America is facing a catastrophic jobs crisis. Not since the Great Depression has official unemployment hovered above nine percent -- where it is today -- for more than 20 months. Millions of American have given up looking for a job altogether. Even worse, real unemployment is more than 18%. Yet Washington overall has obviously yet to embrace a large-scale job creation agenda. Even if we reach consensus around the deficit -- the only economic issue even getting any attention these days -- it will do little to help the 29 million Americans who are unemployed in real terms. If we do not seriously tackle jobs, our country may never regain its competitive global edge.
I recently co-chaired, along with Leo W. Gerard -- who is International President of the United Steelworkers and a member of the executive council of the AFL-CIO -- a twenty-person Task Force on Job Creation seeking real solutions to the jobs crisis plaguing our country. This group of policy makers, economists, business and labor leaders developed a series of 15 immediate recommendations for reversing the crisis, outlined in a new report, "Vision for Economic Renewal: An American Jobs Agenda." We found there are six vital policy areas that our government must address in order to create millions more jobs now: manufacturing, trade and globalization, U.S.-China trade, the infrastructure crisis, jobs in the green economy, and youth unemployment.
Washington is often a city of Chicken Littles, which makes ringing the alarm bell difficult. But once Washington wakes up from its deficit hangover, politicians will realize something that most Americans have known for months: The sky has already fallen.
Here's what we found we can and need to do:
Manufacturing
America's manufacturing sector must be a cornerstone of the nation's economy and thus one of the essential drivers of the recovery we are still searching for. Yet manufacturing remains in a decades-long free fall, with, like most other sectors, stagnant wages for more than a decade. In just three years, our manufacturing sector has lost over 2.5 million jobs, and over the last decade, we've lost more than 6 million. The continuing decline of manufacturing will limit job growth and jeopardize our national standing. Industries that were once great contributors to our country -- auto manufacturing, shipbuilding and machine tools fabrication -- are barely shadows of what they once were. Meanwhile, jobs in other leading manufacturing sectors, like aerospace, are being offshored every day.
Why the decline? One of the fundamental reasons is simply that the U.S. lacks a national manufacturing strategy that integrates policies around tax and investment, R&D, domestic procurement and currency valuation. And we lack any plan for how to restore this sector. Our task force identified several ways to bring back this sector:
• Buy-Domestic Procurement requirements. No single measure would do more to help resuscitate U.S. employment, particularly in manufacturing, than an encompassing buy-domestic government procurement requirement. All infrastructure projects funded and guaranteed by the federal government and the proposed infrastructure bank should require purchases to be made in America rather than overseas, consistent with our international trade agreements. As well, to qualify as "Made in America," at least 75 percent of the content should have to be manufactured within our borders. To make that happen, Congress should require domestic content calculations to be effective and transparent. Domestic sourcing requirements for all government procurement programs (e.g., Buy American, the Recovery Act) and programs that support U.S. exports (e.g., the U.S. Export-Impact Bank) should also be reviewed to ensure that contracting agencies are obeying and implementing the requirements. The Defense Authorization Bill passed in December that requires the Pentagon to buy solar panels from U.S. manufacturers is a good model. In addition, Congress needs to enact an all-of-government successor to the 1933 Buy American Act.
• Link an investment tax credit directly to jobs. A 10% investment tax credit for the rehabilitation and renovation of existing manufacturing facilities would pump billions of dollars into modernizing America's plants. And with an additional investment tax credit for new equipment, businesses could retool their factories.
• Determine which government programs create and support U.S. jobs. We should require those bidding or applying for government contracts, assistance, grants or awards to provide detailed Employment Impact Statements in the application process. Results would factor into the outcome of the project or transaction.
Trade and Globalization
Our trade policies and unaddressed ills from globalization exacerbate America's manufacturing industry woes. Just since 2001, the U.S. has had massive annual trade deficits totaling over $6 trillion. Yet the U.S. has no precise strategy to compete in a globalized economy.
In many parts of the developing world, workers toil for minimal pay under harsh conditions because organizing against unfair treatment is prohibited. This cheap labor seduces large multinational companies to move production overseas, where healthcare, pension and environmental costs are minimal. While human rights are plundered, U.S. workers are also losing their jobs. And many of the Asian countries where these jobs are going are manipulating their currencies to keep them undervalued against the dollar and are providing massive illegal subsidies and other unfair trade benefits.
We must mobilize to restore balance and mutual benefit to international trade. Let's call on our leadership to:
• Restructure the tax code so American companies stay here. Right now, we provide tax incentives for companies to invest overseas, a sure sign that our economy works best for big business instead of for regular Americans. We must fix our tax code so corporations are not rewarded for closing plants and shipping jobs to China. In addition, Congress should offer partial tax rebates on exported goods and impose equivalent taxes on imports.
• Protect national security manufacturing. Today, the U.S. has an $80 billion annual trade deficit with China just for "Advanced Technology Products," many of which are essential to our national defense. Congress should pass legislation requiring that certain critical items be subject to a national security impact statement before allowing their manufacturing overseas.
• Enact temporary tariffs. Congress should enact temporary tariffs to protect our high-value manufacturing. A temporary policy of import tariffs, coupled with encouragement of foreign direct investment, would provide the U.S. with all the benefits of free trade without promoting a low-wage workforce.
• Create a new Justice Dept. bureau to enforce trade. On the issue of enforcement, an independent office within the Department of Justice would be tougher and more effective at ensuring that our trade agreements are complied with.
• Initiate trade cases under the U.S. trade remedy laws. The U.S. should spearhead an Unfair Trade Strike Force to be deployed when nations violate trade laws.
U.S.-China Trade
It is impossible to overlook China when considering how to correct globalization's unwanted fallout. The Chinese economy has been growing at ten percent a year for the last 30 years. Such unprecedented economic growth is at the root of China's dramatic surge in military power, international political weight, and financial influence. These developments, with their economic and geo-political implications, are not simply the outgrowth of free market forces and fair trade. Rather, they stem from sophisticated industrial and mercantilist trade policies, often illegal, that China has instituted to establish its great power status.
The U.S. economy will continue its decline unless our leaders in Washington take immediate action to take on Chinese economic practices.
• Create a White House office to focus on American competitiveness. A transparent office dedicated to gathering independent intelligence on our trade competitiveness with China would improve our economic standing. It would help align trade and tax policy so that private sector incentives match the public interest.
• Pursue a hard line on Chinese economic policy. From intellectual property theft to restrictions on rare earth mineral exports to extortionist indigenous innovation purchasing policies, China is playing by a different set of rules and we're doing little about it. Our government must be willing to challenge and mitigate the disastrous effects of Chinese economic policies on American manufacturing and trade. This should start with a clearer focus from the White House, guided by the independent body recommended above and directed at all federal agencies. Initiatives should include bringing cases in the W.T.O., imposing tariffs when necessary, and requiring rigorous reviews of China's planned investments in American ports, markets, natural resources and transportation industry.
Infrastructure Crisis
Coincident with the loss of trade and manufacturing is the decline of our nation's infrastructure. After years of under-investing in public infrastructure, America faces an infrastructure deficit of $3 trillion that is impeding economic growth and undermining our economy's efficiency. We need to spend $2.2 trillion over just the next five years to meet America's core infrastructure needs, according to the American Society of Civil Engineers. But actual spending plans fall far short.
• Create a levered National Infrastructure Bank. The administration and Congress should create a national infrastructure bank that would be an independent financial institution owned by the government. Able to fund a broad range of infrastructure projects beyond roads, rails and runways, it would make loans and loan guarantees and leverage private capital. It should be able to sell or issue general purpose bonds to raise funds for lending and investment, sell specific project bonds when necessary, and invite private investment, along with state and local government pension plan investments.
Green Economy
Employment opportunities in the "green economy" can provide some relief, although not as much as some project. According to Booz Allen, green projects will create eight million jobs by 2013; the Global Climate Network puts that number at 20 million world-wide by 2030. Bolstering this segment of our economy will put people to work in manufacturing jobs that have the greatest multiplier effect, and will stimulate more economic growth. Leaders in Washington must do more to encourage growth in this industry.
• Extend the Cash Grant Program for renewable energy production. This program converts non-refundable tax credits for renewable energy production into cash grants. Extending the program until the equity and debt markets recover will help create jobs and avoid further job loss in the industry.
• Lengthen the period of the Advanced Manufacturing Tax Credit. ARRA authorized up to $2.3 billion in tax credits for investments in qualified advanced energy projects at manufacturing facilities, such as energy storage, electricity transmission, energy conservation technologies, and others.
• Expand Title 17 Loan Guarantee Program. Title 17 of the Energy Policy Act of 2005 provides federal loan guarantees for the construction of energy-related facilities that use "new or significantly improved technologies" which are "non-commercial" and have high technological risk. These guarantees lower the cost of capital for these projects. Broadening Title 17 to include energy-efficiency investments would help spur this market and create new jobs.
Youth Employment
The hardest hit among the unemployed are young people. Almost 25 percent of teenagers from 16 to 19 are officially unemployed. For young adults aged 20 to 24, unemployment is nearly 16 percent -- a number not seen since 1948. Many of these disconnected youth are at risk of becoming permanently disengaged from the labor market. Young people who do not have a successful work experience by age 25 are also at greater risk of lifelong poverty.
• Extend the Work Opportunity Tax Credit (W.O.T.C.) beyond August 2011. This law provides small businesses with tax incentives to hire people who might ordinarily struggle to find work - for example, those with lesser skills and veterans. Congress expanded the tax credit in 2009 to include the tax credits for hiring disconnected youth. Our ongoing national youth unemployment demands that this W.O.T.C. provision be extended well beyond August of this year.
Our national leadership is responsible for tackling the extreme real unemployment and stagnant wages crises. President Obama has already shown a strong willingness to reform health care and regulate the financial services industries. Today, however, our nation needs, from all of Washington, that same passion and commitment directed at job creation. It's time our leaders show the moral courage that defines true leadership and resolve to restore what all good Americans want and need: the security, well-being and self-respect that come from fair employment and wages.
Leo Hindery Jr. is chair of the Smart Globalization Initiative at the New America Foundation and an investor in media companies. He is the former CEO of AT&T Broadband and its predecessors, Tele-Communications, Inc. and Liberty Media.
Follow Leo Hindery, Jr. on Twitter: www.twitter.com/leohindery
The US has not had an industrial policy. To make these recommedations happen, one [I guess this is you, Leo, since you have a seat at the table] would have to coordinate across many government entities.
Perhaps an all-out effort like a combination of the National Security Council [create a new entity across relevant Cabinet Departments to pull important policy issues together for the President] AND a Super Congress for Industrial Redevelopment [House and Senate]. This would provide a consistent, high-level focus for a fast-track way of making it all happen.
The current fragmented, special-interest-driven system can't handle it.
I wanted to share these thoughts:
1) Manufacturing will come when we actually produce something that people want. Since our Dinosaur industries refuse to accept that the party is over, the old way is reigning and new ideas can't get thru.
Consider that when our country expanded out of the depression - after the class war, much like the one we are being made to fight right now - it was on infrastructure, making the highway the artery to connect people, for that's who made the sales- that artery now is the internet. We are stymied by the lack of access on the level that the highway was made available and the zeal with which it was understood as being for ALL Americans.
2) Women. We need the recovery to be equal. We need more than manufacturing jobs that are not necessarily an area where women a) would get work over a man in a tight economy, b) jobs women currently hold.
We need a real recovery plan that includes women. I find it ironic now to learn that almost every industry that has developed in capitalism's history (pls, just by using the word for critique does not make me anti-capitalist) has come out of the work that women used to do at home.
Equal Recovery must come with policy and honesty in mind. It can't be like before.
3) If we really want to change to create green jobs, there are millions of real important jobs out there. DO NOT make the jobs and youth program some welfare agency training program. We have to confront the reality that we don't actually need gas and oil, never have. We can use plant stuff to develop these resources in a sustainable way. Truth is, a whole world structure of finance and fighting are build on those dinosaurs. So good luck with that. But, if we really truly want to rebuild our country, we are going to have to deal with this truth
Why are our university labs instead profits makers for corporations instead for the people of the country?
4) We have to think strategically. Real issues of commodities are rising with the environmental impacts and gambling on wall st. We need to secure our food. Here again, we are up against the Dinosaurs who will say their way has ended poverty. Be that as it may, we need to secure our food locally. there is ton of work and development here too.
5) Recrafting foreclosed homes and properties that we own from the bailout, for purposes of rebuilding communities and neighborhoods.
We've got the people, we've got ideas. Now, we need real vision, and it may upset an apple cart or two, but our country depends on it. I know we have the smart people, like these authors who share their good ideas and knowledge, who all want to help.
When the Defense Advanced Research Projects Administration developed the internet they certainly did not envision your entire telephone and mortgage customer service departments decamping for India and Asia.
Business will go where their bottom line is strongest. Put enough roadblocks in the form of taxation and regulation in front of commerce and it will just build a road around them. What you will find are international businesses locating ABA (anywhere but America.) Americans will wind up with a version of taking in each others' laundry.
Eventually--certainly not in my lifetime--wages and benefits will equalize worldwide and no business will be able to relocate for economic advantage.
In the meantime, we must manage the devolution. The Task Force on Job Creation's suggestions are as good as any, but they are not going to stop "progress."
The culture of cheap money by gambling on the stock market has broken the american work ethic, if it did ever exist.
I know I'm probably spittin' in the wind, but at least I DID something.
Corporations have no incentive to hire, since between the tax cuts the super rich have received and the money corporations can make overseas combines to exceed what they could make at home, as government job lay offs have killed domestic demand for goods and services anyway, mostly because that money went directly to the top 1% in the form of tax cuts--a vicious cycle.
All that needs to be done, however, is to get the tax rate back up to job creation levels and turn nation building overseas into nation building here at home, and of course put the breaks on the out of control military industrial defense complex, another very efficient system for transferring the nation's wealth to the super rich, while undermining the nation's general economic health.
You can read the proposal ("A Modest Proposal to Save the American Economy: Entrepreneurial Blitzkrieg as Job Creation Vehicle") and its companion piece ("The 75 Percent Solution? A Moral and Economic Imperative to Create Good Jobs NOW!") here: http://jpbulko.newsvine.com/
Joseph Patrick Bulko, MBA
Venture Backed Securities have "bubble" writ large all over them.
Before most entrepreneurs involve themselves in a start-up they have to be assured there will be a demand for the product or service. No amount of available capital will force someone to create an unnecessary job.
You were spot on, however, when you explained Americans are busily deleveraging their debt. There is no substitute for liquidity, and we are just going to have to bite the bullet and wait for it to happen. This is not a process which can be hurried.
There is historical statistical success rate for new businesses, and by bundling 30 or more of them together and creating a corresponding investment fund (cf. venture capital fund), we can determine a remarkably accurate return-on-investment for the whole bundle/fund. Then we "securitize" the bundle/fund (cf. the mortgage-backed security) as a venture-backed security, which is sliced, diced, stamped with AAA-rating, and sold to myriad investors (cf. MBS-based financial instruments), producing profits for Wall Street institutions. [This, ultimately, is the profit-motive that provides incentive to Wall Street to pour money into the investment bundle/fund.]
The securitization process along with the initial “bundling” effectively distributes and quantifies risk associated with the new ventures. By creating a massive number of new businesses in a short period of time, tremendous amounts of new consumer spending (via the new incomes) are introduced to the economy, creating a “rising tide” that “lifts all ships.” There is absolutely neither a shortage of entrepreneurs waiting to jump into the marketplace nor a shortage of ideas for great new products and services waiting to be developed into new businesses.