Wednesday, September 28, 2011

Where the Jobs Are

The latest talking points from the federal government are on job creation. The president has, in effect, proposed another stimulus to promote job growth.  According to the Hoover National Report about one-half of President Obama's proposed $447 billion American Jobs Act consists of payroll tax holidays designed to boost spending and increase hiring. But these temporary policies will do little to jump-start the economy, much as earlier temporary economic Band-Aids, such as the 2009 stimulus, did little to improve the economy.
A change in tax policies is necessary to promote growth, but those must be long term and substantial changes.
U.S. Corporate Tax Rate
A May 2010 study by University of Calgary economists Duanjie Chen and Jack Mintz for the Cato Institute using World Bank data finds that the effective combined U.S. federal and state tax rate on new capital investment, taking into account all credits and deductions, is 35%. The OECD average is 19.5% and the world average is 18%.
Paul Volcker led the White House tax reform panel whose recent report concluded that "The growing gap between the U.S. corporate tax rate and the corporate tax rates of most other countries generates incentives for U.S. corporations to shift their income and operations to foreign locations with lower corporate tax rates to avoid U.S. rates."
Rep. Patrick Meehan said "We must close loopholes so corporations pay their fair share and increase revenues. As the president's fiscal commission recommended, we can spur growth by making America's business tax rate more competitive globally. With the highest rate in the world (39 percent), our tax code helps send U.S. jobs overseas. China's rate is 25 percent, and Canada's will be 25 percent next year. Key tax provisions seem to expire right before the next election, giving no sense of certainty for long-term planning. This all tilts the playing field firmly against U.S. workers and kills jobs."
Taxes alone are not the major contributor to the high cost of doing business in the United States. Burdensome regulations play a major role. Stimulus programs fail to stop these regulations and the many new ones being imposed on American business. There are bills in congress now to curtail the flood job-killing regulations.
“There is a mindset in our nation’s capital that the best way to grow our economy is through more government spending,” said Rep. McMorris Rodgers.  “But where we really need more spending is from America’s jobs creators – specifically, changing their spending from complying with government regulations to hiring new employees.  Whether it’s the Administration’s new energy regulations, new health care regulations, or new financial regulations, every dollar that a job creator has to spend complying with these new regulations is a dollar he could be using to create jobs.”
“American energy and mineral production, whether onshore, offshore or renewable, already employs millions of Americans and could support millions of additional jobs by simply harnessing the resources we have here at home,” said Natural Resources Committee Chairman Doc Hastings (WA-04). “Yet during the first two years of the Obama Administration, American energy production has faced constant obstacles from unnecessary government regulations and red tape. The offshore energy industry has shed thousands of jobs and lost the potential to create millions, renewable energy jobs have seen little growth, and the mining industry is facing job-destroying proposed new rules. It’s simply unacceptable for this Administration to put the brakes on the job creating potential of some of America’s leading economic contributors.”
Under the Clean Air Act alone, we are facing over twenty regulations. One planned regulatory action, the new “Boiler MACT” rules, would affect thousands of American job creators – from factories to hospitals to municipalities – that use boilers. James A. Rubright, Chief Executive Officer of Rock-Tenn Company, cited a recent study that found that the rule would cost the U.S. forest products industry $7 billion and “would place at risk 36 mills and over 20,000 jobs in the pulp and paper sector alone, about 18% of its workforce.”  Rubright warned that “the current wave of regulations is unsustainable,” and that “living with such an uncertain regulatory environment not only costs current jobs, but also prevents new jobs from being created.” Rubright urged Congress to pass the EPA Regulatory Relief Act (H.R. 2250), bipartisan legislation sponsored by Rep. Morgan Griffith (R-VA), “as soon as possible” to address the regulatory uncertainty that is putting jobs at risk. (Testimony, 9/8/11)
Dan Harrington, President and CEO of Lehigh Hanson, Inc., a supplier of heavy building materials to the construction industry, said just one of several new regulations affecting the cement industry “could force the closure of 18 out of the nearly 100 U.S. cement plants,” job losses that “will not be readily absorbed in the communities where most plants are located.”
Washington has become a red tape factory, with more than 4,000 rules in the pipeline -- hundreds of which would cost our economy more than $100 million each annually. The disappointing reality is that what may be a faceless regulation to most can have a profound impact on local economies and families like yours.
In his weekly address, Senator Peter Roskam said “Just one rule has Chicago White Metal Casting, a manufacturer in my district employing 240, fighting to survive in an already tough economy. Already facing a stream of regulations, they'll soon face new regulations from unelected bureaucrats implementing a back-door national energy tax -- after it failed in Congress. Chicago White Metal Casting already has one employee who spends half his time dealing with existing federal audits, certification requirements, and complex paperwork.
“By now, you've probably heard about the case of Boeing, one of the world's leading manufacturers. This Chicago-based company invested more than $1 billion in a new plant in South Carolina that would generate thousands of good-paying jobs … only to be sued by the government and told that the plant can't open. Who in the government sued them? No one that's elected, I'll tell you that. No, Boeing is being sued by the National Labor Relations Board, which is charged with looking out for labor unions.
“I'd also like to share with you the story of Gibson Guitars, a company that makes world-class guitars. Well a few weeks ago, Gibson was raided by 26 armed federal agents. No charges have been filed and regulators have not explained to the company what they may have done wrong or how to rectify the situation. Well I'd like to know how job creators can be expected to prosper with the threat of a federal raid hanging over them?”
The Obama administration has publicly listed a total of 219 new regulatory actions under consideration for the upcoming year, each of which would have an estimated cost to our economy of $100 million or more.
The increased costs associated with high corporate taxes and crushing regulations is sending jobs literally out the door.
Actual Hiring
The Economic Policy Institute, a Washington think tank, says American companies have created 1.4 million jobs overseas in 2010, compared with less than 1 million in the U.S. The additional 1.4 million jobs would have lowered the U.S. unemployment rate to 8.9 percent, says Robert Scott, the institute's senior international economist.
More than half of the 15,000 people that Caterpillar Inc. has hired in 2010 were outside the U.S. UPS is also hiring at a faster clip overseas. For both companies, sales in international markets are growing at least twice as fast as domestically.
The Wall Street Journal reported that Corporate America certainly isn’t doing its part to help bring America out of its economic malaise. The paper surveyed employment data by some of the nation’s largest corporations — General Electric, Caterpillar, Microsoft, Wal-Mart, Chevron, Cisco, Intel, Stanley Works, Merck, United Technologies, and Oracle — and found that they cut their workforces by 2.9 million people over the last decade while hiring 2.4 million people overseas. Note: to read the entire article you will be asked to subscribe.
Changes and Solutions
Coming up will be posts on bills that are in the house and/or senate that are designed to curtail many of the burdensome regulations mentioned and many not discussed here. The path to a better economy is not found in increasing debt or more fail-proven stimulus bills. The path is in smaller government with a balanced budget. The path is in liberty and capital gains from actual risks and allowing business to grow.
We The People are the key to solutions that will fix the economy and allow business to grow. Get involved and encourage your representatives to pass legislation that will bring the jobs back to this country- back to We The People.

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