From Hooverville to Obamaville

by PAUL HOLLRAH August 18, 2010
During the Great Depression of the 1930s, the unemployment rate rose to a high of 24.9% in 1933, fell to 14.3% in 1937, and rose again to 19.0% in 1938 after six years of Keynesian tinkering by the Roosevelt administration. By contrast, current jobless rates, hovering at just under 10% are, at first glance, much less severe. However, it should be noted that Americans of today live much closer to the “edge” than did our parents and grandparents. We save much less for a “rainy day” and we buy many more luxuries on credit than any past generation. 
 
During the 1930s, as plants closed and men lost their jobs, homes were lost to foreclosure and family units disintegrated. While the women of the family moved in with friends and relatives, the men of the family took to the road looking for work. Many found temporary shelter in shanty towns called Hoovervilles… named, cynically, after Republican President Herbert Hoover, whom Democrats blamed for the economic collapse. 
 
Well, don’t look now, but history may be repeating itself. Coming to a town near you… in fact, to every city and town in America… is a phenomenon destined to elicit painful memories of the Hoovervilles of yesteryear. And since no one has as yet coined a term to describe the coming phenomenon, and since they will be largely the result of the failed economic policies of Barack Obama, we will take the liberty of calling them “Obamavilles.”
 
What will most differentiate the Hoovervilles of the 1930s from the Obamavilles of today is that, while Hoovervilles were primarily squatter communities of tramps, hobos, and other transients, the Obamavilles of the 21st century will be recognizable as overcrowded family homes wherein the family’s grown children… along with spouses and children… will move in with parents and grandparents lucky enough to be without a monthly mortgage payment.    
 
And while most residents of the Hoovervilles relied on public charities or begged for food from farmers, or those lucky enough to have food in their pantries, Obamaville residents will rely on the generosity of parents, uncles and aunts, and grandparents for their daily sustenance. Most will spend their days searching for jobs, but when no jobs are to be found and when pensions and Social Security checks won’t stretch far enough to feed all of the hungry mouths, children will be sent out into the streets to earn whatever they can at whatever odd jobs are to be found.
 
The spoiled “me first” generation of the recent past will be but a memory and, for the first time in decades, teenagers will learn that there is, in fact, a bottom rung on the economic ladder. Every family member will have to contribute something just to put food on the table and keep the utilities turned on. And while the Kool-Ade drinkers in the mainstream media will do whatever they can to keep the blame off Barack Obama’s shoulders, the American people will know, intuitively, who it is that causes them so much pain.   
 
Literally everything that Obama has done since occupying the White House in January 2009 has taken the nation toward economic malaise.  As a living, breathing composite of everything Democrats have stood for since the dawn of the New Deal, he has not been a job creator, he has been a job killer and blue collar Democrats are finally waking up to what a horrible mistake they have made.  
 
For example, from the time he first set foot in the U.S. Senate until the present day, Obama has supported three major increases in the minimum wage. Dr. Walter J. Wessels of North Carolina State University, a leading expert in labor-management relations, has found that for every 10 percent rise in the minimum wage, the overall number of jobs available decreases by as much as 2 percent. The impact on entry-level jobs is even greater.  For each 10 percent increase in the minimum wage, Dr. Wessels finds a decrease in minimum wage jobs of from 4 to 5 percent.
 
Nevertheless, since gaining control of Congress in 2006, Democrats have pushed through a forty percent increase in the minimum wage, from $5.15 per hour to $7.25 per hour. And although the effort was strongly opposed by congressional Republicans on the grounds that such unwarranted increases would have a stifling effect on an already faltering economy, Democrats attached the minimum wage increases to Iraq War funding measures and Bush was forced to either sign them or shortchange our troops in the field. 
 
While Obama is fond of pointing to what he claims are 2.5-3.6 million jobs saved by his $800 billion stimulus boondoggle, he clearly does not wish to take credit for the number of jobs that were lost or never created due to uneconomic increases in the minimum wage… entry level jobs that allow teens and high school graduates to enter the workforce or to save money for college. Simple arithmetic tells us that a forty percent increase in the minimum wage would result in the loss of as many as 12.3 million jobs in a civilian workforce of some 154.5 million over a three year period… a net loss of nearly 10 million jobs due to minimum wage increases alone.      
 
Now Obama and congressional Democrats are faced with the question of whether or not to extend the Bush tax cuts through 2011 and beyond. Should they allow the tax cuts to expire on January 1, 2011, among the most damaging changes… and a major job killer… will be a 33.3% increase in the capital gains tax from 15% to 20%.    
 
As a group, Democrats have never been able to grasp the role of investment capital in the overall health of the economy. They seem to believe that when an individual sells a piece of property or a block of securities, realizing a substantial capital gain, it is only the seller of the property or the securities who becomes wealthier. They seem incapable of comprehending that such capital gains are not hidden inside a mattress or buried in a coffee can beneath the petunias in the back yard. Instead, they are deposited in a bank where they reside for only a nanosecond before being loaned out to someone who wishes to buy a new car, build a new house, or create or expand a business… all of which create jobs and wealth for everyone.  
 
Nevertheless, Obama and congressional Democrats are intent upon taxing away an additional one-third of that investment capital so that they can use it to buy the votes of those at the lower end of the economic ladder. Either they fail to understand that the economic uncertainty they create is a major factor in the gloomy business climate, or they see economic uncertainty as their friend because it creates more and more economic dependency among their core constituencies. 
 
In an August 9 op-ed column in the Wall Street Journal titled, “Why I’m Not Hiring,” Michael Fleischer, President of Bogen Communications, Inc. of Ramsey, N.J., explains why it is so difficult for today’s employers to begin hiring once again. He tells the story of just one 15-year employee named “Sally.”
 
According to Fleischer, Sally grosses $59,000 a year, which shrinks to less than $44,000 after taxes and other payroll deductions. The $15,311 deducted from Sally’s gross pay is comprised of New Jersey state income tax: $1,893; Social Security taxes: $3,661; state unemployment insurance: $126; disability insurance: $149; Medicare insurance: $856; federal withholding tax: $6,250; and her share of medical and dental insurance: $2,376. Roughly 25.9 percent of Sally’s income is siphoned off by Washington and Trenton before she receives her paychecks.
 
But then there are the additional costs of employing Sally. In addition to her gross salary, her employer must pay the lion’s share of her healthcare insurance premiums: $9,561; life and other insurance premiums: $153; federal unemployment insurance: $56; disability insurance: $149; worker’s comp insurance: $300; New Jersey state unemployment insurance: $505; Medicare insurance: $856; and the employer’s share of Social Security taxes: $3,661.
 
Over and above her gross salary, Bogen Communications must pay an additional $15,241 in benefits and state and federal taxes, bringing the total cost of employing Sally to approximately $74,241 per year. Sally gets to keep $43,689, or just 58.8% of that total. And with the new Obamacare taxes scheduled to take effect on January 1, 2011, Sally can expect to take home roughly half of what it costs to employ her. 
 
Is it any wonder that Sally’s employer makes the case for not hiring more employees? As he sees it, every time he hires a new employee his obligations to the government go up.  He says, “… the government's message is unmistakable: Creating a new job carries a punishing price.”
 
Barack Obama is fond of bragging about how many jobs he has saved by spending $800 billion of the taxpayers’ money on foolish stimulus schemes. When he is gone from the White House in two years, or less, some will remembered him for the number of jobs he claims to have saved. However, among the millions of residents of the nation’s Obamavilles, who will envy the kind of lifestyle that their parents and grandparents enjoyed during the latter half of the 20th century, he will be more remembered for the millions of jobs he killed and the millions of jobs he prevented from ever being created.
 
As Obama’s approval ratings plummet from the mid-sixties to the low forties, and below, we may not be surprised to learn that Michelle Obama’s jet-set vacation in Spain’s Costa del Sol was actually a house hunting expedition… looking forward to the day in the not-too-distant future when he will be widely viewed as the guy who made Jimmy Carter look like a genius.    
 
FamilySecurityMatters.org Contributor Paul Hollrah is a Senior Fellow at the Lincoln Heritage Institute.

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