President Barack Obama has a ten year $447 billion jobs plan, but the Senate isn’t buying it. The Republicans have a jobs plan, but the Democrats aren’t buying it. Keynesian economists have a jobs plan, but economists who don’t believe in borrow-and-spend to stimulate demand aren’t buying it. Obama wants to raise taxes on families earnings more than $250,000 per year, but Democrats in the Senate aren’t buying it—they want to impose a 5.6 percent additional tax on millionaires instead. The Republicans are calling for a plague on both White House and Senate Democratic tax raisers, and want to lower taxes on corporations. There is more, but you get the idea—the politicians are unable to agree on almost anything. Worse still, they are delighted that they can’t agree so that they can campaign on a platform accusing the other guys of not caring about job hungry voters.
Meanwhile, Americans’ incomes declined in inflation-adjusted terms by 7 percent in the decade just ended, and economists are predicting they won’t make up lost ground by 2020. Little wonder that CEO confidence is at a two year low, that 74 percent of Americans think the country is “off on the wrong track,” that a plurality of those polled support the “Occupy Wall Street” demonstrations springing up around the country, and over 80 percent describe the government as “not working well” or “unhealthy” and “stagnant.”
Into the policy void comes something called the president’s Council on Jobs and Competitiveness, a private sector group put together by the president and chaired by Jeffrey Immelt, CEO of GE. Immelt, a supporter of the president, announced last year that GE plans to invest $2 billion in research and development facilities in China, notwithstanding his concerns about China’s discrimination in favor of its own firms. It is not immediately evident just how this investment in China, which this past week resumed its policy of pushing the yuan down, will create jobs in America, the goal of the Jobs Council and the president’s “American Jobs Act.” Immelt apparently does not believe there is any conflict between his responsibility to the president for finding ways to create what U.S. politicians like to call “good paying American jobs,” and using his company’s funds to create dollar a day Chinese jobs.
The Jobs Council does not intend to address “troubling” long-term trends in “education and training, respect for workers’ rights, tax policy” and a host of other policy areas. That’s reserved for a later report scheduled for December. For now the Council would begin with large infrastructure projects, where a five-year, $1.1 trillion “short-fall for government-funded infrastructure” must be corrected, and the permitting process fixed, as well as a political process that substitutes political “log rolling” for rational priorities. Every additional $1 billion spent will, the Council assures us, create between 4,000 and 18,000 jobs. Given that relationship between spending and jobs it is a mystery why the president’s $787 billion stimulus package didn’t manage massive job creation. That is a question not only left unanswered, but unasked by the Council. And where the money is to come from is left largely to the imagination—public-private partnerships (which have not been huge successes in Great Britain) are mentioned, as is “a national infrastructure financing organization.” Perhaps something along the lines of Freddie Mac and Fannie Mae might do the trick.
The energy sector comes in for special attention. The Council worries that America is falling behind in the development of clean energy, the sort of thing on which GE is working. It is for the government to provide needed capital. “The US Department of Energy loan guarantee program has demonstrated how low-cost federal financing incentives can accelerate and deploy advanced technologies and help create jobs.” The bankruptcy of solar panel maker Solyndra, with a loss of more than half a billion dollars of taxpayer money amid a possible scandal—Obama financial supporters were among the backers of Solyndra, and at the administration’s urging the Department of Energy went light on due diligence— demonstrates something entirely different. Worse: The Council calls for “a full faith and credit-backed government financing institution to mobilize the private sector” to invest in advanced technologies—presumably those that investors are savvy enough to shun.
Not all of the Council’s suggestions are equally risible. There are ideas for tax breaks for entrepreneurial start-ups and “angel” investors who often fund new businesses, relaxation of visa restrictions so that rich Chinese visitors can more easily descend on our malls, and various training programs to upgrade workers’ skills so that they can fill currently available job openings.
All in all, a damp squib, unlikely to do very much to make a dent in the 9.1 percent unemployment rate. Not a word here, or from the president, about the effect of the looming cost burden of Obamacare on small businesses’ willingness to hire. Nor about the effect on confidence of the president’s new round of class warfare against “millionaires and billionaires” and “fat cats.”
Perhaps the Council’s wisest comment is that “there is no one ‘silver bullet’ to create jobs.” What is needed is some sense that the political class not only nods favorably in the direction of any new job creating proposals, but that it acts on the more sensible ones. No one disagrees with the Council’s call for a reduction in the regulations that are stifling growth. The president agrees, but despite his widely publicized decision to sidetrack a few proposed regulations—due to be put back on track after the 2012 election—his regulatory bandwagon rolls on. Over 4,000 new regulations are in the pipeline, awaiting approval.
No one disagrees with the observation that small businesses are the engines of jobs creation, with the successful ones, the so-called gazelles, leading the way. Or that they at some point need access to bank credit. But risk averse bank examiners make it dangerous for banks to extend credit to fledgling enterprises.
No one with any economic nous disagrees that the best policy would be to postpone austerity until the economy shows signs of life, but make a credible promise now to cut deficits later. But there is no mechanism for binding future Congresses to redeem the promises of their predecessors.
So businesses hoard their cash, consumers prepare to host the Grinch this holiday season, and the odds on a bleak 2012 continue to mount.