Tuesday, March 19, 2013

Kelly Ayotte appeals to her base: Part 1


If I were to ask you to craft a speech that needed to be delivered at CPAC, what would you focus on? Would your speech focus on Obamacare, unemployment, taxing small businesses, and radical Islamists? You mean there's other subjects out there? Kelly Ayotte, Junior Senator from New Hampshire, decided to focus on those issues during her speech(es).


Senator Ayotte said,”Let me tell you about some of the things that keep me up at night. Too many Americans are out of work. Federal regulations are strangling businesses. Obamacare is increasing health care costs and stopping so many businesses from hiring.” Ayotte who was a potential choice to be Mitt Romney's running mate, seems to still be stuck in 2012 campaign mode.


Not that it really matters, she does appeal to the base of the Republican party but I thought we might like to talk about some of what she said.


I'll start with “too many Americans are out of work.” If you've been following the news, at all, you'd know that the unemployment percentage is now at 7.7% which is the lowest since the beginning of the great recession in March 2008. In February, we saw an increase of more than 200,000 jobs which is better than the average of the previous three months which was slightly under 200,000 jobs per month. The DOW set all-time highs recently and the signs of the economy seem to be in a net positive position. The jobs will come if you believe the Congressional Budget Office, who projected that 10-12 million jobs would be created from 2013-2017. Of course, Republicans don't like this measure, anymore. If the economy shows sign of recovery under a Democratic president, it must be misleading. More and more, Conservatives and Republicans are citing that there are millions more Americans not working now, like they were four years ago. Most of that increase, as PolitiFact notes is because of the graying of the baby boomer generation. Also, there is a long-term trend of people leaving the working population for other reasons (PolitiFact compares the numbers to George W. Bush's presidency). All in all, they find that it has increased by about one million people compared to under President Bush. But it's hard to know what caused those 1 million more people to leave the workforce, whether it be President Obama's policies or the recession or whatever.


“Federal regulations are strangling businesses.” This has been a popular refrain from the Republican party for years now. The World Bank did a study, in order to find out which country or area was most conducive for the starting and operating of a firm. The United States ranked fourth which means that the regulatory environment is very conducive for starting and operating a local firm. PolitiFact quotes Dean Baker an economist for the Center for Economic Policy Research who says,”We had a more regulated economy in most areas in the 1940s to the 1980s than we do today. In banking not only did we have the Glass-Steagall restrictions that separated banks and investment banks, but we also controlled interest and interstate banking. The government set airline, tucking, electricity, and even oil prices.” The reason for the recession, according to most experts, could be, at least, partially blamed on lax regulations. This includes weak oversight of mortgage markets and Wall Street transactions. BarryBosworth, an economist at the Brookings Institute notes, “countries such as Canada that have more regulation did notably better than the United States.”


“Obamacare is increasing health care costs and stopping so many businesses from hiring.” Surely, Senator Ayotte and her supporters, who routinely claim to have read all of the Obamacare law text, know that the major part of the law doesn't take place until 2014. So, I'm not really sure about how true her claim might be.
 
The study that is somewhat commonly cited in reference to these claims was conducted by Mercer and asked companies about what they thought would happen in 2014 to costs. In 2014, 51% thought that costs would increase by 4% or less. 20% thought it would increase costs by 5% and 29% did not know what to expect.

Sometimes people will talk about Papa John's, as the example to businesses not hiring because of Obamacare. The CEO of Papa John's wrote in an op-ed piece for the Huffington Post that he was actually hiring for 5,000 more jobs worldwide, opening hundreds of stores, and he would not cut team hours as a result of the Affordable Care Act.

PolitiFact found no large-scale studies that businesses are not hiring because of Obamacare.

When the Congressional Budget Office studied the Affordable Care Act, they found that it would reduce the number of people in the labor force because they might decide to work fewer hours or fewer jobs, retire earlier than they normally would, all because of the subsidies in the law. They did find that there would be a small decrease in the amount of jobs primarily on low-wage workers. The CBO reported that businesses might respond by hiring more seasonal or part-time workers. FactCheck spoke with Elizabeth McGlynn, associate director of the health unit at RAND Corp., stated that most large businesses already offer health insurance. Most small businesses are excluded from the mandate. So it's a relatively few firms that would be affected. The CBO reported that most of the effects would not be felt until after 2014, because “it will take time for workers and employers to recognize and adapt to the new incentives.” I have sent an e-mail to Senator Ayotte and will include her response if I get one back.


The other part of the claim was that Obamacare is increasing health care costs. Again, the major portion of Obamacare is not in effect until 2014. But oh well. Health care insurance premimu costs have increased but most analysts agree that the increase is mainly due to other things besides Obamacare. They estimate that Obamacare is responsible for, on average, 1-3% of the increase. The increase in health care costs are anywhere in the range of 8% and higher which only a portion can be blamed on Obamacare. Not that any of this matters, people have a hard time differentiating correlation and causation. Most of the increase in health insurance is due to health care costs that have skyrocketed prior to Obamacare (see article linked above) But overall, health care costs have gone down, saying below 4% for each of the last twoyears. But again, this has nothing to do with Obamacare as major portions of the law have yet to actually start. Once it is in effect, then maybe we could actually make these types of claims.


Senator Ayotte also said in her speech that we have a broken tax code and the President and Senate Democrats want to increase taxes making it harder for small businesses to grow and put people to work in this country. Ah yes. This sounds familiar. Doesn't it? It sounds exactly what Mitt Romney and Paul Ryan were saying during election time. They kept saying how they would fix the tax code, even though they didn't mention what tax loopholes they would cut. Then when non-partisan organizations showed the error of Romney's ways, he criticized the non-partisan organization for being partisan. But I digress. The plan for avoiding the sequester from President Obama proposed $200 billion cut in defense spending, new efficiencies in health care to save $400 billion, eliminating some agriculture subsidies and reforming the postal service. On the revenue side, President Obama would call for closing tax loopholes and capping deductions to 28 percent for the wealthiest Americans. The Senate Democrats plan was to cancel the $85.3 billion sequester and replace it over several years with a mixture of spending cuts and tax increases. The bill proposed would cut $27.5 billion from defense spending and $27.5 billion from agriculture funding. It would raise $55 billion in revenue by instituting the Buffet rule (minimum tax rate of 30 percent on income over $1 million) and ending tax deductions for oil companies. Of course, these plans failed, but we can look to see who would be affected by them. Republicans like to claim that the wealthiest people in America are these small business owners. This is, of course, not true. Only 8% of small business owners have an income of $200,000 or more. Slightly more than half of small business owners reported income of less than $50,000 and half of those reported having a tax loss. Only 0.5% of small businesses reported a profit of $1 million. Of the taxpayers that had their taxes increased, 11% reported any small business income and 9% qualify as small business owners. Of course, since all I'm relying on is feelings, I'm obviously wrong.

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