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.

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