by John F. Di Leo
John F. Di Leo is a Chicago-based Customs broker and trade compliance lecturer. He has spent a career watching companies move production lines to foreign shores because their communities, their unions, and their government drove them off. And it’s high time we evicted those responsible for this job drain from the halls of government, once and for all.
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So the the president really has presented a bill; we saw the cover on television! Now, let's see what's in it...
Liberal pundits are already lapping up the cream that the president poured into their little saucers, in parroting his claim that Republicans who oppose his new “Jobs Bill” do so because they don’t want to help him win re-election next year. Shameful. Just because the Democrats gauge decisions on how they are expected to influence elections doesn’t mean that Republicans are so irresponsible. Too much projection on their side of the aisle, methinks…
While fear of helping Obama is obviously not a good reason to oppose the American Jobs Act – in fact, Republicans have supported the (tragically few) good things that Obama has proposed, regardless of whether or not they would help him politically – there are plenty of very good reasons to oppose this latest boondoggle and its deceptive $447 billion price tag.
1. Class Envy.
This bill institutionalizes the Democratic Party tradition of setting the unemployed against the employed, the paycheck class against the super rich. The flaw here is of course that we are a capitalist nation with flexible income levels, not the permanent classes of the feudal era to which the Marxists want us to return.
The poor of a decade ago could be the rich of today; the rich of a decade ago could be today’s struggling unemployed. This bill therefore asks Americans to cannibalize themselves, to rob from their neighbors, their future selves, their own children and grandchildren. Exactly the wrong approach for this greatest nation on God’s green earth.
2. Negative Offsets.
There is good in this bill – not much, just a bit – but the way it’s designed, virtually every good piece is offset by a commensurate bad piece. And the bad is invariably more significant, more destructive, than the good. Details below.
3. The Free Trade Trade-off.
Let’s begin with Free Trade Agreements. FTAs are Customs-enforced programs in which manufacturers are rewarded for local sourcing and local manufacturing. Make a product here, and it might qualify for reciprocal duty-free benefits; make it by using too much outsourced foreign components, and it won’t rise to the level of qualifying for these deals.
These FTA programs have been successful for over 25 years, with partners as small as Israel and as large as Canada. We currently have FTAs in place with almost twenty countries, and they work great.
But in exchange for supporting passage of the next three FTAs (with South Korea, Colombia, and Panama), our Trader In Chief has affixed quite a price tag: the vague, costly, and outrageous new boondoggle of a new federal program to support anyone who claims that they “lost their jobs due to foreign competition.”
How do you draw such lines in the modern economy? The federal government simply must not insert itself in the market that way… right down to level of each specific job itself. If Obamacare is a violation of the Commerce Clause (and yes, it is), then so too is this!
4. The Temporary Payroll Tax Cut.
For fifty years, Americans have dreaded the day when Social Security Tax receipts would drop below obligations, turning this “pay as you go” Ponzi scheme into a “borrow as you go” program instead. Halving the payroll tax removes even the fiction that there’s any true investing going on, as the process of trading cash for IOUs comes to an end. No cash, no IOUs, just another giant step along the road to collapse.
Should the Social Security program be reformed, amended, rethought? Certainly. But should the funding mechanism be halved or even quartered with no change to its cost structure at all, as our Investment Advisor In Chief now proposes, accelerating the date of Social Security’s complete negative transformation? Certainly not.
5. The Corporate Tax Credit for Hiring the Long-Term Unemployed.
Rarely in any bill is there so much less that meets the eye. Our generous Personnel Director In Chief has dreamed up a $4000 tax credit for a company that hires someone who was unemployed for at least six months.
This one-time figure would reduce the cost of a typical $50,000/year employee by about 5% the first year (after hiring, training, and benefit costs are factored in), which is less than 1% over the course of a typical five-year employment.
Does anyone believe that a responsible company would allow such a miniscule tax credit to influence their hiring practices? Should they? I’d sell my stock in any that did.
6. The Federal Construction Fraud.
Our noisy Jackhammer In Chief would have us believe that federal funding enables states, counties, cities and towns to tear up and rebuild more roads than would be rebuilt without those federal funds.
The truth is, when you take the king’s shilling, you must dance to the king’s tune, which in this context means Davis Bacon.
Ethics advances over the past century have usually resulted in governmental requirements to bid out construction projects, mandating that the lowest legitimate bid be accepted, to keep the costs low and the chance of kickbacks even lower.
Davis Bacon clauses (originally written a century ago to support the unions at the expense of minorities; go figure) require that you jettison those low bids, and only accept bids that pay union scale!
Since labor is usually the costliest part of a project (gravel is cheap, people aren’t), this often-doubling of the labor rate means that accepting federal money can nearly double the cost of the project. So when the feds chip in for half, it doesn’t end up saving the locals a penny; it just makes a few pols happy, rewards a few shop stewards, and as always… adds to the national debt.
7. The Productivity Drain.
There’s another aspect of the road construction mania that you and I think about, but which rarely enters the bureaucrats’ minds. Traffic congestion.
When a highway is rebuilt, lanes are closed and rerouted for months and months, sometimes even for a year or more. This drops the speed limit by five, ten, even twenty mph for as long as that stretch of construction lasts.
Have you ever been on a long distance trip, losing an hour or two of travel time due to such lane closures? Well, so have the truckers who transport goods to market. So have the salesmen traveling between sales calls. So have shoppers traveling between stores. So do hard working folks who moonlight, catching an evening job or weekend job if they can fit it in to help ends meet.
Both your car and those huge delivery trucks get worse fuel mileage as they idle in the closed lane or soft shoulder, awaiting the green flag from the road crew to go on. Your vacation costs more, your commute costs more, your goods cost more, because the fuel cost and transportation time go up every time there’s a road project, and all must be calculated into the price, into your costs, into both.
This contributes to inflation, to waste of our precious fossil fuels (just threw that in, in case any environmentalists are reading), and it diminishes the number of sales calls that those salesmen can make.
Where we truly must rebuild a road because the road bed is unsafe, sure, rebuild. If it’s really needed, the local government must find a way to do it; that’s their job.
But most of the time, particularly during a recession, when productivity is so very critical, we should tell our Asphalt Pourer In Chief to leave his orange vest at home; we really, truly are much better off just patching those potholes for a couple more years, not ripping up the highway for an extended period and slowing down everybody’s lives.
8. The Teachable Moment.
This president claims that investing in education is a great stimulus, and we need it Now Right Now. It’s Urgent. Can’t Wait!!! (a conclusion he apparently came to sometime in the middle of a vacation he had carefully sandwiched between two other vacations).
But when selecting an investment, the wise man considers its maturity schedule. There’s the six month CD, the five year bond, the ten year bond… any number of choices. If a stimulus program is to help us Now Right Now, then surely our Professor In Chief expects the spending to pay off right away, right?
Well, when will these successfully-taught eight-year-olds begin to contribute to the economy?
Unless there’s an earthshaking change to the child labor laws buried deep in this bill that nobody’s noticed, this investment is the most long-term of them all. The children who might benefit from it won’t be entering the workforce, better trained and better prepared, for another five, ten, fifteen years.
Not to say they shouldn’t get a good education, but honestly… this federal money is just a gift to the teachers’ unions, isn’t it? Of course it is.
It’s just federal money to fund local jobs, so that when the federal money runs out in a year and the local school boards have to let go the insupportable additional staff, the locals get the blame. None of them will remember that their jobs are temporary only because of the man in the White House.
9. The Price Tag Lie.
The announcement is that the bill costs $447 billion, but we shouldn’t worry, because it’s totally paid for. Well, is it now?
In fact, the president has proposed “paying for” all this new spending by raising taxes… which means that it’s not paid for at all.
In December, 2010, less than three short and painful financial quarters ago, the Tax Collector In Chief acknowledged that a recession is the worst time to raise taxes, so he supported the extension of the various packages of tax cuts from George W. Bush’s first term.
How then can he propose a massive tax increase on America’s businesses, on America’s employers, on the people and companies we need to buy, build, and create things, now of all times? How can he watch months of stock market declines, of every indicator collapsing, and propose a tax increase in good conscience?
Easy: either his inconsistency is born of an utter lack of economic comprehension, or President Zero has no conscience at all. In fact, when you add deficit spending, it will cost far more than the posted amount, because of the added cost of paying over time. This bill will cost a trillion or more over the next generation, and the bad points in it will be depressing economic growth for generations as well.
10. The Business Community and the Need for Growth.
In the end, the main reason to reject the president’s plan is simply this: What we need in this economy is real private sector economic growth – the creation and expansion of businesses of all kinds – and this bill won’t produce any.
In fact, its combination of tax increases, funding shifts, make-work jobs, and new bureaucracies would just do even more to quell the growth we so desperately need.
When people have jobs, they don’t need unemployment insurance checks, food stamps, or government programs. What we really need is to stop driving our manufacturing offshore; we need to stop scaring all the innovators out of putting their energy into a startup here in their own country!
If we really want to fix this nightmare of an economy (and yes, the conservatives, at least, really do), the solutions are easy, and everyone knows what they are.
• The EPA needs to stop standing in the way of energy production. Start drilling in the Gulf, in ANWR, in the Bakken Oil Fields. Jump on the bandwagon of the pipeline projects to carry Canadian oil sands to market. Ease up on the restrictions that have kept the United States from building a new refinery in thirty years. Only greater energy production on our part will help us wrest the upper hand away from OPEC, at least for our own economy.
• Businesses don’t react to temporary tax reductions. They operate as they must, in a five, ten, even twenty year window. You don’t build a factory or even add a wing to an existing one if you know you’ll probably have to shut it down in a year. So we need to stop the temporary tax meddling – stop it forever – and what we do change, we must change with the intent of permanence. A permanent cut in the effective corporate income tax rate to 11% or so would do the trick; heck, a cut to 20% would at least be a great start.
• While trade unions have certainly had a place in our history, for the past two generations they have done more to drive employers out of business than to help them be productive and successful for the mutual benefit of stockholder and worker alike. The number of factories driven off our shores by their avaricious, shortsighted unions is legendary, having left a myriad of shuttered factories in their wake since the 1960s, especially across the former industrial heaven of the rust belt. The wonderful productivity advances of recent decades, from automation to management tools like sophisticated ERP systems and quality programs like Six Sigma, should make the United States a manufacturing heaven again; there’s no reason why the world’s next USA shouldn’t be the USA! But it cannot be as long as the National Labor Relations Board can ban an American manufacturer from building and using its own factory, as it recently did to Boeing… or as long as manufacturers must fear that “card check” and other pro-crime tools will be given to the unions to enable violence against their employees. The Department of Labor must be reined in or abolished outright if we are ever to hope for an employment renaissance in the blue collar sector.
• As healthcare continues to improve, the cost of providing it continues to climb, especially since the passage of Obamacare. This monstrous violation of our Framers’ design for our government – this outrageous manifestation of the inability of the left to understand either economics or human nature – must be repealed, and be replaced by something along the lines of Rep. Paul Ryan’s family of reforms, as soon as possible.
• In the end, it all comes down to the great trio of taxes, spending, and regulations. Where the president advocates the utter economic violence that increasing these three must cause, the economy knows that what we need is the exact opposite: lower tax rates, less government spending, and curtailing regulations. Only permanent reductions in these three spheres will enable our nation to thrive again, to again be the economic powerhouse that our Founders meant for us to enjoy.
All we need is for Congress to have the good sense to jettison the president’s plan, then pass the right measures instead, and force the president to sign it. The invisible hand of the economy will take care of us, once we unlock the handcuffs that hold it down.
Doing the right things really shouldn’t be difficult. Sadly, the right things are just rather alien to a president – and his party – who are themselves so very alien to the American experience, the American culture, and the American Way.
Copyright 2011 John F. Di Leo