Category Archives: Jobs

Playing Politics Won’t Create Jobs

It is a fact that Americans do not like to pay taxes, never have and never will, which makes it easy for a politician to say that they are going to or actually did lower taxes in an election year. You speak to to the poor, middle, and rich in the country and no one thinks twice about it because it is what everyone wants to hear. I have argued in the past about why rich people should pay more taxes, but with President Obama and Mitt Romney (who I believe will be the GOP’s nominee for President) coming out with job plans, it is worth taking a look to see if further reductions in taxes would actually help create jobs.

The theory (put simply) is that by reducing taxes more people will spend money, which will grow the economy and thus create more jobs. At times it makes sense. Most American’s did not save a lot of money and tended to spend more than they earned. When spending is high businesses do well, owners are confident, and are willing to take more people on. But this scenario is not what we are currently dealing with.

According to data from the Bureau of Labor Statistics, the average Household Income has decreased to under 50 thousand dollars, which is very hard for a family of three or four to live on.

Household Income

When you have to pay for gas, food, and health insurance, it all adds up which takes up a big part of a families salary making it hard for them to spend money on items they don’t necessarily need. Of course the prices of the items they do need have risen in the past decade as well. Keep in mind that because these people are earning money the tax breaks are targeted toward them so they would spend more money. But history shows when taxes were lowered have not resulted in increased spending.

The Consumer Price Index looks at how much prices have risen or fallen on a quarterly basis. The chart below shows the percent change in the past decade, and you can see they have fallen sharply. A large part of this is because American’s stopped spending as much money, especially when there was a disaster such as in 2001 and the financial crisis of 2008. But levels still have not returned to where they were before the crisis and there is no reason to believe they will any time soon.

Percent in CPI Change

 

President Bush reduced taxes in 2003 and Obama extended those cuts in 2009 when they were set to expire. Any economist would be hard pressed to argue that those cuts had a great stimulative effect on the economy. While I’m probably beating a dead horse saying this, President Ronald Reagan did raise taxes as a compromise with Democrats when they reformed the system. For the reasons stated earlier it would not be a good idea to raise taxes on everyone right now, but it would be a good idea to raise taxes on those who have earned millions. The money could be used to either reduce the deficit or create jobs for infrastructure projects that need to be completed.

But instead of advocating for policies that would have a strong impact on the economy Obama and Romney are taking the easy route. Both are in favor of passing the trade agreements Obama recently signed into law with South Korea, Colombia, and Panama; Obama looks to be in favor of creating a oil pipeline with Canada while Romney’s job plan proposes more domestic drilling; and both jobs plans seeks to reduce taxes on small businesses and corporations.

While thousands of teachers are being let go around the country, and with states running out of unemployment benefits, it is not hard to see why American’s are doubtful of the country’s future. Obama has called for a millionaire’s tax before and Congressional Democrats have tried to push it through the Senate even though it has no chance of passing the House. But it was left out of Obama’s job plan and Romney has said he will not raise taxes on the wealthy. Both of them are putting out popular ideas that are not controversial in a time when the country needs bold action. The stimulus was bold, health care reform was bold, but neither went far enough to help the millions of Americans that need it.

The lack of action by political leaders has cumulated in the protests that started in New York and are starting to spread around the country. In 2008 people voted for change but have not felt or seen the effects of the programs Obama has put in place, mainly because there is still so much more to do. But playing it safe during an election year while the economy is still tittering will not create jobs or help the economy, which both candidates say they want to do.

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Why Isn’t Obama Doing Anything About Mortgages?

The last time whitehouse.gov posted anything about home mortgages was on August 3rd of this year. President Obama also did not even touch the housing issues that continue to plague the economy in the jobs plan he gave to Congress. As the employment rate continues to hover around 9 percent, it has forced many banks to foreclose on homes to families they lent money to. At the same time banks are not lending any money out so new homes can’t be built, or for businesses for them to hire. But then again, there aren’t a lot of people asking for money either. But that is no excuse for Obama not to take on the housing problem. In fact, it would be good for him politically as well.

Whatever you think about Obama’s jobs plan, there is nothing in there that will actually create jobs in the short term. In the plan that he said Congress should pass now, the tax breaks that act as incentives for businesses do not take effect until 2012. We of course need more jobs in this country so families can be supported, and banks are not going to get their money back if no one has a job. It’s a cyclical problem which is not going to go away anytime soon if no one has any guts to spend money. Even though the basic functions of the economy are fine, no one is demanding anything that will get it moving again.

If Obama did propose a plan to help families pay their mortgages it might actually have a bigger affect than the tax based one he proposed. Housing is a large part of the economy because it affects so many other areas. Building a house of course creates jobs for the contractors and the suppliers they buy from. But it is also great for areas because businesses are more likely to open a store where they know people will live. Schools can also be built, along with fire houses and police stations.

One of the heaviest hit states in the country is Florida and its 27 electoral votes. There have been so many written and televised pieces on how bad the situation is I can’t help but think politicians are afraid to talk about it. Not in any of the Republican debates that recently took place (two of which were in Florida) was the housing crisis mentioned. If any candidate next year is serious about fixing the economy, they have to propose a plan on housing.

A part of it is that anything they seriously put forward won’t help families in the short term and there’s no real way to promote it like it will. But that should not stop them from trying to enact policies that might solve the problem.

Senators Menendez and Enzi proposed legislation that would allow foreign banks to lend people money specifically to build houses. The problem is that Europe is having the same problems, if not worse, that the U.S. is having. While it is a nice thought, there is no reason why other banks would want to invest in the housing market. One idea that might help is to raise interest rates on new home mortgages. If banks know they will make more money if they are able to find people who want a mortgage, they will want to find those people themselves instead of waiting for them to come to them.

There are also a lot of houses and apartment complexes around the country that need a lot of work. By renovating them for new families, the prices for them will go up in the long term and people will be getting jobs to work on them. The renovations could also include making the houses more energy efficient. After Hurricane Katrina a lot of the houses that have been built in the area will save the families living in them thousands of dollars a year.

You could also make it easier for investors to build new houses or renovate them. By giving them tax incentives for a limited amount of time, say a year, to put money into projects that will spur the housing market they might bite. There are plenty of families that need a home to live in right now and the new developments/projects will help grow the area and jobs they take place in.

These are just a few ideas that might help. But implementing them will take time and Americans do not always have a lot of patience. But with things as bad as they are right now, people are willing to listen. That includes the thousands of people without a home right now in Florida. They are looking for someone who they believe understands what they are going through and at least has an idea on how to help them.

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Don’t Panic on Manufacturing Jobs

Suzy Khimm had a nice post about the troubling manufacturing industry. According to her research “Manufacturing output rose just 0.5 percent in August — a 3.8 percent increase over the previous August, but a sign of weakness overall. The output of consumer goods was even weaker, at 0.2 percent, partly helped by a 1.7 percent increase in output from the auto industry.” This comes on top of the news today that China is playing a bigger role in digging up rare materials that are needed for the new compact fluorescent light bulbs, and the batteries we want to put into cars. While this makes for a good story, and we do need to make sure we do have a manufacturing base in the U.S., it is certainly not time to hit the panic button just yet.

One of the reasons why we hear stories about businesses sending jobs to China is because it is cheaper to produce the small materials, like the toys in McDonalds happy meals, overseas. But for bigger items like cars or air conditioners, it is still cheaper to assemble them here, mainly because of shipping costs. Of course, this does not make the stories about small towns losing their economic base any less compelling. While there have been plans implemented in order to retain jobs in the cities that have lost their factories, such as bringing in sports franchises, building downtown amenities a long with office parks, and creating businesses (particularly around the sciences) in Universities in the area, have proved to be effective in boosting local economies. But these are usually high skilled jobs that require training and a large investment (but don’t call it a stimulus!). In some cases, like in upstate New York, startup companies were grown after students their received degrees in computer science.

It is also important to note that manufacturing around the world, including China, has slowed. According to the New York Times “In the euro area, the purchasing managers’ indexes showed that manufacturing contracted for the first time in almost two years in August, echoing earlier data from South Korea and Taiwan, where new export orders fell sharply.” When it comes to China “although China’s official P.M.I. rose slightly, its first increase since March, it also showed the effects of slowing demand in Europe and the United States.” There are certainly things we could do to bring more manufacturing jobs in America. It might be lowering taxes, but incentives are usually the best way to go, which are included in President Obama’s jobs bill he is pushing right now.

It is also important to note that the United States is still the world’s largest manufacturing economy. According to the National Association of Manufacturers, the U.S. produces 21 percent of global manufactured products. China is second at 15 percent and Japan is third at 12 percent. That would make U.S. manufacturing the 9th largest economy in the world producing $1.6 trillion each year.

Do we have to change the way we are creating jobs, and incentivize entrepreneurs to create small businesses, of course. But we are by no means missed our chance to do so, and we are not falling behind as much as it may seem. While time is not on many families side right now, that is what it is going to take to get the economy fully going again.

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No Serious Policy In Politics

So far, we have three Republican candidates for President (Mitt Romney, Herman Cain, and Jon Huntsman) who have come out with plans on how to “create jobs in America” and fix the economy. On top of that, President Obama sent his plan to Congress last night and has been touting it across the country. Obviously it is good that policy proposals are being put on the table, but they don’t seem to be doing much good.

I know it has only been a day since Obama sent his full jobs plan to Congress, but Senate Minority Leader Mitch McConnell already said of the plan that “For one, they undermine the president’s claim that it’s a bipartisan proposal — because much of what he’s proposing has already been rejected on a bipartisan basis.” In the mean time all Congress did today was pass another three month extension for the Federal Aviation Administration. It won’t do anything for the economy let alone make sure Americans are safely flying in the sky. It also turns out the additional budget cuts Obama will be asking for soon (which are part of his plan to help the economy) will actually slow growth.

This is exactly why politicians do not like to come out with plans while they are campaigning. (I know technically Obama isn’t campaigning but for all intensive purposes he is on the campaign trail.) Reason being is that in the past, talking about specific economic policy issues would bore people. It happened to Kerry in 2004. He knew everything about his plan and what he would do if elected to the White House, but not only was he side tracked by the swift boat attacks, he wasn’t able to articulate the numbers he had in his head in a short and positive way people could understand.

Even now with Herman Cain’s “nine, nine, nine” slogan to promote his plan, people don’t understand what the means. He just sounds crazy and unelectable. While Romney and Huntsman have both listed plans on their website, they never explain them unless asked. Of course the answers they give only scratch the surface. Not to mention Romney’s plan only comes in a five page summary where you don’t learn anything, or an eighty-five page book that no one has time to read. Then again, some of the pages on Huntsman’s website haven’t been updated since May and seems to be organized so only someone who speaks mandarin can read.

In the Republican’s latest debate, it was less about substance and more about who can get the catchiest line in. Not surprisingly many of those lines were repeated from the debate just last week. As much as this country is in need of a serious discussion about how to create jobs and help people, the campaign is still a popularity contest. That is why we saw Huntsman start mentioning he rides a motorcycle and using Nirvana references. Not to relate but get on television.

There are never any serious policy proposals in politics anymore. Decisions are made after the election is over, and instead of trying to come out a winner, we’re lucky if politicians let the chips fall where they are.

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Remember Jobs?

It’s been two weeks since Congress extended the countries debt ceiling, and out of the 435 members in the House, there have only been six bills introduced that have something to do with creating jobs. Three of which have been introduced by New York Democrat Representative Paul Tonko. It would be really easy for me to go through each bill and say why they are good or bad. But apparently the President is going to put out his own job plan in early September, and at the end of the day that’s what will be the base for future job creation policies.

In an interview with Chuck Todd, White House Press Secretary Jay Carney said that the President’s plan is a two step approach that is linked with the deficit commission that will start its work when Congress comes back. While looking for cuts in the budget, Obama is going to give recommendations that will no doubt be included when members introduce job bills when they get back to Washington. One of the policies is to extend the payroll tax cut for small businesses, and other ideas that are “totally consistent” from the negotiations that took place with John Boehner which included new revenues.

I wouldn’t be surprised if we saw more funds or tax incentives to build or repair roads across the country, research for clean energy initiatives (Obama has already called for a carbon tax), or incentives for banks to give businesses money that would create job training programs. It would be surprising if he calls for reforms to Social Security again being this close to the election and the Democrats left in Congress have no appetite for it.

Politically, this move has more advantages than disadvantages for the President. If Republicans are still willing to say no to anything Obama wants, the President can dub them the Do Nothing Congress in 2012. The flip side is if they do pass some of the ideas he proposes, he can say that he signed a bipartisan piece of legislation into law that will create jobs.

After he comes back from Martha’s Vineyard Obama will be recharged and have the energy necessary to push his ideas. He won’t win any political points by standing on the sidelines working the phones. He needs to play hardball with Republicans, and remind the American people they have done absolutely nothing to create jobs since they have taken control of the House.

Of course that’s easier said than done. In the interview, Carney told Todd that the policies the President will be calling for are “things in a normal universe should have bipartisan support.” But as we’ve seen Washington is nowhere close to the Milky Way galaxy. These are the most partisan times in our nations history and it’s disgusting. That’s not Obama’s fault, but while he positioned himself as the adult in the room he lost control of what was going on.

This is a safe win win move for Obama, and look for anything he proposes to be promoted as a big idea. But if the policies he proposes are passed and are substantial, it could be even bigger for the American people.

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Jobs and Taxes; Helping to Pay for the Future

Our new Constitution is now established, and has an appearance that promises permanency; but in this world nothing can be said to be certain, except death and taxes.

Benjamin Franklin

It’s not a news alert that American’s have never liked to pay taxes. We started a war over them, and have never voted for a politician who says he/she will raise them. But in light of the recent debt debate and angst to lower the national debt, it’s important to remember raising taxes on millionaires and corporations could help protect social programs, and create jobs.

In March, the New York Times reported that major companies in the United States paid absolutely nothing in taxes for their record profits in 2010. It wasn’t long after that 60 Minutes took a trip to Eastern Europe discovering American corporations hiding their money where it can’t be taxed. This should have been a moment for the Obama administration and his allies in Congress to call for a major tax reform. Despite vast new financial instruments and companies easily being able to conduct business worldwide, tax reform hasn’t taken place since 1986.

If you took a look at the stock market these past couple of days, you quickly realize the debt ceiling debate was only a artificially problem created by Congress. While today’s employment numbers weren’t the worst we have seen, it still wasn’t good enough. There’s no doubt more revenue is needed, and with corporations still reporting strong profits at the same time American’s are struggling, it is time to seriously look at ways that can bring in more money.

Most taxes collected in this country come from sales taxes or people’s pay checks. But with people out of the job and not spending money we’re not able to use those revenues to pay for the things that we need like roads and teachers.

The balance act being conducted is trying to figure out a way for American corporations to bring the money back to the states and invest it. One idea being floated around is a tax holiday where there will be a set amount of time where corporations can bring back the money from abroad without being taxed. The trick is to figure out a way to make sure the money that is brought back is used to hire people. Versions of this scheme have been endorsed by Obama’s former Chief of Staff Rham Emanuel and former President Bill Clinton, but so far haven’t been endorsed by the President Obama.

Instead, Obama has sought to increase taxes on hedge fund managers, millionaires, and “corporate jet owners.” He has also called for closing certain tax loopholes that can bring in an additional two billion dollars.

Corporations argue that they have to send their profits abroad because their stock holders want to see a profit. Cisco has had to pay back some of those holders because they lost confidence in the company. But corporations should want to pay taxes. If done right it could become a lot cheaper to pay for a employee’s medical bills which would lower their long term costs.

On the political front, there is always some disconnection between people wanting or liking items in a bill and but then still not wanting to pay taxes. We saw in the polls regarding the healthcare debate, that while people liked what was in the bill they still didn’t like what was in the overall package. One of the main reasons a major overhaul of the tax system is needed is so Social Security and Medicare, programs that no one wants to see go away, stay solvent. Price controls for Medicare is only half the battle, it’s never going to be free and new ways need to be implemented to make sure money is going into the system that would keep overall costs low for the majority of Americans.

Certain members of Congress argue they want to reduce the deficit so it won’t burden their children or grandchildren, but paying for items we need now rather than later will be cheaper and create a better economy for them. The reason why we need more revenue is so more money can be flowing through the economy which will help create jobs. With the economy continuing to fluster what is really needed is another, more specific, stimulus package. But unfortunately it’s not politically possible. Americans don’t want their bridges falling or schools lacking the supplies it needs to teach their children. People are needed to fill these positions and the taxes collected from them will help stabilize our social programs. Thus the world keeps turning.

Benjamin Franklin, businessman, inventor, and founding father, was right when he said the only thing certain was death and taxes. It is part of the way the world works that help create jobs that supports families and their livelihoods. Deficits are a long term problem but it will be better to raise revenues now to pay for the future.

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Obama Should Go Nuclear

This whole talk of compromise is bogus. President Obama was able to pass the tax cuts, don’t ask don’t tell, and START, because the public was on his side. Polling consistently showed the American people were in favor of these two issues, and Republicans didn’t want to look like they were not representing the people before they official gained power. But it will be a lot tougher the next two years and it will be important for Obama to pick specific issues that he can claim victory on.

Controlling the White House gives Democrats the ability to set the agenda and control the conversation. That means it is even more important to pick issues that they know they can win political points with since there will be so few of them coming up. By Obama saying he received a shellacking in this election cycle, he down played any new victories that may occur in the future, that way when he does get his initiatives passed through Congress, it is a bigger victory.

If the Republicans goal is to make Obama a one term president, there is no reason to give them an inch of breathing space. The energy legislation that passed the House this past term isn’t going anywhere. While the bill received bipartisan support, it was still a close vote and very contentious. But there are a lot of elements in it that both sides can vote for. One of them is the expansion of nuclear energy.

Obama has consistently said he is in favor of creating more nuclear sites in the United States, and many Republicans have had this on their agenda. The list includes John McCain, Mitch McConnell, and soon to be the Chairwomen of the Senate’s Energy and Natural Resources Committee, Lisa Murkowski. There will be plenty of quotes that can be used to contradict what these Senators will be saying if Obama decides to push this issue. But it is one that he needs to use the bully pulpit in order to get what he wants.

The microphone is going to be set on high for this one too. There are a lot of Not In My Back Yard issues when it comes to nuclear power. People either think of Chernobyl or Three Mile Island and do not want an instance such as that to effect their communities. Both of these accidents were caused by human error, unlike the BP oil spill which was caused by human error. That’s why the Department of Justice is suing BP believing the disaster could have been avoided. More regulation will be needed for the new nuclear plants, but it is hard to make an argument that current plants and refineries don’t need it either.

One of the factors involved with using nuclear technology is where to store the waste that comes from using the material. But while there are currently 104 nuclear power plants operating in the United States, the amount of material that would have to be stored would cover seven yards on a football field. The technology for storing this material has been improved insurmountable since the last two nuclear accidents.

While building new nuclear plants are expensive, there is still plenty of money to be made from building them, particularly with the right incentives that the federal government can provide. In the meantime, the money that is being spent will create jobs. That’s why other countries like England are planning to build more of them. And I haven’t gotten into the environmental benefits of using more nuclear power.

One of the reasons Obama had such a hard time with the media is because he was not specific enough in what he wanted. The public option was the prime example. The official position was “I’m in favor of a public option, but it does not have to be in the final bill for the bill to be effective.” While policy junkies or people who work in the health sector may have understood what he was saying, it was confusing. And it didn’t allow him to own the issue and take credit for the pieces of legislation that will benefit people.

The White House needs to keep it short and understandable. Not everyone is a physicist and kept up on the news coming out of the nuclear sector. Next year Obama is going to have to stop trying to teach, and needs to preach instead.

 

 

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