Obama Policy Agenda Proposals Part III

January 26, 2009

Well, I am back to discuss the third of a four part series on the Obama Policy Agenda Proposals that I began last week. If you missed the former posts, you can find them here:

Obama Policy Agenda Proposals Part I
Obama Policy Agenda Proposals Part II

And now, Part III:

American Jobs Tax Credit. This proposal would create a new temporary tax credit that would be available in 2009 and 2010. Existing businesses would receive a $3,000 refundable tax credit for each new full-time employee that they hire in the United States. This is one that actually sounds promising. I am undecided on the refundable portion of the credit, since I am not a big fan of refundable tax credits. At least in this instance, the funds are going to a job creator instead someone who is doing little with the money to help drive economic growth.

Extension of Unemployment Benefits and temporary suspension of taxes on these benefits. Ultimately, somone will have to pay for this (aka taxpayers.) As far as the suspension of taxes on these benefits – why is now any different than 5 years ago? In both situations, you have someone out of a job that is down on their luck. Why now do we propose that these benefits should not be taxable, yet 5 years ago the same people wanted to tax them. Why is it different now?

Automatic pension plan enrollment. Under this proposal, employers would automatically enroll employees in workplace pension plans unless the employee opted out. If an employer does not already hav a plan, it would be required to enroll employees in a direct-deposit IRA account compatible with existing direct deposit payroll systems. I agree and disagree with this one. First of all, EVERYONE should be participating in a retirement plan. I just am not sure that the government should mandate it. I would not mind it if they would funnel all of the Social Security withholding in there and let the employees and their advisors decide how to invest it – instead of the government. This can definately turn into a burden for small businesses. We will have to wait and see the rules surrounding this one if it passes. Can you, as a small business owner, imagine wearing one more hat?

Penalty-free hardship withdrawals from IRAs and 401(k) plans. This would allow people to withdraw up to 15% (a maximum of $10,000) of the funds from their retirement accounts without paying a penalty in 2008 (retroactively) and in 2009. Not a bad idea, but not a great one either. It is always a terrible idea to sacrifice your retirement funds (most of which are protected from a legal perspective) for current day needs. It will help some people get over the hump though. Unfortunately, most of them will not be as dilligent about building the funds back up as they were in jumping on the band wagon to pull them out.

Retirement Savings Incentives. Personally, I find it sad that in America we have to be incentivized to plan for our futures. Shouldn’t this be something that responsible people just do?
While I think it is ridiculous that we have to do this, I beleive that we have seen evidence over the past 100 years that proves that the majority of Americans will do little or nothing to plan for their retirement. So, go for it. At least we are rewarding responsibile savings instead of giving the $1,000 away to be spent on junk.

Increase Immigration Quotas. Supposedly, this Obama proposal is going to increase the number of “legal” immigrants in order to meet the demand for jobs. I am confused about this one. Isn’t President Obama always on TV saying that we need to create jobs, and we are losing jobs, and there are many Americans without jobs? Perhaps I am reading this wrong, but wouldn’t these new “legal” immigrants be competing with the Americans that are without jobs for the jobs?

Remove Incentives to Enter the United States Illegally. This Obama proposal is supposed to relate around a crack down on employers that hire illegal aliens. There were significant law changes within the past couple of years that will help on this front. I am not sure what else Obama has up his sleeve on this one. This sort of conflicts with the last proposal. Is the plan to crack down on Illegal immigration simple to make the illegal immigration legal? This way, they could say they solved two problems at once – although, not really.

If you have read all of this, congratulations! The good news is that Part IV only has one proposal in it. The bad news is that it may be the one that destroys your small business – as it has the potential to do to millions nationwide. Stay turned for Part IV…