I am fully aware that the following proposal will meet with derision and catcalls from all sides. I can poke many analytical holes in it, and I also realize that if the John Birchers who have a stranglehold on the Republican party were replaced merely by rock-ribbed Republicans that we could arrive at a more sensible accommodation that would be better economic and fiscal policy.
Alas, that world does not exist. Nor does one have reason to believe it will exist any time soon. Even when the Democrats held both Houses and the presidency, the dialogue was totally dominated by the right-wing.
Our jobs crisis is dangerous, not just in the near-term to those who are jobless, but in the long run as part of a generation of young people are unable to develop their skills and resumes. College will seem not only out-of-reach financially, but out-of-value to peoples' economic lives. Just as the rest of the world is achieving higher levels of education, the U.S. will decline.
Like anyone, I do not enjoy being forced to do something at gunpoint because a group of crazies stand in the way of better policies. But, I also do not think that my pique ought to prevent 3M people from getting jobs, so long as the recommendations do not cause a net injury to the country.
Here, then, is the modest bipartisan compromise, entirely focused on jobs:
1.For Republicans, permit the return of overseas profits to U.S. companies at a 10% tax rate. In policy-lingo, this is referred to as "repatriation" of foreign profits. But, to qualify, the company must hire 1 new U.S. employee for every $1M repatriated. Proof that it is an additional employee can be easily shown from social security tax submissions by the company.
It is alleged that U.S. companies have $1T in overseas profits. If they took this opportunity, they would create 1 million new U.S. jobs, pay the U.S. Treasury $100B, and have $800B collectively to do with as they pleased.
2.For Democrats, pass the President's American Jobs Act. Part of its funding would be offset by the $100B from the repatriation tax. This would rebuild infrastructure and enable states and localities to rehire laid off police, firefighters and teachers. Approximately 1.3-2M new jobs would be expected.
3.For Republicans, lower the corporate tax rate to 28% for any company that increases its U.S. workforce by 10% or more. No one knows how many jobs this would add, but it would help call the bluff as to whether lower corporate tax rates would really lead to more hiring. If it were successful, that would be just fine with me; if it were unsuccessful, the Treasury would not be out one dime because no company would qualify for the lower rate.
One added wrinkle. We have just passed mid-year. Hence, no company can take credit for a new employee for all of 2012. Let us sweeten the pie. Any additional employee added between now and September 30, 2012 -- the end of the government's fiscal year -- and who remains employed through year-end, will be counted as a full-year employee for tax and accounting purposes under this law in 2012. However, should the business shed jobs in 2013, a full-refund to the Treasury would be required.
Let me begin the caterwauling.
There will be complaints that Proposal #1 is far too generous. When repatriation was tried before, companies repurchased their own shares (enhancing the value of management's stock options), or gave out dividends, so the relationship to job creation was tenuous at best.
This proposal addresses that to some degree. It requires an additional U.S. job for every $1M to be repatriated. One might add requirements that the new employee(s) receive benefits including healthcare insurance that all the other employees enjoy. So, if one adds, say $100K, to the total cost of adding a new employee, then the company is left with $800K/new employee to dispense with as it pleases. If $1M is too high, then reduce it. I suspect it needs to provide a significant difference between the cost and the amount in order to get companies to do it. Moreover, since we want the company to keep the person employed through 2013, there would be ample "room" left to do that.
The right-wing will attack this as "micromanaging" companies. To that, there is an easy response: you said repatriation was going to increase jobs, this just makes it accountable for what you said they were going to do anyhow. Same with proposal #3.
Suppose the company were going to hire that new employee anyhow. At the current rate of growth in the labor market, an additional 500,000 new employees would be expected to be added by year-end, so this really is over-generous. To this I would answer: so what? The Treasury gets another $100B, another 500,000 workers get jobs AND it serves as a quid-pro-quo to add another 1.9M jobs through the American Jobs Act. Moreover, it serves as a counter to the possibility that the economy may sputter even more.
Another complaint is that the companies will dump their employees in 2013. The clawback prevents some of that, but the underlying premise is that the economy will benefit as a whole from the two stimulus packages, and thus they may actually need these workers in a better economic climate.
Moreover, there will be an election in November. Depending on the outcome we will go one way or the other, so that, in any event, this is an interim measure to get the wheels moving.
Again, I do not consider this the best, or even tenth-best, economic policy required for long-term, sustainable growth. I would argue, however, that this is the best politico-economic policy we can achieve, and relieve the suffering of nearly 3 million Americans and their families.
Unlike all Republican proposals, it does not give away anything just in hopes of creating new jobs. It ties any benefits to actual job creation, right here in the US.
It beats doing nothing... by about 2.3-3M jobs, benefiting millions more who are spouses and children of those who get the jobs.