Dear Readers: Whether you think the economy is Depression-Lite or the Great Recession, make to mistake: IT’S THE ECONOMY, STUPID – Part II. Nothing like sequel to get the summer season going. Probably explains Obama rapidly descending approval numbers.
My highly-placed senior executive officer in a non-Wall Street, but highly successful, financial institution concurs. Professor Athena went on an erudite rant, which is presented below for your enjoyment.
Norma Rae Doesn’t Live Here Anymore
Make no mistake about the facts of what will drive the results of Election Day 2012. It is jobs. It is the economy.
We have seen this in the past. Bill Clinton “got it”. George W. Bush did not and in fact reneged on a “no taxes” pledge to the electorate who managed to have a memory at the polls. One wonders if, looking at the Obama administration’s job-killing policies, that they “get it”. One wonders when they talk about raising taxes on “the richest Americans” that they “get it”. Or when they talk about “jobs programs” on part of the federal government if they grasp their lack of common sense in promising precious dollars to having the non-private, non-profit-creating sector of the economy (aka “the government”) training people for work (see the Federal Economic Development Administration). I can promise this much. Many people who will be voting at the polls in November 2012 do indeed grasp it. In fact, they are showing in ever increasing numbers that they are sick of it.
We all want jobs. Currently about 9% of working age Americans are unemployed. A far larger percentage are “under employed” due to the meltdown in the housing and finance industries. Only the public sector (the government) has had significant job growth in the last three years. All sectors have shed jobs. They are not being added back so far. It would be refreshing to understand why this is, and it boils down to one big cost issue you will not hear from Democrats, unless it is to bash those like Gov. Scott Walker and Chris Christie, who have taken on their state employee unions in order to balance state budgets. The ugly truth is that our jobs aren’t here because we are too expensive.
By now you have all heard that our corporate tax rates are the highest among top world economies. But, our work force is largely also among the better trained and experienced. Why can’t we compete? The number one answer to this is the expense of union wages and demands. This is a “double-dip” problem when coupled with the local school districts (the largest single expense for most municipalities) and other unionized state and local employees. Not only is our economy paying more for wages in the portion of the private sector which is unionized, but we are paying the additional cost of high union wages for teachers, police, fire, and every type of government administrator who pushes paper. It isn’t enough to unionize a coal mine. That is, if you can actually find one the EPA has not restricted out of existence. We have unionized those poor, pitiful, overworked and underappreciated DMV clerks. Only in the public sector do we see generous wages and retirement benefits relative to what exists in the private sector on average coming on top of the insult of lazy customer service and substandard work performance. If they are unionized government employees, you can bet they cannot be fired short of popping off a few rounds from their automatic weapon in the office or school room. We all remember the movie “Norma Rae”, made in 1979, and which won an Academy Award for actress Sally Field. It is interesting that this movie was made a little over three decades ago and yet the job she has in the movie as a worker in the garment industry has all but disappeared. Norma Rae doesn’t live here anymore. She lives in China or Thailand, where you can bet the workers are not unionized.
So, all this begs the question, “What can we really do to add jobs?” This question will be what wins (or loses) the coming election. It will help if we start from the perspective of an adult conversation on this topic, which is that “our jobs” are not really “ours”. The labor industry is global now, and can increasingly opt to produce goods with cheaper labor (as has happened in the garment industry). The growth of an advanced communications industry and most especially the internet has facilitated corporations who want to develop a product here, market it over the internet, and produce it where labor will work most cheaply. A great example of this is Apple Computers, which does a lot in Cupertino, but also makes a majority of their product in Shenzhen. We should also recognize that jobs which have been added to the U.S. economy are increasingly in non-unionized states. Reeling from their loss earlier this week in the Wal Mart class action discrimination case before the Supreme Court, the National Labor Relations Board has proposed a new fast-track union law to allow them to better bypass employers and pressure workers. They lost the “Employee Free Choice Act” (otherwise known as Card Check), and they also lost a recent vote by the United Food and Commercial Workers Union at Target in Valley Stream, NY, where workers opted not to unionize by a vote of 85-137. The latest desperate effort by the NLRB and a decreasing public union base is highlighted in an article in today’s Wall Street Journal, “Plan to Ease Way For Unions”, by Melanie Trottman and Kris Maher. You would think they see the handwriting on the wall, right? Well, the answer is that they indeed do, which is why you will see their push toward Democrat candidates who advance their job-killing policies in a big way during the upcoming election. Here are the points you will not hear from them, which are the ways we can truly grow America’s jobs.
1. Cut marginal individual tax rates. Contrary to what liberals would like you to believe, the most recent “Bush Tax Cuts” benefitted largely middle-income groups as a percentage of earned income. A more salient point is that tax revenues have stayed almost constant for the past 40 years, at about 80% of GDP, regardless of how much we attempt to increase taxes on the top marginal groups. The reason for this is the efficiency of sheltering income vs. claiming it as earned. This is particularly applicable in small businesses all across America, which by the way have been about the only engine of growth for American employment during this recession. For every increase in marginal rates of 3-5%, you see a proportional amount of new hires lost, because that money went to the federal government in taxes instead.
2. Cut corporate tax rates to a flat 20% (no deductions or credits other than depreciation write-off) AND allow off-shore profits for U.S. corporations to be taxed at the rate for the off-shore locality and repatriated back into overall earnings without respect to capital gains. We are currently the only major world economy that applies our domestic tax rates to off-shore earnings for our multinational corporations.
3. No unions. They have overstayed their welcome, are redundant and intent on enriching themselves and their power base among Democrats and not what benefits jobs and workers. We have only to look at the current Boeing debacle in South Carolina to learn just how much the NLRB truly cares about keeping jobs here in America. They want them here only if they are in control (as they have been in the state of Washington), not the workers, and not the companies who employ them.
4. Pass the Reins Act. It is amusing to read the comments of those who oppose Congressional oversight of the various regulatory agencies’ onerous rules and guidelines, the heads of which are political appointees and not elected representatives of the people whose lives and jobs they are impacting. Link: http://voices.washingtonpost.com/ezra-klein/2011/02/the_rein_act.html. This is most especially applicable to the EPA, the budget for which has ballooned by about 60% during the Obama administration, and the additional rules and mandates for which have also increased proportionately. Yes, reins could really be useful, because federal regulators are galloping out of control, growing ever larger and more powerful while at the same time doing little to enforce real protection from damage on behalf of the American people (see the federal regulators at the SEC, the Fed, the NASD, the OCC, the FDIC, and FINRA during the decade of 1995-2005, when subprime housing loans were built and deals were structured and sold by brokers licensed under federal securities laws and purchased by federally-regulated institutions, all without protest or restraint from the above regulators). We need to know exactly whom to hold responsible.
5. Do away with all federal “jobs programs”. This is a no-brainer if there ever was one. If a job is needed, the private sector will certainly create it, and the tax dollars of hand-working Americans should not be spent on what the government decides for them is a need.
We can and should demand that our elected politicians spend far less as opposed to taxing us more. We truly don’t deserve to call them “our jobs” unless we are prepared to first make our economy a strong and vibrant one in which the private sector is growing faster than the public sector and paying far better wages and benefits. It is time to make the unions bleed jobs, and especially those who are taking our tax dollars to create them. This Fourth of July on Independence Day, I plan to be especially grateful for Americans in leadership who understand these facts and who put them into practice. They are the ones I promise to remember when I go to the polls in November 2012. How about you?