It’s all about the jobs…

Posted: September 8, 2011 in Economy, Jobs, Politics

Romney’s got a jobs plan.  Cain has a jobs plan.  Obama’s about to lay out his jobs plan.  Hey, that’s progress…they’re at least talking about jobs.  Not that I claim to have the ability to affect legislation (or convince those in power to do so…but it’s such a nice thought!), here’s what I see as a viable way to stimulate the economy in such a way as to create jobs and pay off the debt.

1.  Raise the debt ceiling.  As I (and others) have noted, confidence in both the economy and in our elected (and appointed) officials is shot.  Because of this, despite sitting on record profits and having very low interest rates on borrowing, those who would otherwise have the ability to invest in job creation and/or business expansion simply are not doing so.  That leaves the only entity able to take such action…the Federal government.  The Fed is the only player out there with the ability to absorb the risk of borrowing massive amounts of money to finance economic stimulus.  So step 1 is raise the debt ceiling.  To coincide with this, adding some sort of language that the increase is only valid during times of economic crisis (craft language that properly reflects the economic conditions we’ve been experiencing).  I would also suggest that any jobs that are created as a result of direct stimulus efforts (i.e. engineers/contractors hired to work on California High Speed Rail, or people hired to rehab/reconfigure/repurpose vacant buildings into some new business venture) should have a portion of the payroll taxes and Federal income taxes they generate specifically set aside for debt servicing/debt reduction.

2.  Solicit a mix of large-scale, long-term projects that will generate long-term jobs.  By this I mean projects like: construction of the California (or other area) High Speed Rail system; a repair/rehab/upgrade project for New York City Public Schools (most, if not all of them); a redesign/update/upgrade for local utilities to upgrade the power grid…primarily the distribution system, but generation facilities could be upgraded, or preferably converted/replaced by alternative energy facilities (solar, wind, hydro, etc.); upgrades to the air traffic control system; research and development of alternative energy sources…with particular emphasis on transportation; possibly even looking at some sort of manufacturing component that would help US manufacturers compete with those abroad (i.e. China, India, Mexico). Some of these jobs will be created within the public sector, but creating jobs that are dependent on public funding is not the right course of action.  Most of these jobs should be created by contractors, consulting firms, engineering firms, research labs, and such, where the jobs are funded by the workload.  Unless legitimately necessary, new governmental agencies or departments should NOT be created via this stimulus program…no pork pet projects for members of Congress.  To the extent that an agency has a large scale project or multiple projects to administer, that would be a justification for creation of public sector jobs.

3.  Simplify the tax code.  I would suggest an in-depth study that looks at a) how much income tax revenue is brought in (split between individual and businesses); b) what is the average tax rate paid (both individually and by businesses, taking into account any and all exemptions, deductions, loopholes, etc.); and c) impose a flat tax rate at those averages, while removing the exemptions, loopholes, etc.  Some will pay a little more than previously, others will pay much less than previously, but nominally revenues should at least stay the same, and in all likelihood would increase due to increases in efficiency and confidence, as more people find jobs and more businesses do increased business with those newly employed.  Besides, a flat tax is the most fair way to tax people from varying levels of means and abilities.

As I’ve noted several times before, people and businesses are shell-shocked, and even those with the means to engage in job creation and economic stimulus, are hesitant to.  The Federal government, having the unique ability to print money and borrow on the global stage, needs to take the lead.  There are plenty of areas to focus…the areas I mentioned earlier (school repair, alternative energy, high speed rail, etc.), and I’m sure there are others I haven’t even considered, but the initial phases of this program should focus on infrastructure-oriented jobs.  But these jobs cannot be permanent, public-funded jobs.  Some administrative/managerial positions in the public sector will likely be necessary, but the bulk of the jobs should not be public sector jobs.  The goal is to create self-sustaining economic development activity.  Public sector jobs are not self-sustaining, and creating a full-on (for example) State University of New York construction department is not the way to do it.  These positions must be with private sector firms, contracted to do these infrastructure-oriented projects.

These types of infrastructure jobs create multiple benefits.  First, many if not most of the jobs that have been lost have been related to the real estate industry in one way or another…engineers, construction workers, bankers, etc.  A good number of these cannot easily be retrained into the few job fields that do show signs of life…biotech research, IT, sales, etc., particularly at compensation levels remotely comparable to what they had been earning.  These types of infrastructure jobs will provide job opportunities for those who need them the most.  Second, this type of work is both materials and equipment intensive.  This would serve to create job opportunities for those who may support construction-related industries in addition to any other fields that may fall within their areas of expertise.  Office equipment sales, heavy machinery sales and manufacturing, banking (financing of equipment), and so on, would see a jump.  Third, this type of multi-layered job creation would generate economic stimulus all on its own.  On the private side, people would have jobs and would then feel more secure in spending money.  They might buy a new car, do upgrades to their house, or even go out for dinner a few times.  This activity then generates revenue (income) for those persons/businesses that provide those goods or services, thereby giving them more security and likely generating additional similar activities.  On the public side, each individual job directly related to one of these stimulus projects would generate income tax revenue and payroll tax revenue, which is money going directly back to the government to either fund additional projects or pay down the debt incurred to create the stimulus (as noted in #3).  The individuals’ economic activities mentioned earlier will generate additional public revenue in the form of sales taxes, use taxes, and the like.  On top of this, the secondary/ancillary jobs created as a result of the economic activity from the newly employed also creates payroll/income taxes as well as sales/use taxes.  Fourth, the public agencies that manage the elements of our infrastructure will likely realize savings in costs related to the operation of these infrastructure elements, through increased efficiency of a modern design/modern execution (i.e. materials) to reduced maintenance costs.

The problem to this, obviously, will be the lawmakers’ ability to step outside of their ideological beliefs.  If the right could accept an increase in government spending in the short term, they could likely realize additional funds and leverage to attack the deficit in the long term.  Likewise, if the left can accept private sector involvement in economic stimulus, they would likely realize greater resources for public sector activities in the long run.  In the abstract, my fiscal views tend towards the right, with the idea of smaller government and fewer regulations being the more effective way of operating.  That being said, I lean more to the Keynesian side of things than the current crop of Republicans and Tea Partiers.  The fact of the matter is that there is and will always be a role for the Federal government, and when the private sector is unable to act that’s when the Fed must step in.  Believe me, we have hit that point.  Following the Tea Party mantra, given enough time I’m sure that the economy would turn itself around, and under normal circumstances their policies of cut the deficit, cut spending, etc., can be very effective at encouraging economic activity.  However, we are not under normal circumstances.  Historically, the US has always spent its way out of a recession and worked to pay down the debt as things improved.  The factory push with WWII.  The development of the interstate system.  The Space Race and Moon Shot of the 60s.  The Cold War of the 80s with it’s focus on defense and tech R&D.  That’s how we’ve done it…successfully, I might add…in the past.  We’re currently at war and this isn’t really the type of war that lends itself to the large defense industry/military complex budget as we saw in the 80s.  Plus, with public sentiment firmly behind ending the war and troop reductions under way, that isn’t a viable option.  Which leaves infrastructure, which is primarily managed by government and other public agencies and organizations.  It comes down to tradeoffs.  No spending cuts in the short term (plus for the left) and a large increase in the debt (negative for the right).  And then as economic levels rise and the general economic health of the public at large improves, money goes towards bringing the debt back down and we can then afford to take a serious look at the structural spending issues within our government, and how to address them (plus for the right, probable negative for the left).

I know it is far more complicated than I make it out to be, and I know the likelihood of the denizens of DC putting aside partisan beliefs for the good of the country is a long shot, but it shouldn’t be this difficult.

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Comments
  1. Brad Evanson says:

    Nice to see Obama took my advice…at least some of it: http://tinyurl.com/3nbxge8

  2. […] a previous post, I laid out what I thought would be the best possible jobs program that had the proverbial […]

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