Tuesday, August 30, 2011

What Obama Should Do: A Real Jobs Bill for America

President Obama came to Minneapolis to the American Legion Convention talking jobs. . . sort of. As of yet Obama has yet to propose a jobs program and in Minneapolis he spoke of a tax credit to hire a vet. As typical, the proposal was too little, too modest, and lacking vision.

Were the vet tax credit adopted it would help only a small spectrum of those unemployed, pitting other unemployed against vets for jobs, ensuring a resentment of the former against the latter. Moreover, there are questions about the job skills for many of these vets and whether military skills have civilian application. For many, workforce training, medical assistance for war injuries, and serious enforcement of the Sailor and Solder’s Act to prevent employer discrimination against vets would be even a better idea.

Yet the tax credit Obama is proposing is typical of the timidity of his vision. His 2009 stimulus bill, panned as a failure by many, did its job but was probably half the size of what it needed to be to make a real impact according to most experts. The best study of the stimulus bill, “The Net Fiscal Expenditure Stimulus in the U.S., 2008-9: Less than What You Might Think, and Less than the Fiscal Stimuli of Most OECD Countries,” by Joshua Aizenm an and Gurnain Kaur Pasricha, concluded that the federal money made available by the stimulus mostly just replaced budget cuts at the state and local level. All it did was to prevent the Great Recession from getting worse–it merely replaced state money with federal money. No significant stimulus as a result.

Thus, the vet tax break along with his rumored infrastructure bank proposal and his desire to extend the payroll tax break, will be insufficient and short of the mark. Obama will be limited in how much money he can invest in jobs, hemmed in by the constraints of the debt ceiling deal he capitulated to. No, Obama, will propose too little, compromise too much, and in the end, it will die a victim of the 2012 election politics. If by some chance a jobs proposal is adopted, it will have little impact, giving Republicans even more ammunition to argue that Keynesian economics has failed, the government is inept, and that Obama must be thrown out of office, only to be replaced by more of the bankrupt Ayn Rand economics that got America into the mess it currently is in.

The Republicans are not going to do anything to help Obama and the economy. This means instead of proposing anemic measures that will not succeed, propose a grander vision and set of ideas for jobs. Offer the alternative, run on it, and make that the theme for 2012.

What should a broader jobs vision include? Such a vision should recognize the need to produce jobs across several sectors of the economy. It needs to be sufficient in size to make a difference. It must also be sustainable.

So an infrastructure bank to rebuild roads and bridges is good. Ever since the collapse of the I-35 bridge in Minneapolis in 2007, it’s been obvious we need to rebuild our infrastructure. The American Society for Civil Engineering places the price tag for rebuilding this country’s infrastructure at $2.2 trillion dollars. Yet even if money is spent for this, only some will find jobs. Yes construction workers would be helped, but not white collar, older, and many female workers. Face it–56 year-olds unemployed by the recession for over a year are not getting construction jobs. They would be left out. As would young people still looking for a first job.

Moreover, infrastructure would do little to help the housing industry which is still ailing. Latest HUD reports find single-family home building permits down 10% this quarter compared to the same period last year; actual sales of new single-family homes were down 6%; and total delinquencies for all homes stood at 8.32%, up from the last quarter of 2010. Thus, a jobs bill needs to address many aspects of the economy and the diversity of types of people unemployed. Moreover, it needs to be big–big enough to help many of the different sectors. It needs to address infrastructure, workforce development, and housing.

But finally, a jobs program must be sustainable. Sustainable means capable of actually stimulating the economy enough so that it will actually grow. Sustainable also in that it pays for itself in the short and long term. Thus, how to pay for it? Three ideas.

First, Wall Street Journal articles report U.S. companies sitting on nearly $2 trillion in cash, unwilling to invest it in jobs. Second, Bloomberg News and other sources note another $1 trillion in offshore earnings and accounts. In the Iowa debate earlier this month Republicans proposed a tax holiday to bring the money home to invest. Again good theory but the last time the holiday occurred, businesses did not invest in jobs. They spent it on mergers and acquisitions, dividends, stock buybacks, and executive bonuses. None of these is useful for job production. Let’s require companies to use this money to invest in American jobs, or tax it and lend it to businesses that will provide jobs. Use the tax code to make corporations invest in jobs and not rely on taxpayer dollars.

Finally, use treasury bonds to finance capital jobs projects. Bonding is still the best way to pay for long term infrastructure. Demand is still high for treasury bonds-as evidenced by the fact that when Wall Street heaved after the S&P downgrade of the U.S. credit rating, money poured into T-bills.

Thus, here is a proposal for Obama to stimulate job production and the economy.

* Five year $2.2 trillion bonding bill to repair U.S. infrastructure.

* 100% tax credit for solar equipping all homes and buildings (the added bonus here is on energy savings and costs).

* 100% tax credit on all individual workforce training expenses for unemployed workers.

* Principal-only repayment of all existing student loans.

* Principal-only repayment on all FHA, VA, Fannie Mae mortgages.

* 100% tax rate on all cash savings by corporations held domestically unless used to hire, train, or reinvest in workers.

* Tax amnesty on all offshore corporate savings repatriated to the US if used to hire, train, or reinvest in workers. Conversely, impose a tax penalty on US corporations that fail to repatriate and invest in jobs.

The exact details of a proposal like this can be refined, but they addresses many problems ailing the economy, while also drawing significantly upon the private sector to finance or invest in producing jobs.

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