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The Honolulu Advertiser
Posted on: Thursday, January 28, 2010

Want to help business? Be specific


By Victor Davis Hanson

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The economic policies of President Obama have frightened the country's small-business community.

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A year ago Barack Obama inherited a recession brought on by financial panic following the collapse of the housing bubble. The market crash was made worse by Wall Street shenanigans and recklessness at Freddie Mac and Fannie Mae. Job losses followed.

In response, Obama pushed through a stimulus bill that went well beyond the borrowing done by George W. Bush in his last months in office. In fact, Obama and the Congress borrowed an additional $787 billion to infuse the economy with fresh job-creating cash.

The president warned us that without this borrowing, unemployment might reach double digits. Yet with the stimulus, unemployment has soared from 7.6 percent to 10 percent. That translates into over 4 million jobs lost in 2009 alone.

Why the continual job losses?

First, the government can create only so many jobs by borrowing and spending. It is less efficient than private enterprise in reacting to market needs — new products, new services and new consumer tastes. Higher federal budgets eventually translate into more bureaucrats to shackle the private sector with more regulations that discourage innovation and experimentation.

In contrast, the U.S. Small Business Administration claims that small businesses employ about half of all working Americans. Yet building contractors, orthodontists, local real-estate agents and small software companies (to name just a few types of small businesses) in the last year have not been convinced that it is time to start buying new equipment and hiring more employees to gear up for increased consumer demand.

Why the continued depression among employers?

Many may suspect that the administration does not appreciate how hard it is to be self-employed — an understandable conjecture when neither the president nor many in his Cabinet have had careers outside government or academia. Tenure and near-automatic annual pay raises do not exist in the world of the insurance agent, farmer or trucker.

Instead, when employers listen to the president's grand ideas for health care reform, they must quietly cringe at increased costs per worker. When they hear soaring rhetoric about cap-and-trade energy policy, they must silently fear higher power costs.

Worse still has been the promiscuous talk this past year about all sorts of higher taxes.

During the 2008 campaign and the president's first year, we heard Obama promise new income taxes that would revert to the higher rates of the Clinton administration. But that would now come on top of recent new tax hikes by the states that have often upped their own income and sales taxes by considerable margins since 2000.

During the health-care debate, there were also promises of a special surcharge on "Cadillac health plans," as well as making the upper brackets pay a surcharge to fund the care of others.

And don't forget Obama's inheritance-tax proposals that would have reversed the scheduled one-year repeal (with what many expected would become permanent) of the inheritance tax to a 45 percent tax rate on anything that an individual leaves to his heirs beyond $3.5 million in value — capital that was already taxed during its acquisition.

As a result of all this tax-talking frenzy, business owners have no idea what their new aggregate tax obligations will be or when they will kick in. They can only sense that the Obama administration wants to go after successful entrepreneurs to fund more federal entitlement for others.

If President Obama really wants to foster job growth, he needs to get specific. Stop the borrowing and instead tell the business community exactly what income, payroll and surcharge taxes he proposes, when they will begin — and how much he appreciates those who will pay them.

When it comes to creating a psychological climate to encourage employers to start hiring again, a little certainty and a little praise are lot better than uncertainty and talk of taxing even more those who now already pay the most.