The Jobs Problem

  It seems that somebody at the White House has noticed that (1) unemployment has overshot Obama's 9% "worst case without an $800 billion stimulus plan" scenario, (2) a strong majority of Americans consider the economy (not health care) to be the major issue, and (3) a plurality of voters believe that Obama is doing a poor job on the economy. The "boost Goldman Sachs and let it trickle down" approach doesn't seem to be working, so lets squeeze in a jobs conference. The problem is that nobody in the White House or the Congressional leadership has ever managed a private sector payroll, and that their instincts lean toward job-crushing initiatives and unaffordable public sector hiring.  

The short term scenario:

-  Unemployment is projected to remain over 10% well into next year. With the average work week at 33 hours and high use of temporary workers, employers have lots of slack to pick up before real hiring begins. Company earnings (and the stock market) are increasing as companies with declining sales cut the fat and reduce investment spending in training, research, and advertising. With the economy projected to increase at 2-3 % in 2010 and 2011, productivity improving at 4 to 5%, and the population growing a bit, it is hard to see the unemployment rate coming down. 

-  Bloated claims of jobs "created or saved" on Obama's www.recovery.org are being criticized even by liberal Democratic leaders. In fairness, many union jobs in the auto industry have been saved, and the portion of the stimulus program aimed at city and state governments have protected public sector jobs in education, law enforcement, and administration. But there is nothing to help small business, the traditional jobs engine.

-  So, the legislation on the Democratic plate: increased taxes on business to support the trillion dollar health care program; cap and trade to make energy more expensive; opposition to free trade agreements with South Korea and Columbia; and "card check" to make unionization easier.

-  And what could be done if private sector job creation really were the priority: a health care plan designed to reduce the burden on employers; use of existing programs (TARP/TALF) to drive lending to small businesses (Small Business Administration loans were down 27 % in FY 2009); reduction of taxes on business- perhaps with credits for job creation; approval of free trade agreements; acceleration of infrastructure construction; some confidence building by starting to control federal budgets and get some finance industry regulations passed.  

- A major impediment - job creation has historically been greatest in small companies which tend to be non-union, and whose leaders tend to vote Republican.  Obama's most frequent White House visitor? - Andy Stern, the president of the Service Employees International Union

   The long term scenario is equally bleak and requires vision that is either absent or politically unacceptable.

-  Even before the Great Recession, the US manufacturing workforce was declining - down 5 million jobs in three decades, from 20% of the workforce to about 11%. (Highly-skilled jobs increased.)  As the country's earlier agricultural transformation shows - with under 2% of the population now producing more food than we consume - the question is really whether we can produce what we need (clearly yes, with some trade adjustments), and what to do with the workers who become unnecessary. In the last half century we have also moved from about a third of women being in the work force to 60%, complicating the social calculation of what to do with the workers who become unnecessary.  

-  Some thoughts:

   --  Focus government spending on investment which will produce future prosperity (infrastructure; education; research and development) rather than consumption (health care; housing; entertainment; social services). Both are desirable, but one improves our grandkids' future.

  --  Structure the tax code to encourage people to stay in school longer, retire earlier, and stay at home (men or women) to raise children.

  -- Protect intellectual property. If we are to compete on the basis of a "knowledge economy", we need to protect patents and copyrights - a particular issue with China.  

  --  Limit immigration. American jobs for Americans. 

  --  And for all of us - Buy American.

  In the meantime, 2010 looks like a bad year for incumbents - particularly those who can be attached to anti-job policies. Gallup shows a rare generic preference for Republicans in Congress and the Obama/Pelosi/Reid leadership continues to press a job-killing agenda.

----- 

This week's You Tube is an impressive extract from Sarah Palin's recent interview with Oprah Winfrey. Unfortunately, it remains necessary to hear her directly rather than through the filter of the media.

bill bowen - 11/20/09

Favorites: 
    1. Mitt Romney's "Free and Strong America" PAC web site. 
    2. Tom Campbell's California governor campaign web site

Comments

[Bill McCormick]

As the CEO of one of America's leading Executive Search firms for the past 35 years I have had the experince of enduring with our clients 4 major US recessions. This recession will likely be the longest and most devastating of them. It reminds me of a combination of the Saving and Loan crisis combined with the Real Estate crisis that occurred in two separate recessions. I believe this recession would have been much less devastating if it had not have started during a particularly complicated Presidential campaign year.It began as Obama and Clinton began their campaign against each other by fueling the anti--Iraq war sentiments of the Democrats and Independents in constant dialogue against the Bush-Chaney deception in initiating what they thought was the ill conceived Iraq war. McCain, the hero of the surge strategy, was being made out as a Bush supporter and a man who could not see the folly of fighting in Iraq rather than Afghanistan. None the less McCain was holding his own as the two Democrats fought each other for the nomination. Once Obama was nominated then he turned his anti Iraq/Bush-Chaney accusations directly to McCain. All the while claiming we were ignoring the truly just war in Afghanistan. My point here is that the real problem facing America namely the housing, banking and AIG crisis were ignored as we watched the debate over wether we should be fighting in Iraq or Afghanistan. Meanwhile the debt surged, the housing crisis created by soft lending requirements and poor oversight by both parties and the economy weakened after a typical 5 or 6 year good run. Then, bam the derivatives market collapsed, the banks and AIG were in crisis and the foreclosures skyrocketed. All this became a three to four month drama as the nation watched Bush enact programs to save the banks. By this time the electorate, weary and skeptical of Republican truthfulness on Iraq, decided to ignore anything McCain and Palin had to say about the economy and solutions opting instead to bet on the Democrats despite extreme respect for McCain and considerable skepticism about Obama.

The country froze as Obama took office and implemented a strategy of bailouts, takeovers and unprecedented government spending for social reforms. This process has further divided America as the once enchanted independents return to their more moderate roots and the debate over social oriented solutions versus business oriented solutions continues to intensify. The result is a dramatic freeze on the part of America's business owners and managers. This freeze is the direct result of lack of confidence and ability to plan for a future. And thus they have no willingness to hire to expand and in fact are still laying off fearing the unknown. This uncertainty is compunded by the fear of Healthcare taxes, increased business taxes, the fear of new energy surcharges, the mounting crisis in state budgets reducing markets, and the roll back of the Bush tax cuts.(Impacting most small businessmen who are LLC's or sole propriatorships. Little known to many of our government leaders is the incredible statistic that 76% of Americans work for companies with less than 250 people and only 1/2 of 1% of America's 8.5 million businesses have more than 250 employees. SO unemployment continues to grow.

Employment in America is fueled by managers confidence. Managers these days are small business owners. This run of continuous negative debate and news has put the confidence of America's owners at a very low point. They are saving their money, cutting costs and minimizing their risk in inventory and hiring. They are waitng for the "other shoe to drop" from the new Administration and the congressional legislative onslaught of spending rightly or wrongly aimed at changing America. Had we fixed the banks and the oversight problems and let America's economy work we would be out of it by now. But, we have embarked on a continual campaign mode in which even the so called news organizations have taken sides and created a coninual campaign like atmosphere full of raging debate and accusations. What began as an "anti Bush-Chaney" campaign by Obama has become an all out "media war" against everything combined with a governemnt convinced it can do everything better than the business sector. The days of waiting for big business to replenish invetories, negotiate labor union contracts or lower interest rates to "kick in" to end economic downturns are gone. China responds to those things now. America requires ingenuity and risk taking by small business owners to stimulate the economy. And, it is time for the government to get out of the way and let it happen.

Over the years I have observed these hiring freezes every time the government gets into these huge debates creating uncertainty in the economy. As long as entraprenuers know what the rules are they will adjust and we will prosper. It reminds me of Bruce Smith, economic adviser to Clinton, who once squared off with 150 small business owners at Harvard (I was one of them) in 1987. He predicted that Japan would dominate the world with their govenment planned and subsidized industries, educated labor and that the Yen would be the new currency of the world replacing the American dollar. I have never seen a more motivated and offended group of people. To a person he was rebuffed as if Pearl Harbor had just happened on an economic basis at Harvard. Three years later the Japanese were mired in a recession that haunted them for ten years. Today reminds me of those days. President's advisors and US government leaders are not immune to making mistakes so never feel they have any better answers than we do. Speak up.

Until the US Congress settles down and stops the rush to change things the US economy will be in hibernation. Sooner or later the real leaders of this country will emerge and slow things down so that we in business know the rules we are to operate with. And then the US economy will reignite and we will put the Chinese in their place just as we did the Japanese. Always remember: an illegal immigrant worker in the USA makes more than 20 times what the average Chinese worker makes and the workers in China will not stay slaves to a government run economy for long.

[Bill McCormick]

Nice job, Bo! Wouldn't it be nice if our representatives we send to congress were actually paying attention to the American people? Today will tell us a lot. There is no doubt that many Senators will go against the wishes of their people back home and vote for the healthcare bill. Will 60 of them do it? The trick of course is that you can vote for it today and then vote against it later because they only need 51 next time so they can forgive the 9 in trouble
back home and reward them with millions for their state. How did we ever get to such a sorry system?

The sad thing is that we are spending so much time and resources on this issue when the economy is so weak. We are now adding the taxes (and no benefits) immediately to a country struggling to right itself. We are adding at least $2 Trillion more to the debt for our children in the next 15 years. And all this money that could have provided infrastructure investment or capital for small businesses to spur on the economy is going for exactly what? Read the 20000 plus pages and find out.

We can only hope that 2 or 3 Senators, by the way where has Liberman gone, will stand up for America and their people back home. Enough for now. Let's watch and see.

By the way Olympia Snowe must feel like she was truly used when she agreed to free this bill from Committee. The deception in politics is one of the reasons that bipartisanship is extinct.

[Ralph Paul '75]

Bill,
Well said! I enjoy reading your articles. You make good sense!