Cincinnatus BLOG *** Political Commentary - Social Commentary

As the world’s most inventive country we have the unique opportunity to patent our way out of the current recession and thrive in the 21^st century global economy. What should we export to create high paying permanent jobs and redress our balance of payments? Ideas.  It’s what we do better than any other country. One country, the United States, accounts for more than one-third of international patent applications. It’s time to leverage what we do best, innovate, and create the jobs we need for today, tomorrow, and decades to come.

In hard economic times we should be looking ever more closely at our export markets and ask ourselves the basic question: What innovative products can we sell to the nearly 500 million inhabitants of the European Union, the 127 million Japanese etc. and, equally important in the long run, the projected 1 billion middle class people who will live in China and India by 2020? The consumption of goods and services creates jobs and we have a vested interest in helping the emerging countries achieve their goals by exporting the new products that they will need to enhance their lives.

In light of the above, what should an economic stimulus package look like?

1.     Entrepreneurial Incentives - In the short run we should help finance innovative ideas in all areas, including green technology, telecommunications, biotechnology, nanotechnology and all other embryonic inventions that will improve our lives. Since so much capital is sitting on the sidelines in Treasury Bills, let’s suspend future capital gains tax on any investment that is made in new technology between February 15^th and October 30^th 2009. We have absolutely nothing to lose. If capital stays on the sidelines we will create no jobs and collect no additional taxes. If, however, the money is invested, we could create hundreds of thousands of permanent jobs and collect income taxes from every employee rather than paying them unemployment benefits. Yes, we can create jobs without spending the taxpayer’s money and simultaneously help all those budding entrepreneurs currently starving for capital.

2.     Education - Over the long term we must improve our performance because we are falling behind other sophisticated OECD countries, particularly in mathematics and science, and that does not augur well for the future. We are the nation of ideas and innovation, we will never be able to go backward and compete for unskilled jobs in a global economy. Our children are our future — but only if we educate them.

3.     Public Projects - Fixing roads and bridges will give a short-term boost to the economy, especially on a local level, but these are not by any stretch of the imagination permanent jobs. Once a bridge in New Jersey is repaired the job is over and a similar project in New Mexico is of little value to the worker from New Jersey. This is a necessary but limited endeavor.

4.     Infrastructure - Projects that improve our fundamental infrastructure, such as a 21^st century electricity grid will pay back for generations. Realistically, the stimulus bill can only be a down payment on what will be a 20-year $2 trillion project.

5.     Accelerated Depreciation - If we allow businesses to fully depreciate their capital expenditures in the first year of a stimulus plan, it will go a long way to stimulate our manufacturing base and maintain and possibly increase employment in 2009. Although not necessarily equal, there is an offset between the loss of revenue from business and the increase in revenue from greater employment.

6.     Cut Corporate Tax on the Profit from Foreign Sales - This offers incentive to create jobs in the U.S. and discourage a shift of manufacturing to foreign subsidiaries where the tax burden in lower.

7.     Issue 1 million “green cards“  - Over the next 6 months, issue green cards to well-educated immigrants who have the resources and will to commit to starting small businesses, which are the greatest engine of job creation in the U.S. Priority should be given to those who want to create export companies. We will create millions of jobs, reduce our surplus housing inventory by 1 million units, and reduce our balance of trade at no expense to the U.S. taxpayer. Such a plan would also increase our most important resource, intellectual capital, which is the basic premise of this analysis.

8.     Cutting Marginal Tax Rates - Such cuts should not be included because they would probably not be as helpful as they have been in the past. When President Ragan did it, marginal rates where high and there was a clear benefit to reducing them. Today, marginal rates are not high enough that cutting them will make a significant difference. But we can revisit this when the current tax cuts expire at the end of 2010. Rates will then be high enough that cutting them will make a difference. The one exception may be for the lowest tax bracket where a permanent reduction would stimulate some incremental spending.

9.     Social Programs - Programs that fund food stamps and increased unemployment benefits are necessary in a recession, but let’s not delude ourselves and count on this to create permanent jobs.

10. One-Time Tax Rebates - A quick infusion of spending will increase one-quarter of the nation’s GDP but one-time rebates are otherwise useless in a stimulus package. It didn’t work for Bush and it’s not going to work for Obama. Hundreds of billions on dollars will be spent and no permanent employment will be created.