While the President is hyped about his latest jobs proposal, The New York Times is reporting that many employers say they do not plan to increase hiring because of the plan.
The problem with Obama's plan is that it does not address the core problems in our economy. We do not have high unemployment because Social Security taxes are two points higher than they need to be, because we lack an employment tax credit, or because government spending is too low. We have high unemployment because there is a high level of uncertainty coming from the government. Congress cannot agree on what course to take until the last moment, and those last-minute decisions have rarely been good for the nation. For example, when Congress could not come to an agreement on whether to extend the Bush tax cuts, Americans waited until December 7 before they knew how much would be withheld in the following year. Just as last-minute cramming rarely works for a college exam, last minute deal-making by Congress has not worked for the American economy.
Instead of offering tax credits and spending, we need to improve government involvement in American labor. Instead of uncertainity and last-minute deals in Congress, we need permanent solutions that employers can rely on when making decisions. A three-step approach would help solve our unemployment problems:
1) Decrease regulation. Regulation currently costs the American economy $1.75 trillion. If companies could cut the costs of regulatory compliance in half, they would have plenty of money to hire new employees. The money that would be saved would be larger than any stimulus plan the President could get through Congress. And the good news for the President is this: he can do it all on his own; no Congressional approval required.
2) Reduce corporate income taxes and eliminate loopholes. Corporations have become very good at dodging income taxes through loopholes. Replacing the current structure with a corporate flat tax will greatly assist corporations in planning for their futures. Eliminating loopholes will ensure that all corporations pay a "fair share" and cover for the loss of revenue from the flat tax.
3) Eliminate Obamacare. Companies still do not understand what impact this law will have on their finances. Many employers are currently considering or planning to eliminate health care when the mandate takes effect in 2014. They are choosing to do this because they would rather face the surety of the fine than the unsure prices in the healthcare market. As employers prepare to face rising prices or the fines, they are certainly not going to hire more than necessary and incur extra costs.
Employers are looking at the big picture, not the immediate one. Employers are not going to hire new employees because of a one-year reduction in payroll taxes or a tax credit. Employers may hire some new workers because of federal spending, but those jobs will only last until the money runs out. It is time to put together a plan of economic certainties that will help employers see a stable picture, and then they will consider hiring new employees.