Why Washington Doesn’t Create Jobs
A recent Financial Times article questions whether America can regain a dynamic labor market. After reviewing the current and arguably difficult trends, it concludes with a quotation by former Obama administration budget director Peter Orszag.
“The truth is that we don’t know how to fix the US labour market — we are in uncharted territory,” says Peter Orszag, now a vice-chairman of Citi. “It would help to spend more on retraining and on infrastructure and to have a more rational immigration system. But these wouldn’t fundamentally transform the situation for the middle class … It is not yet clear what, if anything, could.”
The thesis of the article, and evident in Orszag’s quotation, is that America has lost the dynamic job-creation capabilities it has enjoyed over the last fifty years. More troubling is that the country is losing the middle class to low paying-jobs or no jobs at all.
So how do we begin to look at this broader issue from a political point of view and begin to counter the trends that Orszag apparently has no idea how to handle? Obama’s class warfare strategy demonstrates his lack of innovation in approaching the problem. And of course, the gridlock that exists in Washington amplifies the problem while bringing no real solutions. In approaching this problem and the assumptions stated by Orszag, I’d like to offer the following thoughts.
First, many would suggest that this train of thinking does not consider the Black Swan Theory of undirected and unpredicted events. Indeed, many innovations and changes that have taken place in the business cycle and globally could be categorized as Black Swan events. But the problem in this theory is that we have to wait for those unique outliers of innovation to present themselves in creating the opportunities for change and growth that might fuel the next growth cycle. However, given the challenges before the U.S. economy and the global economy, these surprises are too infrequent to rely upon and, in any case, do not address the current needs of the unemployed.
How we can create jobs
First, roll back regulations and restrictions on coal, oil, and gas exploration and mining and allow fast-track opening of tar sands, shale oil, gulf drilling, ANWR, and the arctic. The industry provides directly or indirectly over 10 million jobs. Forget the nonsense about global warming. We have over 14 million people unemployed. The fast-tracking of exploration and development of these resources not only creates high-paying jobs and ancillary opportunities, but begins to really address our dependency on imported energy.
Second, fast-track approval of refinery development and power-generation, including coal, gas, and oil, which will create construction jobs and technical jobs, as well as support hiring, while also making sure that the United States has sufficient energy for the 21st century and beyond. We must dispose of the notion that we need to worry about global warming now while people suffer. There is no excuse for allowing these restrictions to continue. These jobs don’t move to India or China!
Third, reverse Sarbanes-Oxley (the last financial legislative act that was supposed to make sure a meltdown didn’t happen again), terminate Dodd-Frank and kill ObamaCare — although with the 11th Circuit Court of Appeals ruling, we may only have to indicate DNR on the chart! Also, rein in the EPA, OSHA, and the NLRB, which have become regulatory nightmares for any and all businesses in the U.S. The National Federation of Independent Business (NFIB) estimates the average cost of compliance and government regulation is approximately $10,000 per employee! Why would you want to deal with these regulatory bodies when it’s much easier to go elsewhere with fewer restrictions, even in Communist China?
These actions could easily reduce the estimated $1.75 trillion in regulatory costs to the economy while making it easier to create new business, deploy that capital in productive investment, and renew the United States’ position as a country in which it is easy to do business. Finally, this effort would actually save the government money by reducing the bureaucracy necessary to maintain the enforcement of this regulatory regime.
How we address our deficit and debt
First, require all non-military federal employees, including the legislative and executive branches, to pay at least fifty percent of their health and welfare in matching contributions for those benefits. Not only will this approach have a profound impact on costs to the federal government and therefore taxpayers, but it will deal with the impending shortfalls in funding these public-sector plans in the future.
Second, move the country to the Fair Tax. With nearly seventy legislators co-sponsoring this bill, we need to aggressively make the change to allow for a reasoned and reasonable approach to taxation. Not only will this save billions in preparation and compliance, but it will deal with the operational needs of government and incent business behavior, while also allowing people to control their taxes through their purchasing habits and big-ticket buys. Most of all, eliminating the complex tax system under which we now labor would also help downsize the extensive lobbying efforts to modify and obtain various benefits for businesses or other constituent organizations.
Third, pass the Cut, Cap & Balance Act. Reduce the size of government and move toward a cap on spending as a percent of GDP. No matter the tax rates or scheme, the U.S. government has historically received approximately 18% of the GDP in income taxes. But without a cap, the Congress and the president of both parties simply won’t resist the desire to grow government while increasing their spending.
Fourth, rationalize the federal government. The Department of Energy, Department of Education, Commerce Department, Health & Human Services, and Agriculture Department, along with the EPA, OSHA, and the NLRB, represent a 19th-century model, not a 21st-century administration.
Why is it that these agencies and departments continue to grow? Why do they have overlapping authorities and objectives as detailed in the government’s own budget summaries? And how in a modern economy should they behave to reflect global competition and a global workplace? Eliminating the Department of Education and pushing dollars back to the local school systems is perfectly logical. The federalization of our educational system simply doesn’t add value. The federalization of our education system does not allow for innovation or adaptation to local demographics. And as SAT scores continue to drop, what is the DOE doing?
Social Security, Medicare, and social welfare for our neediest
First, Chile provides a good example of moving social security to a private model. We don’t eliminate those in the program but move to the private model over time. The current approach is simply unsustainable in context of the baby-boomers hitting retirement and the current IOU status of $2.5 trillion in Social Security funding from the federal government.
Second, Paul Ryan has provided a good model for modifying Medicare. Again, no one in the current system moves out of that system. We really need to have a debate about a modified voucher system allowing for individuals to control their own purchase decisions based on their requirements. The Ryan budget approach certainly provides food for thought. We buy home, auto, and life insurance. Why would we be any less able to acquire the appropriate health insurance as we get older? The argument is of course emotional, but if we cannot afford the projected costs of fifty percent of our federal budget for the current program, what’s the use? We can choose to modify the program or be forced to modify the program by bankrupting it when failure is imminent.
Third, use block grants to move Medicaid funds to the states. Allow them to address their local needs within the context of their demographics and deal with the actual health care requirements of their poorest citizens. This approach not only allows the states to innovate, but also address the problem with “one size fits all” that typifies federal programs.
No amount of money is going to correct for the amount of single-parent families and the poverty and developmental problems this creates in educational outcome. This does not mean that all single-parent families are failures or that children from single-parent households can’t succeed. It is simply a fact that the research finds that these households are at greatest risk in terms of poverty, lower educational success, and delayed emotional development in general.
While mixed families and transitional arrangements tend to see improved outcomes, the traditional mother and father working with their children is the arrangement that has the greatest propensity for success. The current report on births in the USA stated that 4.5 million children were born in the country last year. Over 40% were to single mothers. While some choose to have children and simply live together (think Hollywood), most are out-of-wedlock births.
So with such staggering statistics evident in our society, what is the prescription? First, get the message out and share the statistics. Second, continue to invest in outcome-based education and move towards vouchers and grants, however doing so through the local school board, where approaches can be tailored to the student population. Third, encourage marriage and the family — stop accepting the current behaviors and promote the traditional family as a source of benefit to children. Divorce is too easy, and men are too eager to ditch their responsibilities. Until we unite financial, moral, and spiritual elements of education and family development, these trends will result in further degradation to our children’s lives and their success — at school and in their adult life.
So there they are — ideas that even Peter Orszag apparently can’t conceive — and no Black Swan event. It is an alternate vision for this country compared to where President Obama is taking us. There is little ambiguity here; it is a transparent approach to those things that have motivated the American dream for centuries — self-worth, self-action, collective creativity, and a unified nation through its traditional family structure.
Would it work? Can’t tell you, for we may not even get to try. But ask yourself this one question: if these recommendations took place immediately, would you do better financially; would job opportunities in energy, manufacturing, health care increase; would your family be better off financially; would you feel more secure about your future; and would you appreciate the value placed on your family and its values? Oh, and please forward a copy to Peter. He may be looking for a few good ideas!