Private Sector Jobs – The Missing Ingredient in Obamanomics
Six months of railing against business rather than finding ways to encourage entrepreneurs to expand and hire has left the Obama administration with egg on its face. “Pass my $800 billion Stimulus Plan and unemployment will not exceed 8%” was the Obama administration mantra. Well we passed it, and unemployment will soon exceed 10%. President Obama said his Stimulus Plan would save or create 3.5 million jobs in the next two years. This cornucopia of 1960’s “Great Society” style social programs misbranded, as a Stimulus Plan has not produced jobs and worse still is unlikely to produce any permanent private sector jobs. Maybe a few hundred thousand temporary infrastructure jobs will be created over the next year or two but that is the best we can hope for from the ill conceived plan.
The reality… For the unemployment rate to fall, we must not only increase the number of jobs, but that increase must exceed the expected increase in the size of the labor force. In other words, merely increasing the number of Americans working will not necessarily decrease the unemployment rate. Today there are 154 million Americans in the labor force and just to maintain the status quo, 2.0 million new jobs must be created annually (a 1.3% increase). Just to stand still, we need 167,000 new jobs every single month. More than 85% of the permanent jobs must come from the private sector.
As if to add insult to injury President Obama has chosen to support the “Waxman-Markey global warming bill” over creating new jobs. A study by Charles River Associates concluded that if Obama signs off on the Congressional proposal to reduce CO2 emissions, it would have a serious impact on the availability and cost of energy. “By 2025, just 16 years from now, the cost of natural gas would rise 56%, electricity 44% and motor fuel 19%. Annual household purchasing power would annually decline by an average of $1,827. And America will lose 3.2 million jobs.” Obama can choose to placate his base and hope that the creation of “Green Jobs” will at least partially offset this loss or he can choose to use his influence to eliminate the more draconian aspects of the legislation and offend the left.
I am sure that President Obama is aware that Energy use is the direct correlate of a vibrant economy - in the United States for example; we consume 24% of the world’s oil and are responsible for approximately 28% of global GDP. We cannot just reduce our energy consumption, we have to replace it with new cleaner sources or the economy will suffer. It should also be clear that when the economy is weak it is the poor and the less educated that bear the brunt of the burden. For example, the current 9.4% unemployment rate is not equally distributed: the unemployment rate for college graduates is 4.8%, for those who have not graduated high school 15.5%, African American men 16.8% and for African American men and women under 20 it is a whopping 39.4%. As the old song says you always hurt the one you love -especially if you cater to your elite base.
We often appear to ignore the intrinsic reality that all life is carbon based and that at the moment all accessible large-scale sources of energy save nuclear and hydroelectric, are correspondingly carbon based. As a World Street Journal Editorial on August 5, 2008 pointed out, “The U.S. has a great deal invested in fossil fuels not because of a political conspiracy or because anyone worships carbon but because other sources of energy are, right now, inferior”.
Obama will have to make amends for his thoughtless bombastic rhetoric - Greedy Wall Street bankers! Hedge fund moneylenders! Speculators! Shameful profiteers! - If he hopes to gain the support of American business and create the jobs that America needs to reduce the unemployment rate.
Here are a few of my suggestions for correcting the economic blunders of the past six-months:
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 for the next year. 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 and possibly millions 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. Critics will say, “Another tax cut for the rich”. The potential loss of capital gains taxes 20 or 30 years hence when these entrepreneurs sell their companies is insignificant when discounted to current dollars, literally pennies on the dollar.
2. Accelerated Depreciation - If we allow businesses to fully depreciate their capital expenditures in the first year of a jobs plan, it will go a long way to stimulate our manufacturing base and maintain and possibly increase employment in 2009 and 2010. Although not necessarily equal, there is an offset between the loss of revenue from business and the increase in revenue from greater employment.
3. Issue 1 million “green cards“ - Over the next 12 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, sell a large number of cars and reduce our balance of trade at no expense to the U.S. taxpayer. Such a plan would also increase our most important natural resource, intellectual capital.
4. For those who may worry that I’m unrepentant tax cutter at a time when deficits are exploding, I say -”Cutting Marginal Tax Rates Won’t Work” - 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, 70% and there was a clear benefit to reducing them. Using a physics analogy a 70% marginal tax rate created massive economic potential energy, which was converted to economic kinetic energy by dropping the rate to 28%. Today, marginal rates are not high enough to store potential energy, and cutting them will generate little kinetic effect. But we can revisit this when the current tax cuts expire at the end of 2010 and all the new Obama taxes are implemented. Rates will then be high enough that cutting them may make a difference.
5. Government at all levels has an important role to play in creating high paying jobs for the future, 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.
I’m sure there are many other innovative ways of creating jobs. I invite you to share your thoughts.
Sorry, Bill. You miss the big picture here. Obama and the Democrats do not want more private sector jobs. This is by design. By making more people dependent on the government, they do a better job of assuring themselves of limitless political power. There is no intention of pulling the country out of this recession. And 1 million green cards for the well-educated? They won’t vote Democrat.
This has to be the right answer, right? Nobody is this stupid, right?
Or should I “never attribute to malice that which can be adequately explained by stupidity”?
July 27th, 2009 at 6:07 pm
Steve nails it.
Obama knows that we are at a tipping point where the non producing (non taxpaying), government dependent, voters will tip an election. These voters were never mobilized/organized like they are today.
My only hope is that there is a large block of conservative voters that ’stayed home’ in 08 because of McCain that are now realizing the error of their ways. Wishful thinking? Maybe.
July 28th, 2009 at 5:15 am
Getting a Democrat to cut capital gains taxes is about as possible as having them fix Social Security with individual investment accounts. Today government is the largest employer in the US so even wrong policies that grow government are seen as encouragement to Wall Street. That false positive for investors has kept the President from total disaster.
I believe that liberty can only flourish under a limited population (probably about 300 million) density. The election of 2008 argues this point. The undereducated are not out in the country as it was a generation ago, but they are in the inner city gobbling up billions of education dollars with little result. We reward them with free breakfast and lunch.
I agree with Thomas Jefferson that America would prosper best as a nation of yeomen farmers. Farmers are attached to the land for generations. Unchecked democracy consumes our wealth because entitlements buy the hearts of voters, not the guarantees of liberty. We found out what happens when the government tries to expand the American dream democratically with Fanny Mae and Freddy Mac.
The short term solution is radical tax cuts while ending unconstitutional programs. My long term suggestion is to restrict immigration by trading favorable status in exchange for a simple vasectomy or a tubal ligation. Whatever else happens it is in our best interest to adopt policies that discourage procreation, especially among the government dependent. Why shouldn’t one pay for entitlements with some sacrifice? Adoption should be encouraged with the tax code used to address the current crisis that liberals use to justify abortion.
If we lived in a society where the laws would not work to redistribute wealth government would only secure our borders, coin stable money, then get the hell out of the way. Unfortunately government has purchased most of the hearts of the people.
July 29th, 2009 at 6:56 pm
OKAY, OKAY
I’ll solve the entire economic crisis for everyone, but it will cost another 750 billion dollars. Minus a million or two for my fee. I call it the “early retirement recovery omnibus redistribution, or (ERROR)
. Threre are approximately 75 million working Americans who are 55 or older and soon will be facing retirement. Let’s give each of them 1 million dollars and let them retire early! But there are two stipulations.
1) They must purchase or build a home in the US
2) They must purchase an American made automobile.
We immedialely solve the housing crisis by selling 75 million homes and rejuvinate the construction industry.
We boost the auto industries by immediately selling 75 million autos
We free up 75 million upwardly mobile jobs by the early retirements.
Natrually this will never happen, give money to the people, what a concept? The point is that there are SO MANY different ways to create jobs and it is clear that this was never an objective of Obama’s stimulus. It was all simply payoff for votes and contributors. That much is clear.
I disagree that it is the role of government to create jobs. Government should simply get out of the way, especially in education.
Private educators are paid on average far far less than public teachers and yet academically the children are far far ahead. America is based on individualism and the individuals have to resolve this, perhaps its time for torches and pitchforks.
July 29th, 2009 at 7:36 pm
You are not kidding anyone with this right wing drivel.
July 31st, 2009 at 9:33 am
So, Dean…whadddaya got? What is YOUR answer? We’re puttin’ it out there. How about you?
July 31st, 2009 at 6:49 pm
Obama has been in office for 100 days.
Bush got 3000 days in office.
Obama’s initial conditions are severly bad.
Bush’s initial condition were excellent.
Initial condition for Obama means deficits, debt, unemployment, wall street failure,the unprecendented amount of money spent on a war witht the wrong country, economic dependence on China, largest employment and Americanwork force created in history by Bush, but in the wroing location, not for Americans.
I think we should be patient and give some time to Obama to show results, because he has been in office for only 100 days, inherited a mess, and relentlessly taking the steps to turn around the mess created by the last administration, in almost every facet of life.
I think we should acknowledge, the last administration, always woke up after the surprise, never mitiigated ahead of time, and never anticipated things, and never took the blame.
I think Obama should make direct changes to speed up his plan of recovery, direct changes similar to clunker for cash, incentives like tax breaks and stimulus to employers to retain work force, however with accountablity, checks and balances. Ideas like clunker for cash, stimulus & incentives for employers are being used in europe and are making the intended difference. Heallth reform needs immediate attention, because the huge sums of money are already being spent by the government, with excessive waste, duplication. People without insurance still end up in emergency and the government pays. It is better to use the same money to make it more effecient and effective, by improving the processes. The cost of quality will eventually be less than the gains, and the Obama’s team has worked out projections and estimates to prove it.
August 3rd, 2009 at 10:29 am
hmmmm…
Let me just quote you here ”
“I think Obama should make direct changes to speed up his plan of recovery,”
SO DO CONSERVATIVES! Any stimulous at all would be good. Cash for clunkers hasn’t created a single job by the way.
“incentives like tax breaks and stimulus to employers to retain work force,”
That is a conservative idea.
Isn’t that like tax breaks for the rich?
Let’s see so far the “O”man has suggested hiking up taxes for any business that makes over 250k a year, he has pushed through a bill to increase the cost of energy on all business and now he’s going to try and force businesses to purchase health insurance or pay a penalty. Let me ask you, does this create or drive away jobs?
OK so Health Care arguably needs reform, why not remove the waste and reduce the cost ANYWAY. Why not do it WITHOUT spending the extra trillion dollars and creating a whole new Mandarin bureaucracy? Did that ever occur to anyone on the left, to spend less? You don’t remove waste by creating another layer of bureaucrats. …
In his first 100 days B. Hussein Obama has quadupled the deficit. Allowed unemployment to soar to heights not seen since Carter or even the great depression. And regarding spending unprecedented money on the wrong war. Well your president disagrees with you. Barrack thinks it was an extraordinary achievement, and i quote.
“You have given Iraq the opportunity to stand on its own as a democratic country. That is an extraordinary achievement ” _ Barrack Hussein Obama - April 14, 2009, Camp Victory, Bhagdad, Iraq
August 3rd, 2009 at 10:04 pm
Oh and DEAN? Try and attack the actual argument rather than simple ad-hominem attacks. Either that or leave the discussion to the adults while you drink your kool-aid.
August 3rd, 2009 at 10:05 pm
Your ideas are interesting. Won’t you need a means of doling out those Entrepreneurial Incentives that ensures accountability, and that the money goes on genuine business ventures?
Perhaps you’ve heard what happened in Canada with Adscam:
http://en.wikipedia.org/wiki/Adscam , where many millions of dollars designed to fund incentives ended up in the back pockets of government cronies who did nothing to earn them??
August 8th, 2009 at 6:36 am
Thomas Paine?
August 16th, 2009 at 8:20 pm
Some excellent and well thought out points. There is much in this post to digest but overall right own the mark.
If only we had a President and Congress that understood the value and power of limited government, and a free market capitalist system.
As I say in my post over at Rational Nation USA it is time for a serious look at term limits. Perhaps if the country would wake up to the corruption which is rampant in our government, and apply the pressure on Congress perhaps we could get it done through a Constitutional Amendment.
Short of this I highly doubt much if anything will change.
Les Carpenter
September 9th, 2009 at 12:57 am