Obama Budget Will Cost Jobs

Would jobs be recovering faster if the Fed had not almost tripled the money supply, almost doubled the deficit with new spending programs, had the Treasury not bought more than $1 trillion in questionable mortgage-backed securities, and if the president was not committed to major tax increases next year. What seems to be little understood is that the money spent by the federal government is pulled out of the private sector either through increased taxes, higher interest rates or inflation (which is lurking in the wings). This means less credit available for businesses to borrow to expand their businesses, replace their inventory, or hire new workers. Dick Morris nails it in the article below.

Ellen Sauerbrey
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Morris: Obama Budget Will Cost Jobs
Thursday, 04 Feb 2010 08:22 PM
By: John Rossomando

If the nation’s economy is a patient, then Barack Obama is a bit like a medieval doctor trying to bleed it back to health, Fox News analyst Dick Morris tells Newsmax. TV.

The Obama administration’s economic stimulus has done the exact opposite of what ought to have happened in the economy over the past year because the stimulus has been largely ineffectual in creating private-sector jobs in his opinion.

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“When the stimulus passed, they said it would create 2 million jobs… and then it turns out it wasn’t 2 million; it was 600,000,” Morris told Newsmax.TV’s Ashley Martella. “And it didn’t create any jobs; it just saved 600,000, and it turned out 350,000 were government workers ̶ primarily teachers.

“While I’m glad they saved their jobs, it’s got nothing to do with the economy,” Morris said.

Obama doesn’t realize that government borrowing has the net effect of crowding out those in the private sector who need to borrow the same money they need to create new jobs, Morris said.

“They can’t get loans,” he said. “So in the last 12 months, Treasury debt has gone up 41 percent, but consumer lending and commercial lending is down by over 20 percent. And that’s the exact opposite of what we should have happening.”

The expiration of the Bush tax cuts next year does not bode well for the economy because many small businesses file on personal income tax forms and report incomes in excess of $250,000.

The prospect of a 12-percent tax increase next year for those in the top tax bracket ̶ up to 39.6 percent from 35 percent ̶ along with capital gains taxes and the reinstatement of the estate tax, will scare people into hoarding their money, Morris said.

“All of those are going to scare people, and they’re not going to make purchases or investments, or create jobs, or expand when they know the boom is going to be lowered next year, “ Morris said. “It’s like inviting a cow to have a wonderful final meal when they know they are going to get their head chopped off tomorrow.”

Morris sees several ways Obama can chop $1 trillion from the federal deficit. The first way would be for the president not to spend the billions of dollars that have not already been spent out of the $787 billion stimulus plan.

“That’s half a trillion right there,” Morris said.

Another $500 billion could be cut from the deficit by taking the TARP money that has been repaid and use it for deficit reduction rather than his jobs program.

“That would have a huge impact on reducing the deficit and stimulating the economy,” he said.

But Morris said Obama will not do this and he will keep bleeding the economy.