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President Obama's Job Creation Mirage
We've heard plenty about Obama's post Labor Day job creation speech, but will it contain anything that might actually work?
President Obama has discovered how serious the recession is. That's what he told an audience in Chicago last week. To be fair, he was referring to revised data from the commerce department showing that the falloff in GDP was larger than originally reported.
But ridicule is appropriate. He and we knew all along how many people were out of work. The employment numbers told us the size of the hole and the desperate need for government action.
This sort of ridiculous comment, and President Obama's weak response to the recession over the first two and a half years of his presidency, explains the tidal wave of scepticism facing his widely hyped upcoming speech on jobs after the Labor Day weekend. The list of remedies leaked ahead of time does little to inspire hope.
At the top of the list of job-creating measures is extending the 2 percentage-point reduction in the social security payroll tax. This provides no boost to the economy, since it just keeps in place a tax cut that was already there, but if the cut is allowed to end at the start of 2012, it will be a drag on growth.
As it stands, the social security programme is being fully reimbursed for the lost tax revenue, but there is always the possibility that Republicans will use this as a basis for attacking the programme. Given President Obama's willingness to support cuts to social security, it is understandable that this part of his jobs agenda doesn't generate much enthusiasm.
A second item frequently mentioned is an infrastructure bank. This would allow the government to treat long-lived infrastructure investment as capital expenditures depreciated over their expected lifetimes, rather than expenditures to be paid for in full in the years the construction takes place. This is good policy and accounting (it is the same approach used by both private businesses and state governments), but it is not going to create many jobs and certainly not in the next couple of years.
The other items on the list are less clear. On bad days, we hear that President Obama is going to tout the trade agreements with Panama, South Korea and Colombia. These deals are all problematic at best, but even their supporters can't claim with a straight face that they will generate any noticeable number of jobs.
There are also reports that President Obama may propose some sort of tax subsidy for job creation. Such a subsidy can be bad or not so bad. One of the proposals, temporarily eliminating the employer side of the payroll tax, is a great plan – if your intention is to give still more money to business and undermine social security.
There is extensive research showing that increases in the minimum wage of 15-20% have no measurable impact on employment. If raising the cost of labour by 15-20% doesn't reduce employment, then we can't think that reducing the cost of labour by 6.2% as a result of temporarily eliminating the payroll tax will increase employment. (Sorry, Mr President, logic can be cruel.) This means that we should expect few jobs will be created by this sort of subsidy; we will just be further supplementing the record profit share of national income.
And if we pursue that policy, we will also be raising further questions about social security. It is important to remember that if the point is simply to hand a specific sum to business or individuals, we can do this without ever mentioning "social security" at all. In other words, if the point is to give businesses a tax subsidy equal to 6.2% of their payroll, then we can just specify that they get a tax credit equal to 6.2% of their payroll. It is understandable why Republicans, who explicitly want to end social security as we know it, would insist on tying the subsidy to the social security tax. It is hard to understand why President Obama would adopt the same approach.
Of course, we should not be defeatist about creating jobs. Anyone who cares knows how to do it.
At the top of the list should be a jobs programme for young people that would be modelled on the Civilian Conservation Corps. There are many parts of the country where the unemployment rate for young people is 40-50%. These young people have no realistic prospect of getting jobs. Giving them work at or near the minimum wage, cleaning up streets, parks and abandoned buildings in their neighbourhood, can make a big difference in their lives – and considerably enhance those localities.
A more far-reaching policy would be to promote work-sharing as an alternative to layoffs. The money that is paid out in unemployment insurance could instead subsidise shortened work hours. If just 10% of the people who lose their jobs each month could be retained with this policy, it would be create another 2.4m jobs a year. This policy has been so successful in Germany that its unemployment rate is now lower than before the downturn even though its growth has been almost the same as ours.
Finally, getting the dollar down is the most important long-term job creation policy. If we managed to get back towards balanced trade, it would lead to almost 6m manufacturing jobs.
On past form, however, President Obama seems unlikely to go for real job-creation measures. Look forward to being disappointed – especially if you're one of the unfortunate unemployed.
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34 Comments so far
Show AllBalanced trade is the biggest way to get jobs back in America. Our trade deficit is a big problem and that should be the mantra daily and explained in simple terms to all America. We cannot rely on Obama to do that. We need to make it unprofitable for corporations to mfg. overseas and bring their products back to America made in China by slave labor and who knows what chemicals.
Beat the drum continually. It is our trade deficits and jobs shipped and still being shipped overseas is the problem. There are people out here that don't believe that or don't know about that as most of radio and TV is conservative and they don't take about the take over of our government thru payoff of our elected officials by the corporate mafia masters.
You're right that this is an issue that doesn't get enough mention in corporate media, but do you agree with Baker's solution of weakening the dollar? Right now, with interest rates so low, inflation isn't a huge problem, but as a long-term solution I find Baker's idea lacking.
Baker only wants the dollar to float among currencies, a decent proposal to me. The Chinese and others keep their currencies artificially low relative to the dollar. Baker doesn't want to weaken the dollar so much as to get a fair appraisal.
"Interest rates so low" ARE INCREASING THE RATE OF INFLATION, Krycek!
Although keeping interest rates low in the short term has the potential to stimulate an economy, after 2 to 3 years of low interest rates (combined with a deregulated financial sector), the cheap money is used not to create jobs, but to speculate on commodities, thereby increasing the rate of inflation and resulting in more job losses.
Yes to your comment about balanced trade. But you didn't say how this was to be achieved. I will.
At the moment, we have no control over our economy. We've handed it over to China and Mexico and any number of other nations. And we can't do anything about it, unless we change our policy toward free trade.
Corporations are happy with free trade; they manufacture goods overseas and then freely ship them in for sale in the US. Jobs thus freely move overseas. There is no balance in trade; all you need to do is note that our GNP is almost equal to our GDP, indicating that all American economic activity is between American and American. Free trade means that China and others freely sell to us, but are free not to buy. And it won't change until the playing field is leveled by taxes and/or tariffs to equal the costs of making products in the US with those of purchasing them in Asia or Eastern Europe and then shipping them here.
Corporations, particularly multinationals, like free trade. They don't have to deal with unions who keep American wages high and who might strike to ensure they stay high. They'd much rather deal with Chinese, who can't strike, and who work cheaper.
Another suggestion: an excise tax, say a gross receipts tax, on all goods sold in America. This could be offset by taxes paid in the US by American corporations who manufacture goods here. Goods produced overseas would pay the full tax. This would enable the tax code to be rewritten so that corporate taxes are the same as the international average, something like 18%-20%. But so long as foreign nations can 'float' their currencies, but the US can't because it's the international standard, and no method of equalizing trade exists, there won't be equality. I'm for trade, so long as what's made overseas is superior in quality to what's made here. But when the sole reason for purchasing foreign goods is price differential, then we can't compete without tariffs and or taxes on foreign produced goods.
Right on!
It is a very difficult balancing act to help the president's corporate contributors while giving the illusion that he is actually concerned about ordinary people. He has not done a good job of doing this since the beginning of his wretched administration.
Obama has been anxious for months to implement "tax reform" which in obamaspeak means reducing income tax rates for corporations that currently log tens of billions of dollars in profits each year yet get a tax credit worth billions of dollars each year.
Many of the largest corporations (Boeing, GE, for example) haven't paid taxes in more than a decade. After Obama gets his "tax reform" they will get even larger tax credits which means that you, me and the rest of the US taxpayers will need to pay more to make up for it.
If his speech next week doesn't include "tax reform" you can bet your last nickle that Obama's super catfood commission will include "tax reform" in their crusade to gut Social Security and Medicare later this year.
There is extensive research showing that increases in the minimum wage of 15-20% have no measurable impact on employment
well then, it should be raised antoher 15 to 20%
at least the people with jobs will have some money to spend
rich american corporations and individuals ship jobs overseas to countries where it can be produced cheaper mostly dictatorships where people are exploited way more than here, and no laws protect them or the environment
then they ship the same products back here to sell to us
soon they will have to find some other place to ship them because we will have no money to buy the goods here either
As soon as the US Supreme Court upholds Obamacare's "individual mandate" that requires the IRS to fine you if you don't buy medical insurance from a government approved insurance corporation, the floodgates will be open for the government to fine you if you don't buy other products, many of which are likely to be produced abroad by the corporations that own US politicians.
Reforming our military pension fund would provide some added revenue for programs modeled after the CCC. http://www.bankrate.com/financing/retirement/time-to-reform-military-retirement/
Legislating that Corporations return at least XX% of their profits to share holders, this would help spread the wealth, and disenable corporations to hoard cash, and use it to buy other companies furthering monopolies and consolitdation. They could model after our current REIT's, who pay no taxes, but return 90% of their profits to shareholders.
Now I know why when he was asked at the start of his term by a reporter how he was going to redecorate BV$H's oval offic, he said he liked everything right the way it was. This has turned out to be the theme of his entire wretched 2.5 yrs. in office. He's a black version of BV$H 2.
And Obamabots demand as much accountability from Obama as Dubyabots required from Dubya.
I've got a plan for job creation and saving our country from the cliff its heading off (in every respect) it's called "democracy." Corporations have grown to giants, parts of the government's body (like the Pentagon and Intelligence Services) have grown to giants, but the part of the government with the greatest responsibility in a "democracy" the part that represents the people hasn't grown in over a hundred years. Let's end this nonsense. Let's give Americans their country back and create jobs. Ratify Article The First
http://voltairez.hubpages.com/hub/Stop-Diluting-Democracy
Work-sharing works! Back in '92 the company I worked for saved 40 people's jobs with this little-known Massachusetts unemployment option. Everyone from the principal on down had to agree to work 4 days a week, getting unemployment subsidy for the fifth day. After four months the company was able to get back on its feet and nobody was laid off. I would call this job preservation, though, not creation.
The Empire's New Clothes: Barack Obama in the Real World of Power [Paperback]
Paul Street (Author) http://www.amazon.com/gp/product/1594518459
White House Jobs Plan Might Let Businesses Train Unemployed Without Having To Pay Them
http://www.huffingtonpost.com/2011/08/24/white-house-jobs-plan-unemployed_n_935228.html
"It is understandable why Republicans, who explicitly want to end social security as we know it, would insist on tying the subsidy to the social security tax. It is hard to understand why President Obama would adopt the same approach."
Dean Baker, you surprise me. I thought you got it. Obama is one of them, out to destroy Social Security. Just like Clinton's welfare reform, which dumped millions of kids in poverty into extreme poverty. We have rich Republicans who despise the poor, and then we have Democrats in the closet with the same attitudes.
In the case of the super cat food committee, Kerry is the mole sellout, sent in by Harry Reid, who at the same time is busy mouthing platitudes about defending SS with the last drop of his blood. Our democracy has become a sick joke. I almost said bloody joke, but that is yet to come..
Exactly right. I too am surprised by Dean Baker’s seeming naïveté; maybe he’s just being polite, but we’re waaay past that.
This is the camel’s nose under the tent flap . . . soon to be followed by the whole smelly, flatulent beast. It’s a ridiculously transparent prelude to an attack on SS, with more corporate tax breaks, thinly masquerading as an utterly pointless jobs bill. The orchestration of this with the unconstitutional cat food politburo is simply inept theater. Quoting Woody Allen’s ‘Bananas’ dictator “It's a travesty of a mockery of a sham of a mockery of a travesty of two mockeries of a sham.”
Though I'm sure the teleprompter will be all fired up, this is hardly worthy of the great salesman in chief. Apparently, they see very little need to pretend anymore when economists like Baker are duped by their charade --- or sell out and agree to play along.
I was wondering if this weren't faux naivete, hoping that the reader would be able to "imagine" why Obama might hold this position. At least I hope that was Baker's intent!
Anyone remember that slip of Obama's tongue on the 2008 campaign trail at a wealthy donor fundraiser, that working class voters cling to their guns and religion?
That remark puts him right in the company of GW Bush and all the other super rich wannabes. If that's the only glimpse of the real Obama, he puts on a good act. I read he runs the tightest White House in history controlling leaks and gossip. A polar opposite to the loose lips Clinton White House.
I haven't heard Obama's speech because he hasn't given it yet. I predict that it will be some half-assed, complicated approach which will benefit no one except corporations and dumb people who still think Obama is their savior. BTW, I think that "payroll taxes" should mean federal income taxes not Social Security payments.
Job destruction (in the US) has been the industrial policy of this country for over 30 years. Of course, our free-marketer, neo-liberal policy makers would never own up to any policy (a managed economy is simply unAmerican, and crony capitalism doesn't count), let alone the ruthless and just plain vicious policies that they in fact have implemented with such success (for them and their patrons, misery and worse for the rest of us). It beggars belief that the reactionary, right wing Obama would deviate from the labor destruction drive. So, look for window dressing at best. At worst, look for typical Obama deal-making: in exchange for some nominal job growth programs, Obama will agree to rolling back environmental regulations, labor protections, and other "oppressive" regulations that benefit the people.
Clharlos,
I think you hit it right on the head. Obama will agree to roll back environmental, labor and other “oppressive” and ‘unfriendly’ business regulations. It will be a continuation of the extraction and exploitation that defines what capitalism is. We’re nearing the end of the board-game Monopoly. The few remaining players who are winning are maneuvering to finish taking it all. Obama is merely a tool that’s only going to help the winners. He has no interest in helping anyone else.
Capitalism is a failure. We can achieve greater equality and security if the workers controlled the means of production and/or were worker/owners. More than 42,000 manufacturing plants would never have been moved out of the country if the workers were the owners of what they produced. It’s the most feared word of the capitalists – Socialism.
Obama is only interested in his re-election and he is only listening to his corporate toadies.
We as citizens, employees, employers, and consumers need to create our own "New Economy". We need to buy American-made, buy locally, buy union-made, use community based institutions (community banks, credit unions, local stores, farmer's markets etc). And we need to make this appealing to people who don't think much about what they pay for, who created it, where it came from, and where their expenditures are going to be used. It doesn't matter if the "old economy" is shrinking if the "New Economy" is growing, because that is what will create jobs for Americans in America
I'll tell you what....why can't the CEO's and all the top, ohhh, 10 percent of companies, or should I say corporations, take a pay cut of anywhere from 10 % to 50 % mandatory by the gov... then the extra money saved, is spread out over the rest of the employees.... Oh wait I forgot we are supposed to be living in a democracy....but, but, but, hasn't labor done this, time and time again?
I'll tell you what....why can't the CEO's and all the top, ohhh, 10 percent of companies, or should I say corporations, take a pay cut of anywhere from 10 % to 50 % mandatory by the gov... then the extra money saved, is spread out over the rest of the employees....
Obama's proposed Social Security tax witholding reduction is small, and yet it helps those who (including Obama) want to dismantle the SS system.
Because of a similar reduction earlier in 2011, the SS outgo exceeded its income for the first time since 1983. This deficit is miniscule compared to the SS reserves of $2.6 trillions. But the Republicans and Obama will use that deficit to argue fallaciously that SS's bankruptcy is imminent, and SS needs "adjustment". The "fix" consists of depleting its reserves to reduce the debt (caused by the wars, among other things), and then declaring that SS is unsupportable.
Basically Obama is just a dead fish flopping in the septic tank that rests between conservative greed and insanity; and real progressive and liberal solutions--if the liberals would recall history! But they are lost in space.
It is time for Dems to step up in the house and impeach Obama for incompetence! I am sure the Repugs will help them. That will cook the little traitors goose!
I'm all for the CCC and MANY other similar programs. This is really the main thing I would see working, and it isn't as if the US doesn't have thousands of projects that needed doing 20-40 years ago which have ZERO people working on them now.
I don't see why any job has to be "at or near the minimum wage" though. Unacceptable! Living wage now, ESPECIALLY in the public sector! Americans have been cheated out of the value of their labor since colonial times. In Norway for example it was decided that any employer who couldn't pay the equivalent of about $14/hr would be creating a job harmful to society, and for that reason any pay less than that is illegal.
Simply raising the minimum wage GREATLY (none of this below $10/hr bilge) should provide a massive spur to real economic recovery almost immediately. Can't pay your people that wage? Harmful to society - shut the business down!
FOREIGN POLICY/WAR POLICY
Economists and pundits alike seem to compartementalize foreign and
domestic (aka "jobs") policies. This Weibrot contribution includes some
mention of foreign policies. For example, the so-called "free trade policies"
in which "investors" (most of them wealthy and in US and other industrialized
nations) profit from eliminating US and unionized jobs in favor of
terrorized, foreign plants forbidden to organize either for benefits or
against terror. Remember that the parts manufactured in low-wage nations
(such as Mexico) are not for consumption in that foreign nation. Instead
these items are returned to the friendly US "job c reators" at a great
"savings" to the wealthy. Workers abroad are terrorized and starving.
In desperation many try to emigrate to the US choosing the hazards
and loaw wage/high chance places in the US as the only means for
their survival. While Americans take out their irritations against the
immigrants, it is instead the US wealthy who are destroying US jobs
and who are creating the problem for their own profit. Thousands more
US workers, not all of them "blue collar" are shed (fired).
Each domestic economic gordion knot has its history closely linked
to foreign policy. Typically,commentators close their eyes entirely
to these links which are (for them) "uncomfortable".
Anyway, the wealthy don't really care about US workers and their conditions. But
then, you knew that didn't you?
MY EMAIL:peterloeb@yahoo.com
Come on Dean, if you want to return jobs to this country, you need to go back to collecting tariffs on parts and goods imported into this country. Yes, that means taxing the shit out of Ford, GM, Whirlpool, Boeing, Motorola, Apple and a whole slew of other so called "American companies" for building part or all of their products in other countries and then shipping them into the states! Also, you force these so called "American companies" to list on their products sold in this country the percentage of each finished assembly that was manufactured outside of the United States. Then the government can award tax credits to companies that want to replace these so called "American companies" by manufacturing here in this country! The government should also be forbidden to award contracts to any company that does not build the product or service in this country that the government is looking to contract.
“Don’t hate the media: Become the media!”
- Jello Biafra
Alright folks, READ ALL ABOUT IT! -- Low Power FM (LPFM) radio station license applications for non-profit organizations in medium and large-sized cities to commence summer of 2012. This is the first time that’s been done by the FCC in thirty (30) years. Get’em while they’re hot!
This the idea I've been pushing on CD for five years now. This opportunity won't come again. Non-profit progressive groups (including labor interest groups) need to get those licenses while they're hot.
Enough of these stations blanketing a medium-sized or large city with contiguous broadcast ranges could potentially mimic the audience market penetration of large commercial FM stations—ONLY WITHOUT CORPORATE CENSORSHIP.
These stations could become part of a nationwide, populist progressive information cooperative network that airs local programming most of the time but cooperates to concentrate on regional and national issues of importance, averting or responding to crises, and covering independent progressive candidates during election cycles.
The other good idea to get around the Establishment right now is Americanselect.org. Check it out. Via this online idea, anyone can become a citizen delegate and nominate whomever they want and, so the site operators say, get on the ballot in all 50 States. This would circumvent the Dem/GOP/Federal Election Commission lock on the nomination process.
If we had both these ideas, low power FM and citizen delegate nominations in all 50 States—independent of corporate media and the Dem/GOP/FEC nomination Machine, respectively, then we could use the LPFM stations to educate the masses about OUR CANDIDATES and get OUR IDEAS out without having to go through corporate "mainstream" media filters.
CARPE DIEM! Start talking these ideas up in your family, church, community resilience circle, or other progressive group and research what it takes to get these stations up and running. This is a once in a generation-and-a-half opportunity and if we don’t seize it, sooner or later the right-wing will.
So, get off your fat carbo-potato monkey butt and sweat your old agitator mind and body for a change! You progressive retirees who still have your health: There’s no excuse not to. Let me tell you, I’ve worked in radio before and it’s a hell of a lot of fun. It will be even more fun to use radio to help build local community resilience and resistance and stick it to all those creeps who’ve been screwing us locally and nationally since Reagan. And we can use our own media voices that can’t be silenced by corporate media to help locally and nationally organize our own politics to go around theirs!!
"V" for peace and victory over our true oppressors!