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  • How Obama's Stimulus Kills Job Creation

    This morning we detailed that since President Barack Obama passed his $787 billion stimulus package, the United States economy has shed nearly 2.8 million net jobs, the nation’s unemployment has gone up from7.6 to 9.4%. and nationwide a total of fifteen states are now suffering from 10% unemployment. But not only is Obama’s stimulus failing to halt job losses, it is also making it harder for employers to create new jobs. The USA Today reports:

    A federal subsidy designed to make health insurance more affordable for laid-off workers has led to a doubling in the number of people who have opted to continue their former employer’s coverage. The coverage, known as COBRA, allows people who leave their jobs to continue their former employer’s health coverage for up to 18 months. … The economic stimulus package signed into law in February subsidizes 65% of COBRA premiums for some recipients — workers laid off between Sept. 1, 2008, and the end of this year. The result has been a doubling of enrollments, according to an analysis by Hewitt Associates, a human resources consulting firm.

    How does the stimulus’ COBRA expansion kill job creation? The New York Times explains:

    First, employees who initially turned down Cobra have another chance to say yes (if they became eligible for it after Sept. 8). Second, business owners who have more than 20 employees and offer health insurance are now required to lay out 65 percent of any Cobra payments for employees who qualify for the benefits (this, too, applies to employees who took Cobra after Sept. 8). In addition, employers also must collect the 35 percent that employees still have to pay.

    This represents a significant new burden to small businesses. Yes, the government will eventually reimburse employers for these Cobra payments through payroll tax credits. But that can take months.

    Let’s think about what’s happening here. There is an assumption that an employee who is laid off is going to need help making those Cobra payments, and that may well be the case. But what about the employer? If a company is laying off people, there’s a pretty good chance it’s losing money. Possibly a lot of money. In some cases, it may be fighting desperately just to stay in business.

    So here’s my question: Why do we automatically assume that these companies are in a position to be fronting money for anyone. Why are they automatically in a better position than the insurance company, the employee, or the employee’s relatives?

    It gets even worse when the employee files for unemployment. A lot of people — including a lot of business owners — don’t understand how this works. Because the government cuts the unemployment check, it is widely assumed that it’s the government that pays the unemployment benefits. In reality, those benefits are funded by employer taxes. And here’s the killer: The more unemployment benefits your former employees collect, the higher your taxes go.

    It works like insurance. If the government pays a claim, your rates go up. In fact, if your former employee collects $10,000 in unemployment payments, you can expect to pay close to twice that in increased premiums. At least that’s how it works in my state, Illinois.

    Thus, this becomes another cost of doing business that smart owners attempt to control. How do you control it? By making as few hires as possible, by making sure that those hires you do make are as strong as possible, and by combining documented rules with good management.

    And now, thanks to the stimulus package, unemployment insurance has been extended as much as an additional 20 weeks. If you’ve had to lay off 10 people, this could easily result in additional taxes of $10,000, $50,000, or even $100,000. It’s a time bomb that won’t go off until after employers get their contribution-rate increase in November, but it will go off.

    And therein lies the final irony: Even after the economy improves, I’m going to think long and hard before I hire anyone. Thanks to the stimulus package — the stimulus package — the costs, paperwork, and legal exposure associated with hiring employees is on the rise.

    Posted in Ongoing Priorities [slideshow_deploy]

    20 Responses to How Obama's Stimulus Kills Job Creation

    1. Pingback: » Financial News Update - 08/18/09 NoisyRoom.net: Where liberty dwells, there is my country…

    2. Pingback: Heritage Report on Stimulus- Truth in Jobs

    3. Bobbie Jay says:

      When is anybody going to stop this guy for what he is. Everything he has and will do is a deliberate set-up to take us down.

    4. NYC says:

      all you can do is complain.

      companies small and big have not taken care of their employees for 40 years!

      having a business takes some work, if you didn't know.

      nothing is easy and if its that horrible….

      go work for someone else if YOU think the EMPLOYEE has it so GOOD. the only jobs that ever get created by greed are minimum wage slave timeshares. nepotism is in said my last employer as he went on a family vacation and bought a new Harley davidson. as I asked for a $1.00 raise and got a $.50 raise for all employees working there. which raised my grand total to $8.50 an hour unloading tractor trailers of appliances and managing a warehouse and coming in any day asked to, so I could pay for heating oil and food only at home. I was thankful then and am thankful now, for the slave labor position. I left to grow my own food in a garden and cut wood for heat and am much happier. All this takes less time than the crap small business slave labor job I had. If you want to…come talk to me ANYTIME.~cleveland


      (small print)

      subject to censorship does not lead anywhere.

      breathing air is a privilege.

      and i am blessed for I can say anything to my mother anywhere.

      I understand why this is posted for I have read other comment sections. and it is annoying to say the least.

      but then again….. hey you get to know ya neighbor!

      ya might not approve but now you know who your neighbor is.



    5. Cheri, Marysville, C says:

      We need to stay strong. Thank you Heritage! For months now (November 2008) I have felt I am witnessing the end of the dream of America. The perversion of education has led too many Americans to think they "can't" because things are stacked against them. American children are trained from kindergarten to put their hands out not realizing this is what does the "stacking". Americans have big hearts and it will be their undoing. While the media like a spoiled child refers to the rght as the party of "no", I am proud to have the backbone to say it.

      You say "Socialist" like it is a bad thing, it is!

    6. Kristi, TN says:

      Yes, I agree with Bobbie Jay. How can we stop this guy and further how can we bring him down? He's broken all the rules and the Constitution, Bill of Rights, Declaration of Independence and is now dissolving "checks and balances"; Congress–President–Supreme Court. Where does it stop?

    7. Loyd Reddig, Weather says:

      I can't figure out why he has stifled the Oil and Gas Industry. We are now importing Natural Gas into the country and we have the world's third largest reserves. We should be trying to get CNG powered cars and light trucks into the market. CNG (compressed natural gas) is cleaner, inexpensive and abundant in the US. There are 300,000 oil and gas workers looking for work that is at 25% of what is was last year. It seems as though he wants to hurt all oil and gas ventures in order to make himself look good. Most oil and gas ventures in the US are done by independent firms, not "Big Oil". There has been no growth in any job creating work since this guy got in office. I don't see any shovel ready work and I personally got past the shovel phase of my career about 30 years ago.

    8. Joyce Buckley, Coron says:

      Small businesses are ALWAYS treading water and that's why they are small businesses. There are taxes on taxes and surtaxes and "contributions." This country is going down and there's no reversing the slide. This president is the final nail.

      First and last something drastic has to be done about the illegal aliens who have ALL the labor intensive jobs here and are rapidly climbing the ladder into blue/white collar jobs.

    9. Ben C, Ann Arbor says:

      The above points are well said. What is missing in unemployment is the notion that the employer is "the bad guy." In State Government, at least in Michigan, the employee wins unemployment even if the employee violates stated company policy (speaking from personal experience). There is a disincentive to hire people. My unemployment tax went from 1.9% to 6.6% of payroll when I dismissed an incompetent employee – one employee! Unfortunately many people "use" the system and stay employed long enough to get their "state (employer) paid vacation." When challenged in court the courts tend to favor the employee because we all know – employers are the bad guys.

    10. Daver Ft. Worth says:

      Patience–my soldiers!

      The Deamon and his minions are on the run! Even the state run media is forced to admit the foibles and inconsistencies!

      Only the 5-second idealogues are still maintaining support for these gov't takeover efforts. "Stimulus," "Healthcare Reform," "Freedom of Choice" all lies and misnomers!

      The party of unintended consequences has engulfed the masses, and the Truth Will Set Us FREE!

      Did I mention this is the first time in my adult life I am no longer proud to be a citizen of this government?

    11. Lynn B. DeSpain says:

      Why work harder when failure leads the way to profit? Why succeed at anything when losing brings you the rewards? Why obey the Laws when the President himself mandates that people cannot be arrested for merely breaking the Law? Can't arrest an Illegal just for being an Illegal! Why have pride in your Nation and its history when the President is just going to spit on it and plead forgiveness from our enemies? Why bust your butt to provide for your family when Congress will just take all you have and give it to those who do not work and provide for their families? There is an answer. We can all stop being sheep, and start being the hell raisers that our forefathers were against the powers of the British, who also gave us no voice and no recognition! It is our rules and our Laws that Congress and the President are to follow as laid out in the Constitution and its Amendments, our Bill of Rights, and our Declaration of Independence! We not only have the Right to remove these people, we have the sacred duty to do so, as set forth in the Declaration. Read it. Tell your Congress to straighten up or get out!


    12. Jerry from Chicago says:

      To NYC — Did you really say that "companies big and small have not TAKEN CARE OF their employees for 40 years!"?

      Where does is it written that employers owe employees anything other than what the employee agreed to take as compensation for the job they were GIVEN. If you need more money get off your rear-end and make yourself valuable enough to someone who will pay you more.

      Employers just hire people, they don't adopt them. Tell me that you voted for Obama and everything will be clear for me.

    13. Mike Mancuso, San Jo says:

      The comments section following Heritage Foundation writings keeps me motivated to stay on top of what the Obama administration is doing to destroy our country. Based on this, the NRA, my favorites on talk radio and surprisingly, sometimes, MSNBC I fire back regularly to Obama, Axelrod, Pelosi, Feinstein, Boxer and Honda. Hope you all have the time to do the same.

      By the way, SC Johnson, Progressive and GEICO have not responded to emails regarding the influence of the Obama administration on their sponsorships of the Glen Beck Show.

    14. David VanNorman Wi says:

      I hope those people who voted for Obama realize what they have done. It might be good for them.

    15. Catriona Dempster says:



      WHAT A JOKE!




    16. Catriona Dempster says:


      From Dreams of My Father:'I ceased to advertise my mother's race at the age of 12 or 13, when I began to suspect that by doing so I was ingratiating myself to whites.'

      From Dreams of My Father :'I found a solace in nursing a pervasive sense of grievance and animosity against my mother's race.'

      From Dreams of My Father:'There was something about him that made me wary, a little too sure of himself, maybe. And white.'

      From Dreams of My Father:'It remained necessary to prove which side you were on, to show your loyalty to the black masses, to strike out and name names.'

      From Dreams of My Father:'I never emulate white men and brown men whose fates didn't speak to my own. It was into my father's image, the black man, son of Africa, that I'd packed all the attributes I sought in myself: the attributes of Martin and Malcolm, DuBois and Mandela.'

      And FINALLY,

      From Audacity of Hope:'I will stand with the Muslims should the political winds shift in an ugly direction.'

      Error! Filename not specified..jpg" SRC="aoladp://MA23610085-0005/image002

    17. Normca says:

      NYC – sounds like you are up for a free health insurance premium. And the rest of us owe that to you. You are just the kind of victim of society that the new president caters to. And here a little secret for you; corporations exists to make a p r o f i t and they are not a social welfare program for people who cannot, on their own initiative move up in a business through the hard work you mentioned. Good luck, victim.

    18. Ross writes, Braden says:

      The one truism of socialism, generally all citizens are equally miserable and broke.

      Not near-enough citizens(or press for that matter!) are "looking the gift-horse in the mouth" because they don't know how, thanks to government educational systems and the teacher's unions.

      Nowhere in the constitution is there any mention of guaranteed health-care(or any other welfare program) for all(or anyone to be technical).

      In a nutshell the sole purpose of the federal government is to (1)guard the shores, to(2) regulate the flow of interstate commerce(that is between states, not instate commerce), and to (3) keep the hell out of our(that is us citizens) business.

      The United States Constitution list more of what the federal government can't do than what it can do. Why are state governors and legislators not scream at federal lawmakers to "get out of our business" instead of just rolling over and playing dead as the federal government continues to infringe on their authorities. Is state government dead? Sure looks like it from where I stand.

    19. Jerry from Chicago says:

      I am now interested in reading Mr. Obama's two books.

      If even half of the comments quoted above, from Mr. Obama's two books, are true they explain who this guy really is and why we should all be wary.

    20. Norris Hall says:

      I read this piece of outrageous news in today's Wall Street Journal

      Couldn't , wouldn't believe it!!

      It makes me sick.

      And the Wall Street Journal , of all newspapers, should know better.

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