Sunday, September 11, 2011

Jobs - how government temporarily put people to work in the 1970's and how it's now failing workers

It is clear that for the long term we have lost 10 million jobs in the United States, including 1.2 million in California, compared to the employment level at the end of 2007.

After watching the most recent efforts of our national and state leaders to provide "solutions" to get the employed back to work, one has to wonder why the simplest solution is ignored. In 1973 President Richard Nixon signed the Comprehensive Employment and Training Act. It was legislation that had a number of components, one of which had the most impact on unemployment and was simple.

Through the State employment departments, block grant funds allowed state and local government and non-profit organizations to hire unemployed people.

Again, it was simple. What the federal government did was say to each State, here's some short-term money - say for two years. Put people to work. For instance, the Economic Stimulus Appropriations Act of 1977, which was signed by President Jimmy Carter on May 13, 1977, funded providing 725,000 people with gainful employment in 1978 and 1979.

Or we could do the Obama $447 billion American Jobs Act which involves mix of $253 billion in tax cuts and $194 billion in newly authorized spending. Included are the following:
  • Cut Social Security withholding on people who already have jobs even further - from 6.2% on their first $106,800 of wages, down to 3.1% from the current stimulus cut-rate of 4.2% set to expire at the end of the year; plus cut the employer share to the 3.1%; and if a business hires a new worker or gives an existing worker a raise, all payroll taxes will be waived; most of this will do nothing in the immediate future for someone who is now without a job nor is it clear that it will offers much to increase employment more than would occur without it, but it represents $240 billion of the proposal.
  • About $30 billion would be allocated to keep teachers from being laid-off and, perhaps, allow hiring a few back; an additional $5 billion would be allocated for public safety personnel; this would avoid some layoffs, but it is not likely to help many now unemployed for the $35 billion.
  • About $49 billion would be allocated to an unemployment insurance benefits extension which would help some who are currently unemployed.
  • About $90 billion would be allocated to several different infrastructure/public works construction projects, which within 12 months would start to trickle into the economy probably employing construction workers now working.
  • The remainder would be allocated for various programs from retraining and student summer jobs next year and funding $10 billion in private construction, some of which would help a few of those currently unemployed in the long term.
As an alternative, if the entire $447 billion were put into funding two years of an employment program similar to what was done in 1977, it would put 5 billion unemployed persons back to work. Like that old program, some of the money would be wasted by states, local governments including schools, and non-profit organizations. But generally, the waste would be no more than the waste in Obama's proposal other than the Social Security contribution reduction.

Which brings me to the whole "let's don't pay enough Social Security contributions" approach to stimulating the economy. I thought the Social Security program had a funding problem. If the entire $447 billion were put into employing people directly instead of cutting the Social Security contributions, in addition to getting those contributions back up to normal the newly employed and their employers would contribute an additional $19 billion of that stimulus money into the Social Security fund.

And around half of the currently unemployed would be paying income and Medicare taxes and spending the rest. This would result in an immediate increase in consumer spending which would lead to private sector expansion.

In addition to the Obama proposal, we had proposals by Governor Moonbeam and Legislators here in California. These included a $1 billion tax shift that would have spread out tax breaks to California businesses, an eight year $3.2 billion extension of a tax on private utility customers to fund clean technology research and energy-efficiency programs, and a $500 million tax credit program to moviemakers.

Of the proposals, only the moviemaker tax credit passed. None of these programs would put people currently unemployed back to work soon.

Again, if something similar to the 1977 federal program could have been crafted, California could have put more than 20,000 unemployed persons back to work.

If a direct employment program had been adopted and put in motion by January 2012 at both the federal and state level, somewhere around 500,000 unemployed Californian's and 5 million unemployed American's could have temporary jobs doing things for their communities.

Instead, we'll likely be cutting by $3,311 a year Social Security withholding on employed folks making more than $107,000 and, as a bonus, giving their companies the same amount of money. And we'll be providing Comcast through it's subsidiary Universal Studios a tax credit on movies produced in California. Ironically, all of this is brought to us by Democrats.

Thursday, September 1, 2011

The Great California Slump - Brown v Bezos

Two names - celebrities really - are playing games with The Great California Slump and the future well-being of California families.

Governor Jerry Brown was in Las Vegas on Tuesday at a green energy conference where commenting on the lack of new investment in California infrastructure he said: "It's dangerous, it's shortsighted. But it's a product of this notion that taxes are like some kind of a sexually transmitted disease, and government is all the problem."

Brown was at the green energy conference because he (and his national policy doppleganger Obama) are believers in the concept that the tech industry, the newest being green energy technology, is going to somehow save the economy and pull California out of The Great California Slump.

While Brown was in Vegas making smart remarks dutifully and amusingly reported in the California press, Solyndra shut its doors and laid off 1,100 workers. Solyndra, the Fremont maker of solar technology that President Obama visited May of last year, because it was a model for green jobs in America admitted in a news release that it could no longer compete with foreign manufacturers. Obama said last May "companies like Solyndra are leading the way toward a brighter and more prosperous future."

Essentially, Brown and Obama have yet to figure out that in the Bay Area/Silicon Valley - the area of the technology booms - the number of jobs in 2010 were the same as in 1990. The technology business model does not create permanent jobs as I explained in a previous post under the section Small Lie 1.2 - Technology will save us.

It makes venture capitalists and founders rich. Yes, venture capitalists lost money on Solyndra. They do that. That's what venture capitalists do - lose 19 times and win big on the 20th. But in this case, the U.S. Department of Energy also lost a half a million dollars.

The reality is, these ventures don't create jobs in America. They hire engineers and other tech types. They succeed or fail. In either case, they lay off engineers and other tech types. New ventures hire the engineers and other tech types. No real job boom is created.

Sometimes they set up manufacturing operations. Intel recently shut down its last plant in Silicon Valley laying off a few thousand workers. Now so has Solyndra.

The fact is Silicon Valley and the Bay Area are not the place to look for a model of how to put Americans back to work. It's that simple. Except Governor Moonbeam (he likes the name) and the President don't seem get it.

Jeff Bezos is the founder, President, Chief Executive Officer, and Chairman of the Board of Like it or not, Bezos company is the most successful internet retailer ever. He and his company have been made the face of evil by Brown and California Democrats, out-of-state internet companies that don't collect California sales taxes.

At the behest of Brown, the Legislature passed a bill in an attempt to force Amazon to collect those taxes. Amazon has been attempting an end run around that law by seeking an initiative to effectively repeal it. The Legislature plans to pass another bill which would repeal the first bill and adopt a similar but different law thereby thwarting the initiative efforts of Amazon which have already cost millions.

Last week Amazon reportedly offered to open six new distribution centers in California in the next three years that would create an estimated 7,000 jobs. In return, Amazon wants an exemption from having to collect sales taxes until sometime in 2014.

On Thursday morning Brown indicated to the press that he's leaning against's proposal. He says we need the $200+ million revenue. He says this even though someone on his staff knows the State is looking at a $10+ billion and growing deficit, a deficit that wouldn't even miss $500 million if Californians can't get jobs.

Two problems with this scenario should make everyone in California, including the press, angry with Brown and Bezos.

First, Brown is incompetent in everything but being a winning politician, winning meaning he panders to the press and wins elections. If he weren't that way, he would not be at green conferences as they will produce nothing for California families during The Great California Slump.

Second, if Jeff Bezos can in the next three years open distribution centers in California employing 7,000 people, it would be nearly a criminal act if he does not do so even if his political extortion attempt fails. California's economy is failing at levels significant to the national economy. The biggest single problem is unemployment. Whether or not his company has to collect sales taxes should not determine if he will give 7,000 Californians jobs.

Obviously, there is no auditorium, hall or stadium big enough to hold these two men and their egos, but somehow someone should get them together, force them to work out an agreement.