Research Briefing

As Financial Crisis Inquiry Commission Meets Today, We Offer Dems A Dose Of Reality When It Comes To What’s Causing The Current Economic Downturn

PURPOSE OF THE FINANCIAL CRISIS INQUIRY COMMISSION: “Examine The Causes … Of The Current Financial And Economic Crisis In The United States.” (Fraud Enforcement And Recovery Act Of 2009, Public Law 111-21, Enacted 5/20/2009)

HERE’S WHERE THEY CAN START: THE OBAMA-PELOSI-REID AGENDA

Businesses Not Hiring, Cutting Benefits Because Obama’s Liberal Tax-And-Spend Agenda Creating “Inertia [That] Could Impede An Economy Recovery.”  “But a health-care overhaul grinding through Congress could bring unknown new obligations to insure employees. Bush-era tax cuts are set to end next year, and their fate is unclear. Legislation aimed at tackling climate change might raise businesses’ energy costs … Many companies say they have responded by freezing hiring, cutting benefits and delaying expansion plans. With at least 60% of job growth historically coming out of the small-business sector, according to the government’s Small Business Administration, that kind of inertia could impede an economic recovery.” (Gary Fields, “Political Uncertainty Puts Freeze on Small Businesses,” The Wall Street Journal, 10/28/09)

Entrepreneurs Reluctant To Hire When Democrats’ Legislation “Could Make Their Business Projects Unviable.” “Why has private-sector job creation fallen so sharply? Businesses are retrenching wherever they can, taking measures to survive the immediate downturn such as laying off workers and conserving cash. The policy agenda in Washington--the health care legislation, cap-and-trade legislation, higher taxes to pay for more spending--has also contributed to businesses’ unease about the future. Entrepreneurs are reluctant to invest when they fear that federal legislation could make their business projects unviable.” (James Sherk and Rea S. Hederman, Jr., Op-ed, “Thanks For The November Jobs Report?,” The Wall Street Journal, 12/4/09)

Businesses Not Creating Jobs Until “Health Care, Climate Legislation – Go Away Or Are Resolved.” “Companies large and small are saying, ‘I am not going to do anything until these things -- health care, climate legislation -- go away or are resolved,’ said Dan DiMicco, chief executive of steelmaker Nucor Corp.”  (Neil King Jr. and Gary Fields, “White House, Business Leaders Split On How To Create Jobs,” The Wall Street Journal, 11/30/09)

• Because New Regulations From Obama’s Health Care Experiment Will Make It More Difficult For Employers To Hire Workers They Need. “[E]mployers who do not offer ‘affordable’ coverage to employees would have to help pay the cost of such benefits for their low-income workers ... The Center on Budget and Policy Priorities, a liberal research and advocacy group, said this proposal ‘could unintentionally discourage the hiring of lower-income people,’ by adding a new ‘health surcharge’ to the cost of employing them.” (Jeff Zeleny And Robert Pear, “Obama Says Government Health Coverage Plan Would Not Hurt Private Insurers,” The New York Times, 6/23/09)

• Obama’s “Cap-And-Trade” National Energy Tax Hurts American Businesses With Higher Energy Prices That Reduces Productivity. “By gradually increasing the prices of fossil fuels and other goods and services associated with greenhouse-gas emissions, climate legislation would … reduce economic activity through a number of different channels … Reduc[ing] the productivity of existing capital and labor, which are currently geared to relatively inexpensive energy.” (Douglas Elmendorf, Committee On Energy And Natural Resources, United States Senate, 10/14/09)

• And Obama’s E.P.A. Regulations “A Nightmare Scenario” For Businesses. “The blunt instrument of EPA regulation is a nightmare scenario for … major industries. Businesses that have a seat at the table in legislative negotiations would have little opportunity to influence regulations.” (Coral Davenport, “EPA Prepares To Classify Carbon Dioxide As Dangerous,” CQ Today, 12/7/09)

Job Creators Also Facing Threat Of Higher Taxes. “Businesses also face this year the probability of higher capital gains and income taxes, as well as new taxes to help fund Obama’s social agenda. It’s hard to see how higher taxes on job creators fits into the strategy of job growth.”  (Editorial, “Editorial: Obama Needs Policies, Not Promises, For Job Growth,” The Detroit News, 1/12/10)

• Including Obama’s American Savings Tax To Pay For His Binge Spending. “The Obama administration is aiming to hit banks with a fee to recoup losses associated with the government’s bailout of financial firms and the auto industry, administration officials say. … Even though the proposal is still under discussion, it is expected to be included in the White House’s budget, due next month, if only conceptually. It’s expected to cost large banks billions of dollars and could also affect bank customers if firms pass along the cost.” (Deborah Solomon and Damian Poletta, “Banks Brace For Bailout Fee,” The Wall Street Journal, 1/12/10)

• New Medicare Taxes On Investment Income To Pay For His Health Care Experiment. “House and Senate negotiators are considering applying for the first time the Medicare payroll tax to investment income as part of a compromise to pay for a health overhaul …Under the proposal now being considered, people making more than those amounts would also pay the Medicare tax on dividends and other income from investments ...” (Martin Vaughan And Laura Meckler, “Democrats Weigh New Tax On Investment Income,” The Wall Street Journal, 1/12/10)

• And Even A National Sales Tax That Obama’s Economic Recovery Board Chair Is Laying The Groundwork For. “My tax philosophy would be if we can’t deal with our expenditure loan with the present tax system, we’ve got to think about changing the tax system … When you think about changing the tax system, given the problem that we started out talking about, you’ve got to talk about some tax that hits consumption.” (Henry J. Pulizzi, “Volcker: Carbon Tax VAT Should Be On Table If Cost Cuts Insufficient,” Dow Jones Newswires, 9/29/09)

Obama’s Stimulus Ignored “The Main Factor Increasing Unemployment: Lack Of Private Investment.” “Obama’s signature jobs initiative was the stimulus package, but the bill did little to promote private-sector investment or job creation. The new government spending in the stimulus does not encourage entrepreneurs to start or expand a business enterprise unless they received a stimulus contract. Consequently, the stimulus ignores the main factor increasing unemployment: lack of private investment.” (James Sherk and Rea S. Hederman, Jr., Op-ed, “Thanks For The November Jobs Report?,” The Wall Street Journal, 12/4/09)

• Yet Obama’s Stimulus II Includes More Government-Directed Infrastructure Spending, Despite Its Failure To Create Jobs As Part Of Stimulus I. “Ten months into President Obama’s first economic stimulus plan, a surge in spending on roads and bridges has had no effect on local unemployment and only barely helped the beleaguered construction industry, an Associated Press analysis has found. ... Obama wants a second stimulus bill from Congress that relies in part on more road and bridge spending, projects the president said are ‘at the heart of our effort to accelerate job growth.’” (“What Stimulus? Road Projects Aren’t Boosting Jobs Much,” The Associated Press, 1/11/10)