There's an old saying... that says, fool me once, shame on -- shame on you. Fool me -- you can't get fooled again."--George W. Bush
Businesses, Republicans tell us, would turn on the job spigots if they could just repatriate their overseas profits with a tax holiday, had their taxes reduced and/or did not have to follow certain regulations.
We have, of course, been down these primrose paths before. Despite all the sweet words and pious promises, there was virtually no job creation from the last profit repatriation and fewer jobs created under the disastrous Bush Administration's tax cuts for the wealthy and laissez faire regulatory policies than over any comparable post-World War II period.
Nonetheless, lobbyists are said to be on a full-court press to convince public officials that "this time it will be different."
So, let us give businesses a second chance, but, so we do not get fooled again, let us make any forbearance transactional, a quid pro quo, benefits in exchange for, not just in the hopes for, US jobs.
That is, call their bluff.
Regarding taxes, let us allow any business that increases its net US workforce by, say, 10% to pay 25% tax rate. If, for example, a business has 100 US employees, it gets to pay a 25% tax rate if it maintains an average US employee payroll of 110 in the tax year. Indeed, one might add a sweetener: for any company that qualifies under this provision for the 25% tax rate, and that provides all employees with DHHS-approved healthcare insurance, investors in that company would pay a capital gains tax rate 5% below whatever the prevailing rate is (today it is 15%, but is due to increase to 20% when the Bush tax cuts lapse on 12/31/12).
Regulations are trickier, because of the potential for long-term damage from forbearance. But, if we maintain in this "transaction" the need for the regulatory agency to fulfill its mission not being undercut, we may be able to make it work.
So, let a business approach a particular regulatory authority with a plan for a net increase of X US jobs in that firm, and allow that authority to weigh the impact of a regulation suspension for that particular company compared to the number of net new jobs it will create.
If the agency believed that its mission could be fulfilled by allowing that company to avoid a regulation, and the company indeed increased its US workforce by X, then it could consider waiving the regulation for that company.
Consider, not be compelled. The company would have to report monthly on the total number of employees, and the regulation would automatically be re-instituted if the company did not maintain that new net employment number in the United States.
It would, among other things, be very interesting to learn just how many jobs a company would add if this or that regulation were indeed waived. My guess is that the answer is "zero," but let us keep an open mind.
It will be even more interesting to learn what benefits the companies believe the American people should forgo by suspending specific regulations. Should we stop inspecting food, cease setting standards for aircraft maintenance, approve new drugs with less-than-adequate clinical studies to support safety and efficacy, license new nuclear power facilities without thorough review and without insisting on current standards, expose workers to increased safety hazards in the workplace? It would be interesting to learn what exactly they propose.
The public would be kept informed of the waiver requests, the number of net new US jobs created, and the agency's analysis of potential harm.
The White House gave up far too much when it suspended the EPA's proposed air-quality regulations. If they were prepared to give it up, they should have extracted a job-increase number from each affected company in return.
Regarding repatriation of overseas profits, large US businesses reportedly have over $1.5 Trillion stashed away overseas, not being returned to the US because the businesses do not want to pay taxes on it. Ordinarily, one's reaction might be several four-letter words strung together.
These are not ordinary times. And, while one hesitates to appease such behavior, the benefits a smart deal on repatriation could provide to the unemployed, and the pain it would eliminate for potentially large numbers of people, outweighs the animus against "being had" like this.
Here is the deal: for every net new worker hired in the United States, a company would be permitted to repatriate 2-times the total compensation paid to that worker, up to a maximum of $300,000, by paying a 5% tax. For example, if company X hired a net new worker and paid $75,000 in total compensation (wages, benefits), then company X could repatriate $150,000 of overseas income by paying $7,500 in taxes. If the new worker were paid $160,000, the 5%-tax on the repatriated money would be $15,000 on the maximum of $300,000.
Note, for clarity, it must be a "net" new employee, so that the total employment by that company in the United States increases.
At an average total compensation of $50,000, that would enable up to 15M workers to be hired in the United States with repatriated money.
The cost to the US Treasury is either $520B if one assumes that the money would be repatriated anyhow and taxed at 35%, or zero, if one assumes that the money would not be repatriated at all, or somewhere in between.
The question is longevity. Let the program run for 3 years, allowing repatriation every year under an identical scheme. To use the above example, if the Company hired 1 net new worker and paid him $75,000 in total compensation, and that new US employee count remained the same, the company could repatriate another $150,000 in year 2 and year 3 for that one worker.
How many net new workers would be hired under the reduced taxes, regulatory forbearance, repatriation proposals? Probably the same number that were hired under the "if business says it I believe it" scheme that was previously tried i.e., near zero.
Of course, they will complain that actually tying these benefits to performance on job creation is, somehow, unfair, un-American, socialist, Kenyan, who knows... I, for one, would enjoy every minute of their squirming. Remember how ballistic Senator Jon Kyl (R-AZ; of, "not intended to be a factual statement" fame) became when Transportation Secretary Ray LaHood suggested that if Kyl really did not like the stimulus, he (LaHood) could spend it in other states. How unfair!
Will they really vote against these proposals? I would pop my own popcorn to watch that vote unfold.
The best news, of course, would be to be absolutely wrong, and that this time it is indeed different, and that they really do hire people.
Instead of getting diverted into pointless arguments, just call their bluff... and move the discussion to real solutions for our waning economic growth and unemployment.
Follow Paul Abrams on Twitter: www.twitter.com/pabrams2001
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I do not agree with any reduction in capital gains taxes. As Buffet says, the wealthy will invest no matter what the rate. After all, what is their option? Banks? Gov't bonds? Capital gains should be considered income, like any other income, and be taxed at the individual's tax rate.
To the editor: Severe and widening income inequality is reducing the capacity to create wealth in this country. The theory that supply can drive demand was propagated by the aptly named economist Arthur Laffer, who theorized that enriching the few would create a shower of gold for the many. That is the once famous and now debunked "trickle down theory." What happens when this theory governs economic policy is a slowdown in economic activity, resulting in low growth and high unemployment. It has happened every time supply side policies have prevailed.
Emphasizing supply side economics to move an economy forward is like pushing on a rope. Demand drives supply; supply cannot drive demand. You can manufacture millions of widgets, but if people can't afford them or don't want them, your widget business will fail. Demand is both the ability and the desire to purchase goods or services. Jobs only improve the demand side of the economy when workers are paid good and fair wages. Slaves had jobs, but they could do nothing for the demand side of the economy. Business fails when it has no customers. Everyone benefits from fair wages and more equal distribution of income. Incentive is required to encourage entrepreneurs and risk takers, but making too many billionaires reduces demand in the economy. One billionaire may have 30 cars. One thousand millionaires may have 3,000 cars. Do the math.
Yes, you are correct, hiring minimum wage workers would rig the system a bit, and yes, I agree that the workers cannot be discriminated against with respect benefits. With regard to indexing to the wage rate, THAT would be difficult to monitor, and THAT would provoke some honest criticism that it is micromanaging the business.
This whole business about lowering taxes to increase jobs is a canard. As I suggested in the article, I suspect that the number of jobs created by this would be close to zero. But, it would call their bluff.
He is in effect saying: put your money where your mouth is.
However, I thank you for coming up with them because it is good to discuss policies that actually work instead of failed supply-side economic theories which haven't created a single job in 30 years.
Also, a recent report shows that China, a country that has few or no regulations, is beginning to see companies leaving there for cheaper labor costs in other countries. It seems lack of Regulation is not necessarily a factor in job creation. And this is not something that should be negotiable. If the controls are important, like the deep warter drilling in the Gulf, then lessening them only risks reocurrances of similar events and that would again put people out of work, as we saw last year.
The reason they won't go for it is that tax rates have nothing at all to do with their hiring decisions. What they are looking for is a tax rate decrease and no responsibility whatsoever to do anything other than pocket higher profits.
Another big "fly in the ointment" here is that our government doesn't know what it is doing now. We don't have enough regulators as it is. Throw in all those variables and I am afraid the government will look like the Keystone Kops (Cops) are running the show. [ Which under the current circumstances may not be a bad thing! ]
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