PAGE NINE
TOM PAUKEN
OBAMA’S ‘ECONOMIC STIMULUS’ PLAN ISN’T WORKING
By Tom Pauken
Aug. 15, 2010 - The Financial Times recently reported these dismal figures
for private sector hiring: “Since the stimulus began, about 400,000 public
sector jobs have been added (through May 2010) while 2.7 million private
sector jobs were lost.”
The National Federation of Independent Business (NFIB) has a study
showing that small businesses in the US lost jobs in 12 of the last 14 months.
Equally disturbing in the NFIB survey is that its small business members have
no plans to increase hiring in the foreseeable future. Considering that small
businesses are responsible for creation of a majority of new private sector
jobs, this is particularly worrisome.
One group of employees, however, continues to do well even in these difficult recessionary times. Federal
employment has increased by 225,000 since President Obama took office. Moreover, according to USA
Today, Federal workers now earn more than twice as much as employees in the private sector doing
comparable jobs.
For every other sector of the American economy, unemployment remains high, and those who have gone
back to work after losing their jobs in this recession often are making less than they were before. The U.S.
Bureau of Labor Statistics reports that 46 per cent of the unemployed have been out of work for 27 weeks
or longer. Economist Martin Hutchison notes that long-term unemployment in the U.S. “has reached levels
not seen since World War II.”
All of this data should make it clear to most Americans that the so-called stimulus programs aren’t helping to
get Americans back to work. The thrust of these various government spending packages has been to
encourage the American consumer to spend more as a means to get us out of this recession. The problem
with this approach is that, if the consumer is worried about holding a job, keeping a business going, making
mortgage payments on a house, or paying down credit card debt, he or she is going to spend less and save
more – which is precisely what is happening.
That’s why consumer confidence continues to remain weak. In fact, the latest consumer index from the
Conference Board for July states that “confidence had hit a five-month low,” down to near the 50 per cent
range. It was at the 100 per cent level a little less than three years ago.
Scott Burns had it right in a recent column in which he warned of “the idea that government could stimulate
demand with deficit spending.” Burns quotes economist Lacy Hunt: “Deficit spending, rather than energizing
the economy, is debilitating it. Worse, after the spending is done, the private sector has to service the new
debt.”
If the current policies aren’t effective in putting Americans back to work, then what should we do instead?
The key is to provide incentives to get the private sector moving again similar to what we did with Kemp-
Roth Job Creation Act in 1981 during President Ronald Reagan’s first term in office. The economic
circumstances are different from what we faced back then (government debt is a lot higher), but the
concept is similar: How do we encourage savings and capital investment in order to create jobs here in the
United States?
I submit that the best way is to replace our corporate tax system and its 35 per cent tax rate with an eight
per cent revenue-neutral, business consumption tax. That tax would be applicable on goods and services
coming into the U.S., while U.S. exports would get a comparable tax credit. This gets rid of our onerous
tax on businesses operating here in the U.S., while leveling the playing field with our trading competitors
who currently enjoy a huge trade advantage over American exporters.
Adopting a business consumption tax to replace our current system would reduce the outsourcing of
American jobs, encourage long-term investment in U.S. businesses, rebuild our manufacturing base, reduce
our trade deficits, and put business owners back in charge of the American economy.
This is a real economic stimulus plan to get Americans back to work.
Tom Pauken is Chairman of the Texas Workforce Commission
By Tom Pauken
Aug. 15, 2010 - The Financial Times recently reported these dismal figures
for private sector hiring: “Since the stimulus began, about 400,000 public
sector jobs have been added (through May 2010) while 2.7 million private
sector jobs were lost.”
The National Federation of Independent Business (NFIB) has a study
showing that small businesses in the US lost jobs in 12 of the last 14 months.
Equally disturbing in the NFIB survey is that its small business members have
no plans to increase hiring in the foreseeable future. Considering that small
businesses are responsible for creation of a majority of new private sector
jobs, this is particularly worrisome.
One group of employees, however, continues to do well even in these difficult recessionary times. Federal
employment has increased by 225,000 since President Obama took office. Moreover, according to USA
Today, Federal workers now earn more than twice as much as employees in the private sector doing
comparable jobs.
For every other sector of the American economy, unemployment remains high, and those who have gone
back to work after losing their jobs in this recession often are making less than they were before. The U.S.
Bureau of Labor Statistics reports that 46 per cent of the unemployed have been out of work for 27 weeks
or longer. Economist Martin Hutchison notes that long-term unemployment in the U.S. “has reached levels
not seen since World War II.”
All of this data should make it clear to most Americans that the so-called stimulus programs aren’t helping to
get Americans back to work. The thrust of these various government spending packages has been to
encourage the American consumer to spend more as a means to get us out of this recession. The problem
with this approach is that, if the consumer is worried about holding a job, keeping a business going, making
mortgage payments on a house, or paying down credit card debt, he or she is going to spend less and save
more – which is precisely what is happening.
That’s why consumer confidence continues to remain weak. In fact, the latest consumer index from the
Conference Board for July states that “confidence had hit a five-month low,” down to near the 50 per cent
range. It was at the 100 per cent level a little less than three years ago.
Scott Burns had it right in a recent column in which he warned of “the idea that government could stimulate
demand with deficit spending.” Burns quotes economist Lacy Hunt: “Deficit spending, rather than energizing
the economy, is debilitating it. Worse, after the spending is done, the private sector has to service the new
debt.”
If the current policies aren’t effective in putting Americans back to work, then what should we do instead?
The key is to provide incentives to get the private sector moving again similar to what we did with Kemp-
Roth Job Creation Act in 1981 during President Ronald Reagan’s first term in office. The economic
circumstances are different from what we faced back then (government debt is a lot higher), but the
concept is similar: How do we encourage savings and capital investment in order to create jobs here in the
United States?
I submit that the best way is to replace our corporate tax system and its 35 per cent tax rate with an eight
per cent revenue-neutral, business consumption tax. That tax would be applicable on goods and services
coming into the U.S., while U.S. exports would get a comparable tax credit. This gets rid of our onerous
tax on businesses operating here in the U.S., while leveling the playing field with our trading competitors
who currently enjoy a huge trade advantage over American exporters.
Adopting a business consumption tax to replace our current system would reduce the outsourcing of
American jobs, encourage long-term investment in U.S. businesses, rebuild our manufacturing base, reduce
our trade deficits, and put business owners back in charge of the American economy.
This is a real economic stimulus plan to get Americans back to work.
Tom Pauken is Chairman of the Texas Workforce Commission