Saturday, July 3, 2010

Obama's Green Jobs Continue to Put US in the Red

I don't understand Obama fascination with "green" jobs. With unemployment sitting at just under 10% (staying in single digits in large part to the 300,000 census workers our government has hired), let's work on just getting people back to work in a job. Any job. With our federal debit deficit setting new records nearly every day, we need to ensure that every dollar we spend in trying to ramp up our economy is invested in such a way that it is returned several times over in wages and the accompanying taxes. While stories surfaced that each stimulus job cost in excess of $500,000, more reliable reports put the cost of each stimulus job ranging around $246,436 to $267,000.

In pushing their dramatic expansion of social and health care programs, the Democrats have been forced to find offsetting revenue through tax increases. These taxes are being aimed squarely at the companies that have driven our economy. Small business will be forced to pay for increased employee health care insurance costs, all companies will face increases in corporate tax rates, increases in regulations for financial services companies will add costs and force them to drop some products and markets, medical device companies will pay a surtax on their products. The only jobs Obama appears to be concerned about saving are government service workers, most of whom are members of SEIU and other unions that were key in sweeping Obama into office and will be needed to keep him there.

In his speech this week, Obama announced:

"...we’re accelerating the transition to a clean energy economy and doubling our use of renewable energy sources like wind and solar power – steps that have the potential to create whole new industries and hundreds of thousands of new jobs in America.

In fact, today, I’m announcing that the Department of Energy is awarding nearly $2 billion in conditional commitments to two solar companies.

The first is Abengoa Solar, a company that has agreed to build one of the largest solar plants in the world right here in the United States. After years of watching companies build things and create jobs overseas, it’s good news that we’ve attracted a company to our shores to build a plant and create jobs right here in America. In the short term, construction will create approximately 1,600 jobs in Arizona. What’s more, over 70 percent of the components and products used in construction will be manufactured in the USA, boosting jobs and communities in states up and down the supply chain. Once completed, this plant will be the first large-scale solar plant in the U.S. to actually store the energy it generates for later use – even at night. And it will generate enough clean, renewable energy to power 70,000 homes.

The second company is Abound Solar Manufacturing, which will manufacture advanced solar panels at two new plants, creating more than 2,000 construction jobs and 1,500 permanent jobs."

If you read between the lines here, most of these jobs are temporary. Only 1,500 are permanent. That puts the cost of each of these permanent jobs at $1.3 million dollars. Those had better be some pretty super high-tech, bad-ass solar panels.

What does it take to create REAL jobs? Lawrence Kudlow over at has some thoughts:

"In a watershed study, former Treasury economists Gary and Aldona Robbins argued a few years ago that tax cuts aimed at capital and business produced the biggest economic benefits. For example, for every tax-cut dollar on capital gains, $10.61 of new GDP is created. For every dollar of accelerated business-investment tax write-offs, $9 of new GDP is created. And for every dollar of corporate tax cuts, $2.76 of new GDP is created.

This bang-for-the-buck analysis contrasts sharply with estimates for increased government spending. According to the White House, every dollar of new government spending creates about $1.50 of new GDP -- much weaker than the effects of business tax cuts. And the White House analysis looks like a stretch. The International Monetary Fund has a model that says every additional dollar of government spending creates only $0.70 of new GDP. So you have to borrow a buck to get 70 cents back. Not a good trade.

Clearly, neither of these spending multipliers holds a candle to the benefits of lower business tax rates. Incidentally, for deficit worriers, corporate tax cuts pay for themselves, as do lower tax rates on capital gains.

Fred Smith, the CEO of FedEx, does not have a Nobel Prize in economics. But he founded from scratch a gigantic global transportation and delivery company that has employed tens and tens of thousands of workers, something the Nobelists have never done. And Smith argues that the best job-creating measure would be a significant reduction in the corporate tax rate and a move to full expensing for business-investment tax write-offs. He's exactly right.

Japan intends to cut its corporate tax rate. So does Great Britain. But the U.S. corporate tax rate of 35 percent, or 40 percent when states are included, is not even remotely competitive anymore. So why aren't people talking about the economic benefits of unleashing business power? The rapidly growing Asian economies treat capital and business better than they're treated in the United States. Same for Europe. What are we waiting for?

During the Ronald Reagan 1980s, when a deep recession led to a 10.8 percent unemployment rate, the Gipper cut domestic discretionary spending, lowered tax rates across-the-board (including corporate tax rates) and sped up tax write-offs for business investment. The first two years of that recovery generated nearly 8 percent growth, with hundreds of thousands of new jobs created monthly.

Right now, we are facing one of the largest tax hikes in U.S. history, scheduled for 2011. Taxes on investor capital and business will go up significantly. So will individual income-tax rates. This is exactly the wrong medicine.

When will Washington come to its senses, and unleash the power of capital and business to end all this pessimism and move us toward real prosperity?"

No comments: