Freedom Line Blog

Up to 38% of people who qualify for Obamacare exchange subsidies may have to pay some or all of the money back to the IRS. That’s because the amount of subsidy dispensed is based on a sliding scale. As income rises, the amount of subsidy decreases. In practice, many people who currently qualify for a subsidy could wind up paying back the amount if they earn just a little bit more in income.

“At biggest risk are people who annual household income put them near the thresholds where the Obamacare subsidies make steep declines,” explains AEI expert Scott Gottlieb. “These cliffs are steepest for those people who earn 150% of the federal poverty level (family of four earning $35,000 in annual household income); 250% (a family of four earning about $55,000 annually); and 400% (a family of four earning about $95,000 annually).”

The upshot of this is that people may become much more sensitive to family budgeting since their financial stability depends on which side of the subsidy wall they fall. The downside of course is that we’re likely to start seeing people decline job promotions and salary hikes to avoid becoming a net loser at tax time.

As I’ve noted before, Obamacare’s War on Work is just beginning.

“Tucked deep in the Affordable Care Act is language requiring all restaurants with at least 20 locations to list nutritional information alongside each and every item on the menu,” writes Peter Doocy at Fox News.

The purpose is to inform customers about the nutritional value of a menu item before ordering.

This regulation hits made-to-order eateries particularly hard, since in practice the restaurant would have to provide customers with things like calorie counts on-the-fly – a nearly impossible task for places like Domino’s where up to “34 million different pizza combinations [are] available at the chain, when all crusts and cheeses and toppings are factored in.”

To make matters worse, the cost of compliance will fall on franchisees; i.e., the small business owners most at risk under the new regulation.

Domino’s and other groups are pushing for a solution that would deem restaurant owners compliant if they provide the nutritional information online or through an app.

But if that fails, it’s easy to see eateries cutting back on menu options and clamping down on substitutions. “Have-it-your-way” may soon become “Talk to the FDA.”

If the proposed nutritional rule goes into effect as-is, Americans can add food to the growing number of health-related choices – including doctors, hospitals and insurance plans – that are being reduced thanks to Obamacare.

CFIF Senior Vice President Timothy Lee discusses how the U.S. has fallen from the top ten most economically free nations in the world and how, in unrelated news, temperatures have fallen too despite the warnings from the global warming alarmists.

Listen to the interview here.

Get ready for more presidential overreach.

Today, Barack Obama convened his first Cabinet meeting of the year. Unwilling to negotiate with Republicans in Congress, the President threatened to bypass the legislative process in order to impose his preferred policies through executive orders.

“I’ve got a pen and I’ve got a phone,” CBS’ DC affiliate quotes the President telling Cabinet members. “And I can use that pen to sign executive orders and administrative actions that move the ball forward in helping to make sure our kids are getting the best education possible, making sure that our businesses are getting the kind of support and help they need to grow and advance, to make sure that people are getting the skills that they need to get those jobs that our businesses are creating.”

Quick, grab the pen and unplug the phone!

What Obama is promising is to intervene in every stage of an American worker’s lifecycle, without any input from the 535 people elected to represent their diverse interests in Congress. Instead, he will rely on the accumulated wisdom of the bureaucratic and trade association elites to impose change in a centralized, top-down fashion.

It’s as if after five years of running annual trillion dollar deficits, destabilizing the health insurance market, destroying the coal industry and presiding over the largest increase in food stamp use in history the President thinks he needs to increase his influence over the nation’s economy.

It would be better if instead of rushing to issue a flurry of short-lived orders President Obama instead took the remainder of his lame duck tenure for what it is: An opportunity to see the big picture and exercise some humility.

Republicans are interested in talking about poverty reduction. Obama – whose upcoming State of the Union speech is rumored to include a section on income inequality – should meet them half way. Have a real conversation. In private and in public. Elevate thoughtful opponents like Paul Ryan so that the American people see two powerful intellects engaging a serious issue in a respectful way. In short, dabble in statesmanship.

Obama’s executive orders will expire the moment he leaves office. They will also incite partisan opposition, and rightly so since each will represent an end-run around the lawmaking process.

Mr. President, you can do a lot better than your so-called “pen-and-phone” strategy. America deserves it.

Below is one of the latest cartoons from two-time Pulitzer Prize-winner Michael Ramirez.

View more of Michael Ramirez’s cartoons on CFIF’s website here.

Below is one of the latest cartoons from two-time Pulitzer Prize-winner Michael Ramirez.

View more of Michael Ramirez’s cartoons on CFIF’s website here.

Earlier this month, I noted that our economy continues to sputter at stalling speed, some four long years after the last recession officially ended:

The U.S. Commerce Department announced second-quarter gross domestic product (GDP) growth of just 1.7%.  That follows first-quarter 2013 growth of just 1.1%, and fourth-quarter 2012 growth of just 0.1%.  Together, that means our economy has grown less than 1% over the past nine months. That obviously provides additional confirmation that Obama’s economic agenda has failed, even as he barnstorms the country demanding more of the same.”  

Yesterday, Macroeconomic Advisers lowered its third-quarter GDP projection to just 1.8%, which would make four consecutive quarters below 2%.  The fourth quarter of 2012 came in at 0.1%, the first quarter of 2013 was 1.1% and growth for the recently-completed second quarter of 2013 was 1.7%.  That’s significant, because growth below 2% on a year-over-year basis has been followed by a recession some 70% of the time according to a Federal Reserve study.  Keep in mind that the average quarterly GDP growth since 1929 has been 3.3%.

Meanwhile, American workers’ wages continue to stagnate, according to the Labor Department.  Since the recession ended all the way back in June 2009, average hourly pay for non-supervisory employees outside of the government sector has declined 0.9%.  It’s one thing for wages to decline during a recession, but another thing entirely for them to fall during a supposed “recovery.”  Obviously, record trillion-dollar deficits aren’t the only unfortunate novelties of the Obama presidency.

Beware of financial bureaucrats posing as economists. That’s my main takeaway from some pre-analysis of Friday’s unemployment numbers by Gallup’s lead economist, Dennis Jacobe.

As is sometimes the case when using metrics to understand reality, it looks like the federal government isn’t counting the right economic event if it truly wants to understand the employment market.

According to Jacobe, “The current government job measures leave a lot to be desired in terms of face-validity. For example, [Federal Reserve Chairman Ben] Bernanke noted in his testimony to Congress that the Fed’s unemployment target may need to be adjusted, depending on the labor participation rate. A declining participation rate can artificially lower the unemployment rate as job seekers give up looking for work, while an increasing participation rate can do the reverse.”

The problem is particularly acute when one considers how the feds count part-time jobs.

“Similarly, the establishment survey can be distorted by a surge in part-time jobs – a factor that may need to be considered when one evaluates Friday’s report,” writes Jacobe. “Part-time jobs not only count as new jobs for this survey, but if an American having one part-time job adds an additional part-time job, it counts the same as the creation of a new full-time job.”

This kind of counting completely misrepresents the rise in multiple part-time jobs. By treating two-part time jobs as the equivalent of one full-time job, the metric leaves out the fact that unlike just about every full-time job, almost no part-time job provides health or retirement benefits. Thus, while the hours worked my be roughly the same, the overall compensation is not.

What makes this an especially pernicious way to describe today’s employment market is the well-documented impact ObamaCare is having on the decline of full-time employment. If the federal unemployment survey continues to equate workers with multiple part-time jobs and those with full-time employment, a huge net loss in millions of workers’ standard of living will be lost because the official formula simply doesn’t account for it.

That’s a point worth remembering if Friday’s unemployment numbers come back better than expected.

Texas Republican Governor Rick Perry is once again visiting Democratic strongholds in an attempt to lure businesses to relocate to the Lone Star State.

Perry is set to meet with business groups in New York and Connecticut, reports National Public Radio. Previously, Perry extolled his state’s low-tax, light-regulation approach in California and Illinois.

But Perry’s initiative is more than just a series of speeches and photo-ops. His moves are coordinated with the work of TexasOne, a coalition of chambers of commerce and corporations funding a $1 million advertising campaign in the targeted states.

YouTube ads like “Texas is Calling” tout the state’s nine consecutive years ranked #1 for business, hosting the world’s largest medical center and welcoming 1,400 new residents a day.

With states like California, Illinois, New York and Connecticut ranking near the bottom in business-friendly taxes and regulations, it’s no wonder Perry sees an opportunity to let wealth creators in those states know there is an alternative.

A new Gallup poll provides more proof that the liberal fixation on gun control and immigration reform isn’t even on the Top Ten list of the most important issues for Americans:

This suggests to me that one way to inject issues 1-10 into the deliberations about gun control and immigration is for Republicans in Congress to ask rhetorically, “Why are we discussing restricting guns and legalizing illegal immigrants when 1) 86 percent of Americans want us help create jobs and help the economy grow, 2) 81 percent want us to make the government work more efficiently and fix our schools, and 3) 77 percent want us to address the financial problems with Social Security and Medicare?”

Rather than letting Democrats pick the two issues that most divide Republicans, GOP members of Congress should be picking issues that divide the opposition. Any of Gallup’s Top Ten are natural strong points for Republicans, and especially conservatives. All they need to do is pick one and start reframing the debate.

Now.

With the first half of President Barack Obama’s regulatory legacy behind us, the folks at Heritage tallied up the cost thus far – 131 new major regulations totaling $70 billion.

Major regulations are those imposing a cost on the economy of at least $100 million or more each year.

In 2012, the two biggest profit-killers were (1) a joint EPA-Dept. of Transportation rule to boost fuel-economy standards that will result in an average new price increase of $1,800.00, and (2) an EPA Utility MACT regulation designed to shut down coal plants by making it cost prohibitive to meet new emissions standards.

On deck are the literally hundreds of regulations spawned by ObamaCare and the Dodd-Frank financial reform law. Since those are still working their way through the bureaucracy, it’s too early to estimate what their financial impact will be. One this is certain, though; they won’t be cheap.

Get a copy of the entire report, Red Tape Rising, here.

Now that the Gang of Eight’s immigration reform bill has been slowed down a bit, it’s worth pausing for a moment to consider what economic trade-offs might occur if millions of illegal immigrants become eligible to enter the job market. Since many of these newly eligible workers are low-skilled, they’ll be competing with low-skilled, low-wage native workers in an economy with 7.6 percent unemployment.

Members of the U.S. Commission on Civil Rights are taking notice, says Byron York:

Last week, three members of the U.S. Commission on Civil Rights wrote to Ohio Democratic Rep. Marcia Fudge, chairman of the Congressional Black Caucus, arguing that legalizing currently illegal immigrants will have far-reaching effects on African-Americans.

“Such grant of legal status will likely disproportionately harm lower-skilled African-Americans by making it more difficult for them to obtain employment and depressing their wages when they do obtain employment,” the commissioners wrote. “The increased employment difficulties will likely have negative consequences that extend far beyond economics.” Among those consequences, according to the commissioners: increased crime, incarceration, family breakdown, and more.

A recent review of the academic literature by Harvard economist George Borjas confirms the negative impact mass legalization will have on low-skilled native wages:

For American workers, immigration is primarily a redistributive policy. Economic theory predicts that immigration will redistribute income by lowering the wages of competing American workers and increasing the wages of complementary American workers as well as profits for business owners and other “users” of immigrant labor. Although the overall net impact on the native-born is small, the loss or gain for particular groups of the population can be substantial.

The best empirical research that tries to examine what has actually happened in the U.S. labor market aligns well with economy theory: An increase in the number of workers leads to lower wages.

If you increase the supply of something, you lower its value. If they want a way to frame opposition in positive terms, expect to see Republican opponents of the Gang of Eight’s reform bill to become the champions of the forgotten working class.

Matthew Continetti of the Washington Free Beacon has a must-read opinion piece today explaining why President Barack Obama’s policy agenda ignores the economic and employment concerns of millions of Americans to focus on much less salient issues like gun control and amnesty.

In short, to understand Obama’s refusal to concentrate like a laser beam on improving the nation’s economic outlook, one has to remember that the President cares more about wealthy liberal pet projects from the likes of New York’s billionaire mayor Mike Bloomberg than about anyone on Main Street.

The Bloomberg style has several distinctive features. The first is a complete indifference to or dismissal of middle class concerns. In this view, it matters less that the middle class is enjoying full employment or economic independence or a modicum of social mobility or even action on issues it finds important, and more that it has access to government benefits generous enough to shut it up.

Recall that in the aftermath of Hurricane Sandy Bloomberg was far more interested in seeing the Yuppie-filled New York City Marathon take place, and in linking the storm to apocalyptic climate change, than in mobilizing the combined forces of municipal and state and federal government to take care of the white working class on Staten Island and in the Rockaways. Similarly, Barack Obama has nothing new to say on the economy or deficit, but delivers speech after speech on gun regulations that would not have stopped the Sandy Hook massacre, while his allies in the Senate work to import low-wage labor on the one hand and high-end Silicon Valley labor on the other. Meanwhile, the vast majority of the nation hopes for better days.

Another hallmark of the Bloomberg style is its insufferable condescension. One need only have heard the tiniest whine of a Bloomberg speech to know what I’m talking about. The preening attitude of superiority manifests itself in a form of moral blackmail. Adversaries of the Bloomberg-Obama agenda are not simply mistaken. There is, it is implied, something wrong with them personally.

Sound familiar? You can read the entire piece here.

Below is one of the latest cartoons from two-time Pulitzer Prize-winner Michael Ramirez. 

View more of Michael Ramirez’s cartoons on CFIF’s website here.

Below is one of the latest cartoons from two-time Pulitzer Prize-winner Michael Ramirez. 

View more of Michael Ramirez’s cartoons on CFIF’s website here.

Earlier this month, we at CFIF lamented the fact that the U.S. now claims the developed world’s highest corporate tax rate.  Fortunately, as we noted, a bipartisan consensus is emerging in favor of reducing and reforming that rate.

Now, in a letter published by The Economist, twenty leading economists from both academia and the private sector called for a lower rate and illustrated how our current rate discourages employment and thwarts domestic investment:

A high corporate tax rate impairs our ability to attract domestic and foreign investment. Because capital and information flows more freely across borders in the Internet age, disparities in the corporate income tax rate can now have a greater impact on location decisions than in the past. The number of Fortune Global 500 headquarters in the United States decreased from 179 to 133 from 2000 to 2011, while China (25.0 percent tax rate), Switzerland (21.2 percent tax rate), and Korea (24.3 percent tax rate) experienced sizable increases over the same period. De Mooij and Ederveen (2005) found that a one percentage point reduction in a host country’s tax rate increased foreign direct investment by 2.9 percent. The OECD (2011) found that corporate income taxes, of all the different types of taxes, are most harmful to economic growth and capital accumulation.

A high corporate tax rate undermines job creation and reduces wages. According to the Commerce Department, foreign investment supported five million U.S. jobs in 2010. To the extent that our relatively high corporate tax rate discourages foreign investment, it discourages job formation. Moreover, several academic studies have found that much of the burden of the corporate income tax is borne not by capital but by domestic labor, in the form of lower wages. For example, Mathur and Hassett (2010) analyze the relationship between corporate tax rates and the average manufacturing wage for 65 countries over a period spanning 1981–2005; they estimate that a one percent increase in the corporate income tax leads to a one half of one percent decrease in hourly wages. The U.S. Treasury Department assumes that 25 percent of the incidence of corporate tax is borne by workers. Moreover, policies that increase the cost of capital will result in less capital being invested.”

As summarized by former Clinton Administration adviser Elaine Kamark and former Reagan adviser James Pinkerton, “This is another confirmation of the growing consensus among experts and political leaders that the U.S. corporate tax rate is too high and the code too complex.”  They added, “As the experts have established, the current U.S. tax code is an impediment to investment, growth and job creation.”

The intellectual consensus thus continues to coalesce.  Now it’s time for the White House and Congress to act before more harm is done.

Get a load of this economic reasoning from Peter Orszag, Obama’s first Director of the Office of Management and Budget and current vice chairman at megabank Citigroup:

More graduates would mean lower inequality, because the wage premium for a college degree would be reduced by the additional supply. And it would mean higher national income, because better-educated workers are, on average, more productive.

So, lowering the “wage premium” means that income for college graduates will go down with more of them in the job market.  This is a good thing according to Orszag because reducing the value of a college degree will have a leveling effect on incomes (in a downward direction, of course).

On the bright side, it’s a remarkably honest admission about everything that’s wrong with the analysis of people who obsess over economic inequality.  In this worldview, government policies that devalue education and distort the labor market should be praised if it means less people have an opportunity to be rewarded for superior ability.

Thus, while Orszag’s analysis doesn’t square with the diminished aspirations of millions of under- and unemployed college graduates in the Age of Obama, it does help explain why his former boss isn’t putting any muscle behind addressing the depressed job market.  In Obama World, so long as more people make the same – even if it’s less – everything is just fine.

Earlier this week, the federal government reported that our economy contracted for the first time since the last recession.

Today it reported that unemployment rose to 7.9% last month, up from 7.8% the month before.

Analysts had expected the rate to remain at 7.8%, already a terrible number nearly four years after the last recession ended.  Moreover, the 157,000 new jobs added fell below analysts’ expectations of approximately 170,000, which itself is significantly below the 200,000 per month necessary to keep pace with population growth and substantively reduce the festering unemployment rate.  So Obama II inherits a higher unemployment rate from himself than Obama I inherited from Bush, but with the added burden of $6 trillion wasted deficit spending.

This has ominous broader implications, as noted by The Wall Street Journal:

The labor market looks anemic 3½ years into an economic recovery.  At last count, there are 134 million employed Americans, or four million less than the month before the recession began.  At the same point after the prior recession in the early 2000s, despite what was then called a jobless recovery, there were 5.3 million more workers…  Whether it is retirees, the unemployed, “discouraged” workers or people claiming disability that explain the difference, though, the ratio of “makers” to “takers” in society has dropped.  That has implications for tax revenue and spending and helps explain why, following weak growth data on Wednesday, this is the slowest economic recovery in modern times.”

Hardly the “Forward” that Obama promised.

The unemployment rate when Barack Obama became President was 7.8%.  Four years, four trillion wasted deficit dollars and thousands of federal regulatory pages later, the unemployment rate remains… 7.8%.

Moreover, the Labor Department reported this morning that we added a lackluster 155,000 new jobs last month, and the labor participation rate (the percentage of Americans actually in the workforce) showed no improvement and remains at a generational low of 63.6%.  In fact, considering that the number of women working outside the home has increased during the past three decades, workforce participation is in that sense even more depressing.

By way of perspective, through good times and bad since World War II, unemployment has averaged 5%.  And facing an even deeper recession, Ronald Reagan’s agenda of lower taxes and smaller government saw unemployment plummet from 10.4% on the date his tax cuts took effect to 7.0% two short years later, and continued its steady decline to 5% during his administration.

Accordingly, this morning’s unemployment report confirms the “New Normal” under Obama and his wasteful policies.

If you’re a conservative looking for reasons to be thankful this November, don’t read Amity Shlaes’ column at Bloomberg today.  In it, the author of books on Calvin Coolidge and the Great Depression identifies four factors that make 2013 seem like 1937 – a pre-election government spending spree; talks of deficit reduction thereafter; presidential attacks on high-income earners; and the economic fallout from first-term “comprehensive reforms” like Social Security and Obamacare.

According to Shlaes, the combination caused “the depression within the Depression.”  Not something one wants to think about this time of year.