Jobs, jobs, jobs. Period.
By Debra Kozikowski
Just two days ago at 6:22 p.m., the U.S. Senate sent a message to the U.S. House that the Senate had passed H.R 3548 amended. The bill extends unemployment compensation benefits to help our nation’s jobless — at least for the folks officially on the rolls. Putting Americans back to work is the key to our long term economic health and over the next weeks and months, the subject of jobs for all of America is something we all need to stay on top of.
Congress knows that this storm can only be weathered by gathering as much as information from as many knowledgeable sources as possible.Yesterday afternoon the Senate Democratic Policy Committee heard from top financial experts on the need to address the loss of American jobs and the effects on our much anticipated economic recovery.
Leo Hindery, Jr, a managing partner of InterMedia Partners VII, LP, is one such leading business expert. He has experience in the financial markets and in creating economic opportunities for American workers. He is the author of two books, “The Biggest Game of All” (Free Press, 2003) and “It Takes a CEO: It’s Time to Lead With Integrity” (Free Press, 2005). Mr. Hindery has been recognized over his years in business with many honors, previously recognized as International Cable Executive of the Year, Cable Television Operator of the Year, one of Business Week’s “Top 25 Executives of the Year”, and one of the cable industry’s “25 Most Influential Executives Over the Past 25 Years”. Mr. Hindery delivered the following remarks (published in their entirety) to the Senate Democratic Policy Committee.
Read it and think.
SENATE DEMOCRATIC POLICY COMMITTEE
November 5, 2009
Ron Bloom and Dan DiMicco have made a very strong case for “jobs, jobs, jobs”.
So let me, if I might, speak to:
- How many jobs we need, which I believe is two and a half times the number the administration is publicly using;
- How we might best create them; and
- How we might best pay for what we need to do.
Despite the fact that as of last week the recession is officially, a number of us believe that using only GDP growth in the third quarter as the proof of this offers an extremely “false-positive” reading of the economy. In fact, I believe that another million or so jobs are likely to be lost by the middle of 2010, and that the U.S. economy is entering into a “new normal” period, which means relatively high effective unemployment into the long term and an equally long period of only around 2% of annual growth versus 3.5% or so normally.
It is important we all remember that the Bureau of Labor Statistics, in its monthly public announcements, excludes changes in employment among the nation’s 11 million farm and self-employed workers, even though they comprise 7% of the workforce, and that it does not take into account the workers who are part-time-of-necessity [9.2mm], marginally attached [2.2mm], or have left the labor force out of frustration [3.4mm].
Right now, for the first time ever, there are nearly as many uncounted unemployed workers – 14.8 million – as there are officially counted ones – 15.1 million. This means that:
- The effective unemployment rate is 19% not 10%;
- The number of effectively unemployed workers has increased by more than 13 million since the recession began not by 8 million; and, most germane to today’s discussion,
- We are short about 22 million jobs not the “nine million” that the White House officially announced two weeks ago.
Even the average fulltime worker is now working only 33 hours a week, which is a record low number that suggests effective underemployment even among existing fulltime workers of around 17%.
America is deep in the midst of a jobless recovery, which in numbers is the largest ever and in likely duration the longest ever. And we need to start thinking of the recession as being L-shaped rather than U or V-shaped.
In response, I believe we need four things, and immediately:
- First, we need an all-of-government manufacturing policy that has as its formally stated objective doubling the size of the manufacturing sector and the percentage of GDP it represents, which would add 12 million or so workers directly to the sector and up to another 30 million associated workers.
- Second, we need “buy domestic” requirements related to almost all federal procurement. The U.S. is the only nation among the G-20 and China without such a program – China in fact just reconfirmed in mid May a 100% government-wide program – yet no single economic stimulus initiative would do more to resuscitate U.S. employment and reduce our trade deficit. We should call this requirement the “U.S. Domestic Investment Act” or something similar, which is what other nations generally call their programs.
- Third, we need a 10-year program of significant public investment to upgrade and rebuild our nation’s infrastructure that would include: (1) a new National Infrastructure Bank; (2) incentives for private funding of public infrastructure, which represents a huge opportunity; (3) Investment Tax Credits for energy conservation-related building retrofits; and (4) a multi-year, $500 billion green transportation program funded through an increase in gasoline taxes. Provided it has reasonable associated buy-domestic requirements, each one billion dollars invested in public infrastructure generates on the order of 40,000 permanent new American jobs.
- And fourth, we need trade agreements that have meaningful labor and environmental standards, forbid illegal subsidies and currency manipulation, and have enforcement “teeth”. With regard to those “teeth”, a perfect place to start is the “Trade Enforcement Priorities Act” just introduced by Senators Brown, Stabenow, Levin, Feingold and Specter, which would revise the old “Super 301” trade enforcement process.
And right now we especially need a fundamental re-working of our trade relationship with China, including upfront changes in China’s outrageous currency policy which has left it with $2.1 trillion of foreign assets, mostly in dollars, and fueled its recovery at the expense of ours.
Then in the next year’s Congress, we need to enact major corporate tax reform to incent corporations to create jobs in the U.S., which should include (1) reducing corporate income taxes and moving to a value-added-tax or VAT and (2) a 10% Investment Tax Credits for renovating and modernizing manufacturing facilities and their associated equipment and processes.
Even though it seems a political impossibility to label anything right now as “second stimulus”, we can’t run away from the major fiscal efforts needed in order to create the 22 million or so high-quality jobs that are missing.
Yet if intelligently conceived and funded, these major new-jobs efforts will not damage the economy as some alarmists say, they will be at least deficit neutral over the next decade, and, most likely, they will even be substantially deficit reducing.
I recommend that we start with a newly enacted financial transactions tax to take effect as soon as possible. In size, this FTT should be on the order of one-tenth to one-quarter of one percent of the value of all financial transactions – stocks, bonds, derivatives, futures, etc. – and it should be levied on all corporate, partnership and very-high-income individual buyers and sellers of securities.
An FTT which excludes the middle class and is dedicated to jobs creation and public investment would be entirely in keeping with President Obama’s demand that the country shift away from growth based on high-incomefinancial speculation, it would be an easily understood “shift” in the nation’s resources, and it would be a very meaningful incentive to move financings overall to longer-term and thus more prudent time horizons – it would also produce much-needed tax revenues of around $150 billion each year.
An FTT is only one of the four revenue initiatives that are required, however. It needs to be combined with:
(1) Finally ending those “tax breaks for companies that ship jobs overseas”, as was promised during the 2008 Campaign, which would raise at least $200 billion over 8 years;
(2) Classifying and taxing carried interest as ordinary income at a 35% rate rather than as a capital gain at a 15% rate, which would generate around $12 billion per year; and
(3) Raising the top tax rate on long-term capital gains back to the 28% rate signed into law by President Reagan, which would raise about $25 billion per year.
All in all, these four revenue initiatives, all aimed at the top 3 to 5% of taxpayers, would raise about $212 billion a year.
In quickly closing, let me say that while there is an increasing amount of talk regarding these issues, for example at the November 2 Economic Advisory meeting with the President, there seems to be an operational urgency lacking in the Executive given other White House priorities. So, it really has to be Congress which gets the ball rolling.