I am writing on Tuesday, two days before President Barack Obama gives his “jobs” speech to Congress. It doesn’t matter what he says. I am not dismissing the president, but unless he completely reverses his positions and statements of the last three years (zero chance of that) on job creation, we are likely to get more of the same ineffective, even harmful, ideas.
In my head I can hear the words “investments” repeated over and over again as in: green energy investments and infrastructure investments. Then there are temporary tax cuts or tax holidays; tax credits to entrepreneurs; regulatory rollbacks; trade agreements. Some ideas, like a large permanent regulatory rollback or signing and implementing new trade agreements, can create jobs over time, but most destroy them.
Let’s start with a “bank” for infrastructure investments. Most politicians and a boatload of economists think this is a good idea. America’s infrastructure (roads, highways, bridges, schools, etc.) is in need of repair. There are hundreds of “shovel ready” projects just waiting for funding. Thousands of new jobs can be created putting construction companies and ancillary suppliers (cement, steel) to work on these projects. The money spent will work its way through the economy via a magical “multiplier effect” and more jobs will be created. Sounds great, but reality gets in the way.
First there are very few “shovel ready” projects in need of funding. Infrastructure projects take planning, permitting, environmental ratification and political agreement at the local level. It can take years for a project to actually start. Next, the political process almost always insures that many of the projects that do get the nod, will be unnecessary (bridges to nowhere, airports in nowhere, trains no one wants to ride) and a waste of money. Further, most contracts will be awarded (by law) only to unionized companies with significantly higher wage costs thereby diminishing any job creation effects. Finally, where does the money come from? Why should taxpayers in Anytown, U.S.A., be funding politically selected projects in Othertown, U.S.A.? Let Anytown taxpayers keep their money and spend it on infrastructure projects they choose beneficial to their local economy.
What about green jobs? Sounds like another great idea. But again, reality intervenes. Creating green jobs requires the government to subsidize industries like solar panels, windmills, electric cars (with those environmentally friendly batteries) and bio fuels like ethanol. None of these alternative resources will ever generate enough replacement energy (for those dreaded fossil fuels). Even combined, they can supply only a fraction of our needs. Moreover, without subsidies, these industries are not viable. Again, where does the money come from? We keep draining resources from private sector producers to support industries making products that no one wants. Every green job that’s created destroys another job (or more) somewhere else.
Finally, we have job creation ideas based on tax incentives. For example, give entrepreneurs a tax credit for every new hire. OK, so we take 35 percent (or more) of entrepreneurs’ profits through income taxes, and then generously give them back through a tax credit on next year’s income about 5 percent of what was taken. What an incentive. This will create jobs? In your dreams.
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Write to GerryK3001@yahoo.com