Lincoln * Institute

Ralph R. Reiland

Ralph R. Reiland

The B. Kenneth Simon Professor of Free Enterprise at Robert Morris University

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Reflections

Obama vs. Business and Jobs

by Ralph R. Reiland
 

Even The New York Times now says that Barack Obama's unswerving call for tax increases -- to impose more "fairness" -- is the wrong prescription during the current instability in the U.S. economy.

"The big issue for each candidate is not spending, per se, but how the crisis will affect their promises on taxes," said the Times in a recent editorial.

With the U.S. in the midst of a financial meltdown, the Times recognized that Obama's proposed tax hikes would only push the U.S. economy into a deeper hole: "Mr. Obama has said that he would raise taxes on the wealthy, starting next year, to help restore fairness to the tax code and to pay for his spending plans. With the economy tanking, however, it's hard to imagine how he could prudently do that. He should acknowledge the likelihood of having to postpone a tax increase and explain how that change will affect his plans. Then, he can promise to raise those taxes as soon as the economy allows."

In other words, in Times-think, it's bad to hit the economy while it's down but okay to knock it around as soon as it gets up off the ground.

It's unlikely that Obama, still unwilling to say that he was wrong about the surge in Iraq, will be insightful and flexible enough to acknowledge that his program of increasing taxes on "the wealthy," corporations, and small businesses is simply a formula for increasing unemployment in an economy that's already delivering rising levels of joblessness.

For the corporate sector, with U.S. firms already facing the industrialized world's second-highest corporate tax rate, Obama is calling for additional taxes and mandates, such as the "windfall profits" tax on oil companies.

In the small business sector, the Urban-Brookings Tax Policy Center reports that "several hundred thousand small business owners" have incomes high enough to be hit by Obama's proposed tax hikes on income, capital gains and dividends.

Most of the entrepreneurial income in these more successful small businesses would be taxed away under Obama's plan, with the top federal grab of income rising to over 50 percent, totaling his proposed increase in the marginal income tax rate, Medicare and Social Security taxes, and the phase out of exemptions.

In addition to higher business taxes, Obama says "I'll require employers to provide all their workers with seven paid sick days a year. That sounds nice, if they're actually sick.

In "A Disability Epidemic Among a Railroad's Retirees," The New York Times recently reported on how a well-intentioned program at Long Island Railroad was turned into a crooked gravy train: "Virtually every career employee — as many as 97percent in one recent year — applies for and gets disability soon after retirement, a computer analysis of federal records by The New York Times has found." Lion trainers have lower levels of "disability."

Those who cashed in with allegedly debilitating conditions included not only conductors and track workers but also the railroad's former lawyers and a full range of retired white-collar managers. "A married couple, one from management and one from labor, are retired and drawing about $280,000 annually in combined disability and pension payments," reported the Times. "Since 2000, about a quarter of a billion dollars in federal disability has gone to former Long Island Railroad employees."

Similarly, the biggest result of Obama's paid leave mandate will most likely be rising levels of duplicity and falling levels of employment and job growth, with millions of government-mandated vacation days producing higher business costs, lower profits, higher consumer inflation and increased layoffs.

Obama's economic plan also includes a "pay or play" mandate that requires companies to either pay for health insurance for 100 percent of their full-time employees or pay 6 percent of their total payroll into a federally-designed fund.

Small employers currently face an average cost of $7,600 per year for health insurance coverage for an employee with a family, according to a recent Kaiser Family Foundation survey. For a small business with thin margins that can afford to cover only 10 of its 50 employees, Obama's full-coverage mandate under the "play" option, at $7,600 for employees with families, comes with a job-killing price tag of $304,000 per year for the coverage of the other 40 employees.

All told, Obama's flawed economic plan may be a vote getter but it is a direct threat to employers and employees, especially in small business, the sector of the U.S. economy that currently creates nearly three-quarters of all net new jobs, produces 28 percent of the nation's exported goods, and employs 51 percent of the private sector workforce.