Creating jobs: A politics-reality disconnect, part 2

Part 1 of this 2 part post dealt with the context of trying to understand job creation and seeing an apparent disconnect in how Democrats want to reduce unemployment. This part deals the apparent disconnect in how Republicans want to reduce unemployment and suggestions for what makes sense from the viewpoint of a pragmatic non-ideologue.

The raw beauty of the capitalist beast

The Republican plan to gut regulations (kill the EPA, etc) and unleash capitalist impulses is not just unconvincing, it is frightening. Recall the great Ronald Reagan and the 1980s? He didn't much like government in the context of his time*. To unleash the beast, he deregulated the savings and loan financial institutions. That set the beautiful and sacred capitalist creature to roam free and wild in the economy. What did we get from that?

* In the context of the present, Reagan was a flaming liberal tax and spend "socialist" compared to today's debt and spend Republicans, some of whom now appear to repent on the spend part. Times and political definitions certainly have changed a lot. And, that's for the worse if our current state of affairs is any indication.

As I recall, deregulation in the 1980s gave us the S&L meltdown and us boob taxpayers were on the hook for at least $125 billion. Of course, that was peanuts by today's colossal standards of epic political policy failures. After Reagan, the Republicans tried deregulation again and got (1) Pres. Clinton to deregulate financial institutions, (2) special interests (including Freddie Mac and Fannie May, neither of which could legally lobby congress but did with impunity) to deregulate consumer mortgage credit, and (3) Bush tax cuts in 2001 and 2003. From all that unrestrained beauty, purity and raw capitalist power we got (a) financial institution collapse, (b) a major recession, (c) the still ongoing housing collapse with major financial damage to millions of innocent under water home buyers (not flipping speculators - I don't care about damage to them), (d) an apparently endless period of high unemployment, (e) damage to the middle class and our standard of living and (f) etc.

Unless all that looks good to you, deregulation over the last 10-20 years has a track record of failure, not success.

Nothing surprising there. Many (most?) folks in government seem to believe in making failed policies work by trying harder with more of the same, like we are doing in Afghanistan now. All we seem to get is bigger, more costly failures. If that is in error, exactly and precisely where are the successes, i.e., good jobs, that should be gushing from all that unrestrained calipalism of the last 10-15 years? I can't see them. Are they hiding behind small bushes somewhere?

Does anyone really think we will ever see 4% unemployment again under Democratic or Republican rule? I don't any time soon. Not given politics as usual, i.e., where special interests buy votes in their own interest and politicians either routinely deceive the public (spin) and put their personal reelection interests above the public interest and/or blind themselves by worship of sacred ideology of some sort or another. As long as they stay in power, we are hosed. If things are going to get better, it will happen despite politics as usual, not because of it. That seems to be the case because politics as usual is what got us where we are today, so why should anyone expect it to get us out?

It costs how much??

A striking aspect of creating "good" jobs, maybe defined (by me) as paying at least about 3-4 times minimum wage and providing a meaningful health care benefit, is how expensive it generally is and how few jobs are created from major investments. When a company wants to build s new plant to make appliances, they can spend $600 million to create a facility that will ultimately employ about 800 workers. Ford spent $300 million in 2005 to upgrade an existing plant, which saved 3,500 existing jobs.

However, even if each of those new or saved jobs creates or saves 4-5 additional good jobs, the total new jobs isn't much for an awful lot of initial investment. We need millions of good jobs, not thousands. The situation is probably better for manufacturing some things that aren't as complicated, but you get the picture. Given the high cost to build much of anything, each worker has to be very productive and the few jobs that are created aren't going to make much difference in unemployment.

Nothing I hear from Democrats or Republicans directly or clearly addresses the problem. All their rhetoric is the vague divisive blither we get from clueless hate-filled partisans and special interests that benefit from the status quo. They do not know how to fix our problems. But, they sure do know how to spin, deceive and distract while benefitting at our expense.

Absent some local catastrophes, our economic competitors are just not going away. Our dependency on imported energy will continue to drain wealth hundreds of billions per year from our economy (2003 estimate; 2011 estimate, see figure 2, page 4). Our roughly 40 year-old trade deficit (1996-2008 numbers) will remain negative for years or decades. Our politicians and political institutions will continue to fail and our economy and standard of living will continue to suffer.

How to fix it

Despite that negative context, there are some things we can do to make a real change in the situation. Those things are politically unpalatable because (1) they entail both "liberal" and "conservative" ideas and (2) gore the oxen of powerful special interests with powerful nasty lobbyists. Other than those fatal flaws, these things are pragmatically quite appealing because they ought to make a real difference. At least the logic should be clear.

• Close ineffective tax loopholes - congress has both inadvertently and intentionally created loopholes amounting to about $100-$200 billion per year in revenue losses. Much of that confers little or no benefit on our economy.
• Simplify the tax code - that could reduce the compliance costs per year by about $50-$100 billion. Everyone wants it. Congress always says it wants it, but never, ever delivers. The reason is obvious - a complex tax code is the perfect hiding place for political payoffs for "campaign contributions". The downside, of course, is the loss of some of the 3 million jobs of people working in the tax compliance industry. Althought a two-edged sword, I suspect the benefit would outweigh the cost - its real hard to see how hoards of lawyers and accountants chasing after tax loopholes contributes much to our competetiveness.
• Spend intelligently to fix infrastructure that can help our economy. If that drives up the debt, then offset with reductions elsewhere, e.g., ineffective farm subsidies to welfare Kings and Queens like Michelle Bachman or getting rid of the National Institutes of Health (an ossified bloatware organization and impediment to progress if ever there was one).
• Have government (federal, state and/or local) build energy, preferably safe nuclear (which does exist) as fast as reasonably possible (waive environmental laws, take needed property by eminent domain and prevent lawsuits - if all of that isn't done, nothing will happen) and sell the energy to the public at cost. If you can get the profit motive out of energy, it will make our economy noticeably more competetive.
• Wind down our military presense in Germany, Japan, Korea, Iraq, Afghanistan and elsewhere. We have done our part for world peace. Its time for the rest of the world to step up and carry their weight. This isn't coming from isolationism. Its coming from a realization that we are not getting our money's worth from the use of our military for foreign policy objectives (another area seemingly devoid of recent success). Our vital security interests no longer requires a significant foreign U.S. military presence, except maybe the 5th fleet in Bahrain.
• Establish an intelligent, shrewd, coherent national strategy on energy policy and international trade. What we have now is ineffective chaos and/or non-existent.

There are other common sense things that can be done, but doing anything will take real pressure and focus from outside the two parties in power. Unfortunately, meaningful and direct actions from Democrats or Republicans are not possible in view of, among other things, their sacred ideology that bars meaningful action and their abject dependency on special interests with money and their own ideas, i.e., maintaining the failed status quo. From the special interest point of view, nothing is broken or needs to be fixed. They are benefitting just fine and certainly would fight to keep it that way. Those special interests fighting to maintain the status quo include the Democratic and Republican parties.

Its time for regime change. Long overdue actually.