Tags: wolinsky | obama | jobs

Obama’s Jobs Plan is Just Another Numbers Game

Thursday, 15 Sep 2011 06:45 AM

By Jacob Wolinsky

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As outlined last week, President Barack Obama’s job proposal is a repeat of his same failed policies.

However, when the president gave his speech, he offered no details on how it would be financed. But a few days later, Obama released details, which consist of Obama’s favorite idea: “tax the rich.”

The measures to pay for the bill consist almost entirely of ending “subsidies” for oil companies, and reducing deductions which individual making more than $200,000 a year can report to the IRS. The amount collected in taxes over 10 years will be equal to approximately $450 billion, which is the amount the president wants in his “stimulus package.”

No one has pointed out that Obama and his advisers seem to be unfamiliar with one of the basic concepts of Finance 101. It is called the time value of money: $450 billion today is worth less than $450 billion 10 years from now.

Assuming interest rates of 5 percent (not an unreasonable number), $450 billion, is really worth $733 billion in 10 years. If America was able to borrow $450 billion and invest it at 5 percent, the return would be $733 billion. Therefore, Obama is using future money, which is worth less than today’s dollar to finance this bill.

Obama likely knows this fact, but he is ignoring it for a different reason: Obama does not want this bill to pass. The bill is a massive tax increase on anyone making more than $200,000, and there is no way the Republicans will pay for it.

The bill is designed in a populist manner in order to make the Republicans look bad. Obama specifically added in $3 billion in revenue to end tax breaks on corporate jets; $3 billion is a drop in the bucket for a $450 billion package.

However the president wants to make it look like the GOP only cares about the “rich” CEO with their private jet, and not the little guy driving a beaten-up car.

Unfortunately, the biggest losers in this whole mess are the American people. Several GOP presidential candidates have offered some very good plans to drive economic growth, while reducing the deficit.

There are also some simple things that the president can do to create millions of jobs almost instantly. These include: opening up more areas for oil and natural gas drilling, cutting down on red tape regulation, and allowing the XL Keystone pipeline to be approved.

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