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Tweaking the tax code appears to be the rage in Washington as a way to create jobs. A growing number of people in the know think the current proposals are not only off target but will cost taxpayers a lot of unnecessary money.
In this post we explore some instances where incentives could of and have worked but also some steps to take which could create markets and jobs without costing taxpayers anything.
But first, if the Republicrats think incentives are suddenlty so great why didn't they give them to businesses which because of tough global competition were forced to export jobs to Mexico, China, India, etc., in order to escape what are arguably among the highest labor costs in the world? Is it too late to give incentives where they would actually do some good to keep companies such as Intermet and Methode just to name a few from going to Mexico?
And second why didn't the Republicrats do their homework? Tax incentives like those passed by the congress yesterday have failed previously and there is no reaons to think they will succeed this time.
However, there are some notable governement incentives programs around the world which have been very successful.
Professor Josh Lerner sets out governement incentives failures and success stories in his book, "Boulevard of Broken Dreams: Why Public Efforts to Boost Entrepreneurship and Venture Capital Have Failed - and What to do about it. He points out for example, that Silicon Valley is the poster child for capitalism. The US governement played a role in making it a success, especially in spending and funding from the US Department of Defense. Other places that government has played catalytic roles in creating hubs of innovation are Tel Aviv and Singapore.
And further, from another angle how about prevention? Why don't the republicrats simply stop doing things that destroy jobs and end up costing taxpyers billions? Instead of trying to "create" jobs by tweaking tax breaks or increasing spending, why not do some things that would not cost taxpayers any money?
Here are just some examples and ideas from an article in the Washington Post dated 12/13/2009:
"-End federal protectionism and price supports for sugar. U.S. candy makers and other food processors cite sugar costs as a major factor in their industrys recent job losses - including 70,000 between 1997 and 2004. Since 1982, the federal government has guaranteed the U.S. sugar lobby up to 85% of the market. In 2006, the Commerce Department estimated that the sugar program cost three confectionary manufacturing jobs for each job it saved in sugar growing and harvesting. (There are undoubtedly hundreds or thousands of market based protectionist programs in place because of lobbyist influence)
-Repeal the Davis-Bacon Act. Passed in the 1930s to "stabalize" (discriminate in favor of) the construction industry (in part by protecting white workers in the North against competition from migrating Souther blacks), this law requires employers to pay the "prevailing" local wage on government funded projects. Today, Davis Bacon applies to about a third of all public construction spending. (Taxpayers pay for) A large staff at the Labor Department which calculates wages using a formula skewed to reflect union pay rates. This inflates the cost of labor on public construction by an average of about 10%, according to a 2008 study by the Beacon Hill Institute of Suffolk University in Boston. The added cost to taxpayers for this discriminatory and protectionist legislation was $8.6 billion in 2007. This does not include the huge but currently uncalculated amount taxpayers spend for those Labor Department employees' wages and benefits. The taxpayer loses on all sides with Davis-Bacon.
Repealing Davis-Bacon would enhance the employment impact and lower the taxpayer hit of proposed infrastructre spending in some of the jobs bills being proposed. (Not disclosed in job creation proposals like Mr. Hare's "Mainstreet " is the 10% premium for using prevailing wage rather than competitive, non-discriminatory public construction proposals. Ask him to tell the truth about his "premium cost proposal".)
In fact, the president has the power to suspend the Davis-Bacon Act by declaring a national emergency. The republicrats say the job crisis is a national emergency so Davis-Bacon repeal should apply. (republicrats in Washington and Springfield cannot be taken seriously about jobs until they honestly address repealing the Davis-Bacon Act in all its emanations)
-Reduce the minimum wage. In 2007, Congress enacted a three step increase in the minimum wage. In the meantime, unemployement climbed from 4.7% to over 10%. Study after study has shown that this supposed benefit to the poor prices low-skilled workers out of entry-level jobs." ( It makes a mockery out of labor economics. It was unwise to keep raising the cost of hiring them in a recession. It would be interesting to see a cost-benefit analysis between the tax incentives proposals and reducing the minimum wage. )
The above examples are only the tip of the iceberg. And what happened yesterday in Washington is surely not the end of the 2010 jobs show. The republicrats will get feedback and adjust to whatever is blowing in the wind.
We would like to hear your ideas about these and other points regarding job creation.
Del.icou.us
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