The president’s jobs bill is a non starter, a desperate attempt to do something by doubling down on failed policies.

Point  one- He offers tax breaks to workers by extending the reduction in FICA taxes, and making up the deficit with higher taxes to the general fund.  He promotes  incentives to get employers to hire the chronically unemployed and to raise wages, yet plans to fund this effort by raising taxes on the same employers.

Point two-  While he demagogues about the millionaires and billionaires, the truth is that there is not enough of them to fund his programs and thus he has to define ‘rich’ down to include the small business people which he cherishes in rhetoric but clearly knows nothing about.

Point three- Businesses do not create long term jobs with short term incentives.  After the ‘tax breaks’ wear off, the business is left with the full fare for the new jobs.  Often creating such jobs  requires investment in new equipment and those pieces of machinery still cost after the incentives have expired.

Point four- The bureaucracy required to utilize these tax credits, and the conditions are so onerous that few of the small business will be able to use them.  If you are only able to hire a few workers it just isn’t worthwhile to ramp up and learn how to comply with an incentive that will only last a few years.  Like most other regulations it is an advantage to larger companies with the infrastructure and the mass to justify the expense of compliance.

Point five-  By giving incentives to hire the chronically unemployed we are creating a perverse incentive to penalize the workers who have NOT relied on the largesse of the extended unemployment benefits.  If I have a choice between two workers and one has been unemployed for a month and the other has been unemployed for a year, I will lean more toward the one who has not been out of the work force for so long.  I will question the work ethic of the worker who has managed not to work for a year.  The advantage of the proposed tax break will not offset the natural incentive to hire a worker with a better motivation. This may seem unfair, but  trust me- this is how most small business employers will think.

At a recent business conference owners and employers from several different small businesses told similar tales.  I could sum it up with two observations: Generous unemployment benefits have made it hard to hire low level jobs such as dishwashers and busboys, and the uncertainty of pending regulations and tax increases has stifled business incentives to expand.  For the amateur economists in the room (and there were several professional economists there as well) it seems obvious that if you create incentives such as generous unemployment benefits not to work, and you also create incentives not to hire (Obamacare, Dodd-Frank, NLRB, higher taxes pending) then you should not be surprised if unemployment remains high.

While we restrain oil production in this country, Canada is tapping their resource with new found vigor.

Mary Anastasia O’Grady writes in the 9/12/2011 Wall Street Journal, Canada’s Oil Sands Are a Jobs Gusher.

Excerpt:

Having spent an hour the day before with Ron Liepert, the energy minister from the Canadian province of Alberta, I found it especially disturbing to hear nothing in the speech about reversing the administration’s anti-fossil-fuels agenda. Canada has recovered all the jobs it lost in the 2009 recession, and Alberta’s oil sands are no small part of that. The province is on track to become the world’s second-largest oil producer, after Saudi Arabia, within 10 years. Meanwhile Mr. Obama clings to his subsidies for solar panels and his religious faith in green jobs.

U.S. unemployment is high because capital is on strike. Short-term offers to coax investors into taking new risks aren’t going to cut it when they have been forewarned that the president intends to pay for it all by raising taxes in the out years. The market dropped over 300 points the day after Mr. Obama’s speech.

Having spent an hour the day before with Ron Liepert, the energy minister from the Canadian province of Alberta, I found it especially disturbing to hear nothing in the speech about reversing the administration’s anti-fossil-fuels agenda. Canada has recovered all the jobs it lost in the 2009 recession, and Alberta’s oil sands are no small part of that. The province is on track to become the world’s second-largest oil producer, after Saudi Arabia, within 10 years. Meanwhile Mr. Obama clings to his subsidies for solar panels and his religious faith in green jobs.
U.S. unemployment is high because capital is on strike. Short-term offers to coax investors into taking new risks aren’t going to cut it when they have been forewarned that the president intends to pay for it all by raising taxes in the out years. The market dropped over 300 points the day after Mr. Obama’s speech.

Alberta is now producing two million barrels per day but expects that number will grow to four to five million within a decade.

Alberta’s oil and gas industry supports more than 271,000 direct jobs and hundreds of thousands of indirect jobs in sectors such as construction, manufacturing and financial services. The province has an unemployment rate of 5.6%. There are also some 960 American companies involved in Alberta energy, supplying equipment and technology, among other things. As an example, Mr. Liepert says, “dozens of Caterpillar tractors, made in Illinois and Michigan and costing $5 million a piece” work the oil sands. He says the region is on track to create more than 400,000 direct American jobs by 2035. The Bakken region of North Dakota, where private land ownership gives drillers relief from federal obstructionism, shares a similar, if smaller, story. Oil production there is booming, and North Dakota unemployment is 3.3%.

The debate of financial reform is looking eerily like the debate on health care reform.

In both cases both parties clearly see the need for change, and in both cases they disagree sharply on the means.

When the financial meltdown occurred neither party wanted to bail out Wall Street bankers and insurance companies with taxpayer dollars. But solutions to such emergencies often require distasteful actions.

But the point of financial reform is to prevent getting to the point where any party even needs to consider such a bailout.

Like the health care reform the attempt at financial reform seems to find all the fault in the private sector.  Congress, largely through Fannie Mae and Freddie Mac, were a central cause of this disaster and there is little or nothing  in this bill to address the role that lawmakers had in precipitating this crisis.

Obama has said he will veto the bill if it includes a $50 billion fund for failing institutions. On this he is siding with the House Republicans over the Democrats.  Such a fund protects the largest financial firms at the expense of the smaller firms. I hope he stays with that decision.

There is much to be improved.  New regulations should forbid off balance sheet accounting, derivative trading should be on exchanges where they can be supervised, capital requirements should reflect the risks of the investments.  There is a case to be made for restoring a safety wall between investment banking and commercial bank lending. There is even a good case to be made for busting up the largest players if that is necessary to bury the retarded concept of “too big to fail.”

But there is also an important need to keep Congress and their influence out of the financial sector.  Congress refused to acknowledge the crisis at Fannie Mae in spite of repeated warnings.  Fannie Mae plied Congress with campaign contributions and lobbyist pressures.

The more Congress regulates an industry the greater the role will be played by lobbyists. An administration that has repeatedly demonized lobbyists seems intent in creating an environment where lobbyists will grow in influence.

Man will always seek to improve his lot in life and he will always take risks to do so.  We will have bubbles, and it is a worthwhile tradeoff if it facilitates the economic growth that has created such prosperity for so many.

It is the job of the Fed ‘to remove the punch bowl when the party gets started’.  But it is the nature of Congress to avoid short term pain even if it leads to much greater long term pain. They have shown themselves able to be bought off and distracted from long term consequences.

While we need a wall between banking and investment , we need a wall between financial regulation and political influence even more.

The threat of the Slaughter Rule to pass the Health Care legislation leaves us wondering if the cure to our health care problems is not worse than the disease.  It seems that there are only two reasons to resort to this tactic.  Either Pelosi does not have enough votes to pass the bill or she wants to provide cover for those who do not want to face the consequence of their vote back home.

In either case she stands ready to thwart the will of the voters.  After so much outright bribery and arm twisting this does not speak well for the bill. If she really thinks that everyone will like the bill afterwards then she is speaking very poorly of her party’s ability to communicate anything.  More likely she is simply arrogant in believing that the great unwashed do not really know what is good for them.

The Blue Dog Democrats have the most to lose from deem and pass (which is really a by-pass).  If voters cannot see how their Congressman voted and this obfuscation is intentionally constructed by the Democrats in power, then their only option is to vote out every Democrat regardless of their fiscal conservatism.  That will be the only way assert the will of the voter.

In an effort to give cover to their Congressmen, the party leadership may bury them.

With a substantial majority in both houses the Democrats are having a difficult time passing the health care bill. Either the bill sucks or the party leaders; Pelosi and Reid are political incompetents.

While I agree that the bill is just disastrous in its content, the raw political arrogance and incompetence only makes it worse. The Slaughter rule that threatens to consider the bill affirmed without a vote will likely cause such outrage that many of those sitting on the fence will likely tilt against it, especially if the vote is dragged out beyond the Easter break.

If it is passed through without an up or down vote, the losers will be the Democrats who stood against it.  With no up or down vote, the voters can only assume that EVERY Democrat voted for it. In other words forcing this bill through with this method will hurt the Democrats much more in the coming election.

The critical miscalculation is assuming that this bill is all or nothing; it must be passed now or never.  Such thinking is extremely limiting. Power comes from expanding options, not limiting them.  There are plenty of options for improving health coverage and controlling costs that are not covered in this bill.

The Democratic leadership is inflicting itself with defeat for years to come.  This is an incredible feat considering the leads they had only a year ago.  A good bill does not need bribes and favoritism to pass, and it certainly does not need to consider radical procedural modifications to game the vote. The only bipartisan part of this bill seems to be the opposition.