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Debt strangles the economy as regulations hamstring businesses

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President Barack Obama visited the Jeep plant in Toledo, Ohio, a week ago Friday to tout the alleged economic benefits of his bailout of Chrysler.

The bailout kept the Jeep plant open, the president told workers there. "This plant indirectly supports hundreds of other jobs right here in Toledo," he added. "After all, without you, who'd eat at Chet's or Inky's or Rudy's?"

This week, Richard Lawrence, co-owner of New Chet's restaurant, announced it was closing its doors after 90 years.

So much for indirect benefits. And what Mr. Obama said at the Jeep plant "is one of the most misleading collections of assertions we have found in a short presidential speech," wrote The Washington Post's fact checker, Glenn Kessler. "Virtually every claim made by the president concerning the auto industry deserves an asterisk, just like the fine print in that too-good-to-be-true car loan."

On the day the president spoke in Toledo, the Bureau of Labor Statistics announced the unemployment rate for May rose to 9.1 percent, the highest level so far this year. Only 54,000 net new jobs were created, barely a third of what had been forecast. The median length of time for people to be between jobs is now at a modern all-time high.

Mr. Obama is spinning mightily to try to distract attention from two damning facts: The unemployment rate today is much higher than it was when he took office (in January of 2009, it was 7.6 percent), and is higher than what his chief economic adviser at the time said it might be if his stimulus package were not passed.

The stimulus bill, the auto bailouts and schemes to prop up housing have taken great gobs of money from taxpayers and transferred a fair amount of it to the president's political cronies. But the massive debt they've incurred is crippling the economy rather than helping it. Our national debt was $10.7 trillion when Mr. Obama took office. It's $14.29 trillion now.

Still, the president is intent upon heaping additional burdens on the private sector. He held a meeting with House Republicans June 1 to discuss raising the ceiling on the national debt so the government can borrow more money. Republicans insist federal spending be cut by $1 for each dollar the debt ceiling is raised. Mr. Obama wants to reduce the deficit in part by raising taxes.

Republican congressmen who attended the "frosty" meeting rolled their eyes when Mr. Obama told them federal income tax rates now are the lowest they've ever been, lower even than during the presidency of Ronald Reagan.

This was less untrue than, say, Mr. Obama's claims for the Chrysler bailout. For most of the Reagan presidency income tax rates were higher than they are now because Reagan inherited very high rates from Jimmy Carter.

But it still was untrue. When Ronald Reagan left office, there were just two income tax rates, 15 percent for those making less than $17,850 and 28 percent for those earning more than that. Today there are six rates, with the highest bracket paying 35 percent on income more than $379,150.

It's a poor idea to raise taxes during a recession. But what's really killing the economy is an orgy of new federal regulations that saddle private sector employers with enormous costs and great uncertainty. The worst is Obamacare, but there are many others, such as new banking regulations which punish small banks for what the big banks did to contribute to the financial meltdown in 2008, and new fishing regulations which may wipe out the commercial fishing industry.

Businesses must spend more than $1.75 trillion each year to comply with federal regulations, according to a report issued in April by the Competitive Enterprise Institute. But it's the uncertainty they cause that contributes more to unemployment.

Stephen Carter, a law professor at Yale, sat next to a corporate CEO on a flight to Minneapolis. Demand for his product was up despite the recession, the CEO told Mr. Carter, but he refuses to hire new workers. Mr. Carter asked him why.

"Because I don't know how much it will cost," he explains. "How can I hire new workers today when I don't know how much they will cost me tomorrow?"

Personal income tax rates are near historic lows. It seems to me that a modest increase in them would be a reasonable price to pay for a deal on the debt ceiling, but only one that would slash both federal spending and the thicket of federal regulations.


Jack Kelly is a columnist for the Post-Gazette and The Blade of Toledo, Ohio ( jkelly@post-gazette.com , 412 263-1476).


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