By Guest Blogger Liping Chen,
Job creation has been a major problem since the Bush administration. 2009 was marked as a year of spending with unfulfilled economic recovery. President Obama, in his State of the Union address, pledged ‘jobs must be our number-one focus in 2010’, and proposed ‘a new small business tax credit’ and investment on ‘Interstate Highway System’. Critics questioned ‘why should anybody think the “new jobs bill” Obama asked Congress to put on his desk promptly will work any better than last year’s $787 billion economic stimulus program that he said would keep unemployment at or below 8 percent?’ (Washington Examiner Editorial, January 29, 2010). Is America out of solution for job stimulus? No! A letter, that suggests a bipartisan solution for creating 3 million jobs with $300 billion stimulus package and an alternate solution for saving automakers, was sent to the White House on February 10, 2009, before congress passed the $787 billion stimulus plan. Unfortunately, the solutions didn’t reach President Obama according to the reply letter from the White House staff in July 2009.
The unfulfilled economic recovery of 2009 taught us a lesson that good intentions are not enough to resolve our economic crises. We need to have good strategies. Facing 10+% unemployment rate, we need to analyze what kind of jobs we need to create. In order to do that, we must first analyze the reasons that the stimulus didn’t work for the past year and identify solutions that will target our problems before pushing a new stimulus plan.
If we analyze the jobs lost since the Bush administration, we will see the main reason for the jobs lost during the Bush administration was the job outsourcing, while the jobs lost at the end of the Bush administration and the Obama administration was the result of severe economic contraction. To stimulate job creation, we should have strategies to solve both the economic contraction and job outsourcing. However, the job creation in the $787 billion stimulus plan is focusing on the areas of greenhouse, education, and transportation for developing America for the future. We shouldn’t expect projects for developing America for the future to solve our current economic crises. The reasons are simple: 1) it takes time to develop a specific field, unemployed people can’t wait; and 2) we can’t expect all unemployed people to get into the fields of transportation, education, and green energy. Without meeting the immediate need, which is to put people back to work, to work on something for the future is like building a house without building a solid foundation. The outcome is obvious.
If we categorize job creation based on the economic problems that we are facing, the needs of the American people, and the need for building America for the future, we would have three initiatives for job creation:
I) stimulate job creation to overcome economic contraction,
II) stimulate long term job creation by restricting job outsourcing, and
III) rebuild America for keeping its leadership in 21 century.
Below I would like to focus on the discussion of the first direction for job creation, which is a key solution for bringing most unemployed Americans back to work, and to suggest some potential solutions for the second and third directions for job creation.
I) Stimulate job creation to overcome economic contraction:
While it is true that the Obama administration inherited the worst economic crisis since the Great Depression from the Bush administration, we can’t blame the Bush administration for another 3+ million jobs lost in 2009 after $787 billion stimulus plan, neither can we blame the Bush administration for tripling the deficits (‘USA Today’, October 16, 2009). We need to define solutions that can really solve our problems.
While congress was debating the $787 billion stimulus package, Organizing for America, under the Director Mitch Stewart, initiated a nationwide house meeting on February 07, 2009, to promote the bill. A small group of president Obama’s supporters in Massachusetts had a house meeting to discuss the bill and concluded the bill would only bring more debt to the nation, with little help for the recovery. After the meeting, on February 10, 2009, a letter with a suggestion for creating 3 million jobs with a $300 billion stimulus package was sent to the White House. A copy of the letter was sent to Mitch Stewart as well, to forward to President Obama. Unfortunately, both the letter and the copy didn’t reach President Obama.
The suggestion in the letter was formulated based on bipartisan approaches. When the Democrats and Republicans debated on a stimulus package, one party emphasized job creation, the other tax cuts. The suggestion in the letter was a simple combination of the emphases of both parties, that is to give companies a percentage of spending back for each employee hired with a cap limitation on the total money back for each hired, when the hired increases the total number of employees in the companies in comparison with the total employee numbers in a reference date.
The advantages of the suggested bipartisan solution over the $787 billion stimulus plan are: 1) Focus on a real stimulus. It would get people in every area back to work. The result would be a self-balanced expansion; but not limited in specific areas, such as building infrastructure, improving education, and developing green energy, which could only benefit a small portion of unemployed people and would not benefit a balanced job creation; 2) Bring money back to government immediately because each newly hired worker will start paying taxes to Federal and State governments; 3) Save unemployment benefit spending; 4) Help people pay their mortgage; 5) Help people pay their health insurance; 6) A job hiring market will bring consumers’ confidence back; 7) More importantly, the money in the package would only be spent after companies hire new employees and the new hires bring a net increase of the total number of employees in the company. The tax payers’ money would not be wasted.
Since the jobs lost during the Obama administration was a continuation of economy contraction, the economy has been kept in a balanced shrunken level. Therefore, it is possible to stimulate job creation for the economy to grow to a productive level and keep the balance by stimulating expanding in every area through self-regulation. In this respect, the stimulus plan suggested in the letter to President Obama on February 10, 2009, will still work. To maximize the money for the stimulus, some modifications should be made to the plan, such as: 1) to claim the spending, companies can apply for monetary advances; 2) federal tax paid by the employees hired using the stimulus plan should pay back to the package for further stimulating the hiring. Facing the skyrocketing national deficits, in order not to further increase the deficits, the stimulus money could be borrowed from funds that are available through the previously passed stimulus plan, which can be paid back by income taxes from employees who were hired using the stimulus money in the years to come.
Importantly, the plan should be well designed to restrict irresponsible behavior for personal gain. Companies that are qualified to receive a percentage of spending back for each employee hired only when the hired increases the total number of employees as well as the net spending on hiring in the companies. Therefore, the areas that should be considered include: 1) preventing companies from laying off employees and then rehiring back to claim the benefit, a reference date, such as January 01, 2010, should be set as a comparison date for the total number of employees in a company; 2) to prevent companies from laying off high salary employees and hiring low salary employees to meet the total number of employees and then rehiring high salary employees to claim the benefit, only spending on new hired that increases the total spending on employees in comparison with the spending on the reference date will be qualified; 3) to prevent companies from hiring high paid executives using the stimulus money, a ceiling should be set for the amount of money back for each hired; 4) to prevent companies from hiring employees at the end of the year to claim the spending based on the whole year salary and benefits, the money back should be based on actual spending, reflected by the number of months the employee was hired; 5) to prevent companies from hiring employees this year and then laying off next year, the minimum of one year benefit should be given for each qualified new hire, and a further extended benefit, such as a 10% of the first year’s stimulus money can be awarded if companies can keep the total employee numbers the same or bring a further increase in the second year; and further 6) to the companies receiving stimulus money during the current year and laying off employees in the following year, a fine should be given, or the company should return the stimulus money received in the first year. In this way, the stimulus package will help job creation that will last for two years. During these two years of period, policy makers should work out solutions for stimulating long term job creation in this country.
In the State of the Union Address, President Obama expressed his concern about economic expansion: ‘We can’t afford another so-called economic “expansion” like the one from the last decade’. A stimulus plan with the restrictions discussed above and the limitation of the money in the plan will not cause another unregulated economic expansion. Because of the conditions in the plan, companies need to carefully consider the hiring of new employees. It will only help to put people back to work in their original fields so that economy will restore from a shrunk level to a more productive level. This is an expansion that we need in the time of economic contraction. If we only give tax cuts to small business, it may help small business to survive, but cannot guarantee for job creation. More importantly, it will leave the majority of Americans without help. In responding to President Obama’s new plan, Senator-elect Scott Brown pointed out “putting America back to work requires bold action”, “not merely targeted tax relief”. We hope that this time President Obama and congress will consider the plan suggested in the letter sent to the White House on February 10, 2009 in combination with the solutions discussed in this article.
II) Stimulating long term job creation by restricting job outsourcing:
A stimulus package could help to recover jobs lost as a result of economic contraction, but to recover jobs lost as a result of the job outsourcing, different strategies will be required.
One thing that often frustrates me in this country is that we have the most advanced technologies, but we also have so much national debt, so many unemployed or under-employed highly-qualified people. In the meantime we are losing ground to compete with other countries in the fields of producing high quality merchandises for every day needs. Have you ever wondered why?
Watching jobs lost during Bush’s eight years, especially those in computer industry gave me the answer. The impact of job outsourcing not only increases the unemployment rate, but also freely provides newly developed technologies to countries having much lower labor cost to compete with us.
In those eight years, computer programmers in many companies were asked to train the future employees in other countries before they were laid off. America spends a tremendous amount of resources for developing new technologies. To become highly experienced in a field, American people also invest tremendous amount of time, money, and energies. When companies demand employees with experiences accumulated for years to train future employees in different counties, it creates an unbalanced competition between America and other countries by saving other countries’ resources and time to reach the same level that Americans have invested years to reach. Laying off experienced employees further creates a social burden to America. As a result, the huge investment that America spent only exchanged for an increased unemployment rate while other countries simply received the benefit of advanced technologies without paying one penny. This contributes to the imbalance between America’s investment and gain. Furthermore, it is immoral to lay off experienced employees after they have dedicated to technology advancement for the companies. America should have regulations to protect hard working American people and to restrict newly developed technologies from freely outsourcing.
What kind of country do we want America to be? Do we want America to be a country where hard work will be rewarded, or a country in which people can’t live a decent life even they want to work and have much to offer? If the answer is positive to the first choice, we need to restrict job outsourcing.
The idea behind Bush’s tax cut for industry was to let industry owners have more money to create jobs. However, as there was no measurement supporting the idea, many industry owners shipped jobs overseas after getting the tax cut. Thanks to President Obama for his determination on tax cuts in the State of the Union Address: “it is time to finally slash the tax breaks for companies that ship our jobs overseas, and give those tax breaks to companies that create jobs right here in the United States of America”. Accordingly, we should have a tax policy to give companies tax cut for the net jobs they have created in a year, which also increase companies’ spending on hiring. The amount of money back in the form of tax cuts could be calculated in a way as discussed in the suggested stimulus plan with a lower percentage of money back.
To restrict job outsourcing, we should also have a policy to increase taxes to those companies that hire foreign employees when there are unemployed American workers who need the same jobs. The tax increase should be based on the numbers of foreign employees hired in a company. The amount of tax increase should be equivalent to the amount of money saved because of hiring foreign employees. In this way, there will be no benefit for a company to hire a foreign employee when there are job seekers in this country who can’t find the job in the same field. To accomplish this, the Department of Labor in each state should have a record of the background and professions of all unemployed Americans. In this way IRS can use the record of the background of the unemployed Americans to determine if a company should be responsible for a higher tax.
In the meantime, we should also increase taxes to those companies that freely ship newly developed technologies accompanied by job outsourcing to other countries. America spends a tremendous amount of resources for developing new technologies. Instead of freely outsourcing our newly developed advanced technologies, it is reasonable to export our advanced technologies to developed countries with some return. In this way, our investment will bring some benefits to our country and help to reduce our national debt.
III) Rebuilding America to keep its leadership in the 21 century:
If we could have a stimulus plan for bringing the majority of people back to work in the near future, followed by restricting job outsourcing to facilitate a long term job creation, our next question would be: Should America be self-sufficient?
In the book “Collapse: How Societies Choose to Fail or Succeed” (2005), Jared Diamond suggests that dependence upon long-distance trade for needed resources is one of the five major reasons for the collapse of 41 studied cultures. If we take seriously the lessons of historical failure, we should keep our country self-sufficient. It means we should make sure that we have all needed resources should we find ourselves in the situation that we can’t rely on imports to satisfy demands. This should be taken into consideration as we rebuild America for the future.
Job creation in the fields of green house, education, and transportation, covered in $787 billion stimulus plan and emphasized in the State of the Union Address, are certainly areas for developing America for the future. It is good that we can create jobs for developing America for the future when we need to resolve economic contraction, but we certainly can’t expect projects for developing America for the future will solve our current economic crises for the reasons discussed previously. Although to lay a new foundation for long-term economic growth is a way to move to full employment, it can’t meet the immediate need of majority Americans, which is to have a place to work to pay bills and to keep their homes from foreclosure. Therefore, we should set priority to expand our work force for resolving the economic contraction. Only after we have a solid economic foundation, which should be reflected in a lower unemployment rate, we can focus on further building America for 21 century. We simply can’t repeat the mistake we made in the last year, to focus on the future without meeting people’s immediate needs.
Like thousands of Americans who were inspired by senator Obama’s book “The Audacity of Hope”, I started campaigning for senator Obama since February 2008, in the hope that this country would once again be reunited. Although 2009 was disappointing, we still have a chance to start over in 2010.
President Obama called for reunion in the State of the Union Address. Can our representatives in both parties answer the call and reunite to work for American people and American future? American People are waiting.