactions on Twitter is a very good (and funny) read as well.

I’m pleased that spending and the debt got as much attention as it did. Usually, spencing specifics get shoved to the side because there’s rarely enough time to talk at length about them and fit in all the other topics a moderator might want discussed into 90 minutes. Last night, however, Jim Lehrer let the candidates have some room to explain themselves and nibble at their opponent, which made the debate far more substantive than I has expected. Certainly, spending and the debt got more serious consideration than it did during the last two or three Presidential election cycles.

Of course, we still need to hear more about each candidates plans, especially how they expect to knock down our $16 trillion national debt in a timely fashion. I hope we get closer to that in the next debate on October 16th.

All in all, though, a good debate. I’m encouraged. Now let’s see more like it.

The Obamacare Tax Bomb Has a Bigger Blast Radius Than We Thought

When Congress debated the Obamacare bill, plenty of us responsible government types said that it was stuffed full of tax hikes that would hit middle class America every bit as hard as it would hit the much-derided “millionaires and billionaires”. Most of our complaints fell on deaf ears. Obamacare wouldn’t really raise taxes, we were told, and if it did, the middle and lower class wouldn’t have to worry. And even if we did, the hit would be small, more than offset by the massive savings we’d see in actual health care costs.

So far, it appears we are going to take a pretty big hit. And by “we” I really do mean everyone. And by “hit”, I mean at least $1,600 a year.

The Congressional Budget Office (CBO) on Wednesday said nearly 6 million Americans, 2 million more than the office’s initial 2010 estimate, will face a “tax penalty” in 2014 for not having insurance once Obamacare is implemented.

President Barack Obama promised not to raise taxes on the middle class, but after the Supreme Court ruled Obamacare was constitutional because it was a tax, the CBO discovered that most of the 6 million Americans that will potentially pay the Obamacare tax are in the middle class.

I never had a big problem with the recent Supreme Court ruling. The Obama administration sold the individual mandate as a tax when it pleased them to do so and the first drafts of the bill called the mandate a tax and not a penalty. In truth, Obamacare in its eventual form as a single-payer health care that encompasses everyone whether they want it or not only works if the mandate is a tax.

The tax hikes are coming, unless Congress repeals Obamacare before it takes effect in 2014. Two years ago, those hikes were supposed to hit “only” 4 million of us. This year, the estimate is 6 million. How many will it really hit if we don’t stop it?

Taxpayers Connected:

Our national debt is  
$ 00 00 , 000 000 , 000 000 , 000 000 , 000 000
and each American Taxpayer owes $119,236 of it.