September 4, 2011

Huntsman's Jobless "Jobs Plan"

CNN reports that the Wall Street Journal loves Jon Huntsman's jobs plan.
The paper described Huntsman's proposals, which he laid out Wednesday in a speech in New Hampshire,"as impressive as any to date in the GOP presidential field, and certainly better than what we've seen from the front-runners."
Wow!  That must be some great jobs plan, I thought, because so far, the one thing the Republicans have been leaving out of their jobs plans were the actual jobs themselves.  All they've offered is less tax, and less spending.

Sadly, Mr. Huntsman's "jobs" plan also fails to include a single job.

Huntsman's plan:

1. Tax Reform
  • less taxes for citizens
  • less taxes for rich citizens
  • less taxes for corporations
  • and less taxes. 
2. Regulatory Reform
  • Get rid of regulations (and the Healthcare act, too)
  • Gut the EPA (which is already underfunded)
  • Kill the NLRB
  • Gut the FDA
  • Give Patents away like lollipops
  • Privatize Fannie MAE and Freddie MAC
3. Energy Independence
  • Smack OPEC upside the head and drill, baby, drill!
  • Create a market for alternative fuels.

4. Free Trade
  • Let's repeat the success of NAFTA (which cost the US 879,280 jobs) with South Korea, Columbia and Panama, and what the heck, throw in Japan, India and Taiwan.

Why Huntsman's Jobs Plan Fails as a Jobs Plan

In short, it doesn't create any jobs.

Lowering Taxes Doesn't Create Jobs.
Well, the first section, lowering/reducing/simplyfying taxes.  Hey, wouldn't it be great if it was easier to prepare our taxes?  I wouldn't need an accountant to figure it out for me - which, of course, means that a lot of tax preparers are going to be totally boned, and likely will go out of business.  Which I, for one, am not factoring in to this, because this thing stinks enough without pointing out how many people this plan puts out of work.

The fact of the matter is that lowering taxes doesn't create jobs.  It's a pretty idea.  And that's all it is. 

Most businesses are, well, in business.  And when you find you're making more money without having to do anything, you don't suddenly decide to hire a bunch of people, you pay it out in dividends. Free profit, baby!

Current Regulations Aren't Killing Jobs
Huntsman specifically cites EPA pollution regulations in his plan:
While the nation struggles to recover from economic turmoil, EPA has imposed vast new rules on the nation's energy producers, crippling one of the most critically important components of economic recovery: energy
The problem is that this isn't actually happening.  The Washington Post rebuts:
An Aug. 8 review by the Congressional Research Service (CRS) refuted much of the criticism of the EPA’s regulatory push. Fears of disruption to the power sector are overblown, the CRS said: Newer coal power plants already have pollution controls, and many older ones are set to shut down anyway, in part because burning cleaner natural gas is now so cheap.
....studies that many critics continue to rely on in their forecasts of expensive regulatory disaster assume stringent provisions that the Obama administration never proposed. A note from the Federal Energy Regulatory Commission, cited by many critics, admits that its analysis is “inadequate to use as a basis for decision-making, given that it used information and assumptions that have changed.”
In other words, at some point, the GOP assumed that President Obama would push for more regulation, and he didn't.  But they're still using the same false assumptions even though the facts contradict them. 

Economist Jared Bernstein weighs in:
Second, and this creates an upward bias to both X and e, you can’t only count the costs of regulations, you have to consider the benefits as well.  Again, from the WaPo editorial:
 “Reasonable people can disagree on how much economic cost is worth bearing for how much environmental benefit. But the Republican critique seems to deny that such a trade-off even exists.”
Suppose an allegedly “job-killing” regulation led to the improvement in public health, thus decreasing health costs or lost work days.  To ignore these factors is to inflate both X and e.
But that's just what analysis shows us; what do business owners say about regulations harming their business?  Well, funny you should ask; McClatchy Newspapers went out and asked them.
"Government regulations are not 'choking' our business, the hospitality business," Bernard Wolfson, the president of Hospitality Operations in Miami, told The Miami Herald. "In order to do business in today's environment, government regulations are necessary and we must deal with them. The health and safety of our guests depend on regulations. It is the government regulations that help keep things in order."
The answer from Rick Douglas — the owner of Minit Maids, a cleaning service with 17 employees in Charlotte, N.C. — was more blunt.

"I think the rich have to be taxed, sorry," Douglas said. He added that he isn't facing a sea of new regulations but that he does struggle with an old issue, workers' compensation claims.
Then there's Rip Daniels. He owns four businesses in Gulfport, Miss.: real estate ventures, a radio station and a boutique hotel/bistro. He said his problem wasn't regulation.

"Absolutely, positively not. What is choking my business is insurance. What's choking all business is insurance. You cannot go into business, any business — small business or large business — unless you can afford insurance," he told Biloxi's Sun Herald.
The article does mention that the US Chamber of Commerce points to the elements mentioned in Huntsman's plan, but noted that those complaints seem to come from the largest corporations, and not from the far more numerous locally owned business that offer the bulk of our nation's employment.

Energy Independence... Fine.  Where are the jobs?
Part 1: drill, baby, DRILL!

Part 2. "eliminate the subsidies and regulations that support foreign oil and inhibit domestic alternatives such as compressed natural gas (CNG), electricity, biofuels, and coal-to-liquids, which are not price-controlled by OPEC."

It should be noted that the inhibition is basically that alternative fuels cost more than foreign fuel.  So this plan is really "let's drive up the price of gasoline and oil for the consumer."    Just  want to make sure we understand the plan; he was kind of vague about it.

This plan is impractical if we're not also investing in mass transit so that we're sharing the cost of $10 a gallon gasoline amongst a large number of commuters.  The best way to shake off dependence on foreign oil is to reduce our consumption by driving a lot less, and making better use of the fuel we do use. 

But this is a jobs plan.  Will this create jobs? I don't see it.  Remember, he's already reduced revenue with the tax reform, which means much steeper cuts than we've seen to date.  Traditionally, alternative fuel research has been subsidized by the government because the return on the investment has been too steep.

Of course, alternative fuels will become economically viable when gasoline costs soar; but I suspect that the sudden rise in costs will put a lot of people out of work. For example, if people stop driving cars in favor of mass transit, that's hit on the auto industry.  Arguably, that could be partially offset by people seeking to replace their current cars with far more efficient vehicles, and building more mass transit systems.  But I think at some point, people are going to start opting out of owning their own car, which means less manufacturing and less maintenance jobs.

Expanding Free Trade.
Remember NAFTA?  As mentioned above, it cost 879,280 US jobs. 78% of the net job losses under NAFTA were relatively high paying manufacturing jobs.   Sure, we eventually regained most of the lost jobs - 809,988.  But the wages dropped 13-16%.

Worse, the idea was to make U.S. products more attractive to Mexican consumers, which would increase our exports there.  But 61% of exports to Mexico are actually components for goods that are assembled in Mexico to be sold in the U.S.

Let's look at the list of Huntsman's proposed partners in trade: South Korea, Columbia, Panama, Japan, India and Taiwan.  Without a Free Trade agreement, we've already lost a lot of jobs to South Korean, India, and Taiwan.  What would be the effects of removing restrictions?  After all, workers in most of those countries make a small fraction of U.S. workers; won't this only encourage companies to move more manufacturing jobs overseas?  Sure, new jobs will eventually replace what's lost, but again, it's likely that we'll see markedly reduced wages.  No net gain, just less money for the same jobs.

Jobless Job Plan
Considering all the factors, this jobs plan doesn't really do much to create new jobs - and remember, we haven't accounted for the jobs lost as Huntsman hacks away at the size of the government.  He's talking about eliminating tens of thousands of government jobs, if not hundreds of thousands.  That will contribute to unemployment even as the few jobs this plan will create eventually appear.

No comments:

Post a Comment