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Unemployment, Job Creation, and Back-of-the-Envelope Economics

March 10th, 2010 · No Comments · General, Health Care, jobs, Politics

Do you want a job? Do you need a job or know anyone who does? Do you think that there are fewer jobs than are necessary for the workforce right now?

Sounds stupid, doesn’t it? Sounds ridiculous. Apparently not to Senators John Kyl of Arizona and Sentor Jim Bunning of Kentucky. Bunning held up unemployment insurance payments for millions of people and Kyl backed him up on it. They don’t understand, it seems, that people who have been laid off and cannot find another job need money to survive. Now, people on the Right may look at the legislative situation and say, “Yes, but…” There is no “Yes, but…” There is only doing what you are supposed to do, being a decent human being first and an irascible, bought-and-paid for lobbyist-pandering Senator second. When it comes to people’s lives, the answer is simple: do it now!

By any standard statistical measurement, we have at least 14,900,000 people unemployed. How is there any discussion of this other than to plan ways to get these people help until we can create sufficient jobs to employ them?

It is time that we all started offering alternatives and pushing them on Congress by any means of communications possible. We all agree on one thing for sure. In the United States especially, it costs money to live. Food, water, shelter and much, much more. Life is not free. We’re not the richest country in the world when it comes to per capita income for our people, or the second or even third. But we are the tenth richest, with a median income of $47,000 per year. We are the wealthiest in simple gross economic terms. So, that means that we have the ability to solve our economic problems.

Let’s get right to problems and solutions. We need to spend about $400 billion to get the economy back on track. We can do it piecemeal but that will take years, probably 3 or 4 years, of high unemployment, gradual return of liquidity to banks, and a slow gradual build up of businesses. It could take longer. And it will hurt the economic infrastructure of the country. Last year, for example, we lost 120 banks. If we try to recover gradually, it will be at the cost of our lifestyle, the “American Way of Life” that we came to expect after WWII and which continued into the late 1970s, when we were already making some mistakes in economic theory. Some people, the wealthy, still have that lifestyle, in spades. But not the average citizen.

Let’s just take a look for a second at the American family unit from an economic standpoint. Let’s take a family of about $40,000 in income. They would pay something like $4,000 in taxes and would have about $3,000 per month to spend on food, clothing, transportation, health care, and other items. Disregarding for a moment whether that is enough to live on, the after-tax $3,000 per month would go right back into the economy.

We could get back to about 5% unemployment, which many people think, for a variety of reasons, is the minimum we can get to anyway, by handing out $40,000 over one year to 10 million people. That’s $400 billion. Let’s say for argument sake that we do so. We bring 10 million people into the workforce through a dozen or so government department where we already have large, national, administrative channels set up.

But the main programs would be in the kinds of needs that governments all have now at the state and local level that they cannot fund. Many would be involved in the development of small businesses, as interns or consultants or in marketing. Some would teach. Many people need training. Some would be working with inner city problems, both plant and facility and security and education. We know that African-Americans are running a staggering unemployment rate in many areas of 40-50%. There would be more infrastructure improvement…roads and bridges and building renovations. Let’s name this effort to jump-start the economy. Let’s call it the “Emerging Enterprise Corp.”

Ten million employed people, working for Emerging Enterprise Corporation spending their incomes at this level will generate about $70 billion in tax revenues from personal income taxes and the taxes of small businesses and their employees. But that is not where it ends. This is

    real

supply side economics.

Ten million people added to the workforce, driving it down to the essential number of people who are available and skilled to do jobs will jump start the economy. Employers must join in because, despite what they would like, they do need workers. Right now these people work for Emerging Enterprise. So as businesses grow, they begin to poach employees from Emerging Enterprise. Right away, many of these employees, on average of course, are making the median income of the country. Over a period of years tax revenues from these newly employed workers in private industry will pay off the investment, especially now, borrowed at the cheapest money has been since probably 1930. In the first year, $70 billion will come from the Emerging Enterprise workers themselves. So that means the program already pays down 20% of the investment.

So as these jobs are being created, phase two of Emerging Enterprise goes into effect. We know that many, many jobs have been relocated overseas. We also know that we must restore some manufacturing and other kinds of solid businesses here in order to handle our full employment needs. So we need to change the import-export game for a few years.

Emerging Enterprise, like so many businesses begins to feed on its success and goes off into all kind of fields. Like all workers, they want better opportunities. So Emerging Enterprise decides that it is going to challenge the manufacture of goods for domestic consumption. We have deeded that to the Japanese, Chinese and Indians. We’ll take some of it back. Some employees begin to move from public to private enterprise.

Emerging Enterprise will go into various categories where it sees the best opportunities. Maybe home entertainment systems, or computer software, playground equipment, energy efficient air conditioners, wind and solar, battery technology, toys and games, educational equipment, chemicals, irrigation and light farm implements, light aircraft, batteries, mopeds, roller skates, lighting, organic food, and health related products or many others. Each company a private investment, funded with loans from private banks, underwritten by Emerging Enterprise.

Of course you may say and every single Neocon Republican will definitely say that it will not work. We cannot compete. Actually they say that we can compete as long as: a.) American workers are not involved and b.) we don’t worry about how high are the untaxed profits of the major corporations. But Emerging Enterprise says that it wants the government to create a much more level playing field between American workers and those around the world who make 50 cents an hour working 12-hour days, 6 days a week in sweat shops.

In 2008, the GDP of the United States was over $14 trillion. It is the richest country in the world, based on economic output. We export about $1.3 trillion, which makes us the third largest exporter of goods. We imported about $2.1 trillion. So we import almost twice as much as we export.

The question is this. Of the products that we import from other countries, which of those products could we make here, thus increasing the number of manufacturing jobs? Here are some:

    Crude oil.

We import approximately $349 billion of crude oil from abroad. Let us suppose that we began a movement to cut that in half, only $175 billion, in five years or less. Alternatives to gasoline, according to professor Robert Zubrin, flex fuel cars could be engineered quickly to have flex-fuel apparatus installed on every vehicle for less than an additional $200. The technology is here, in use, in the United States right now.

The ability to fuel automobiles with other than gasoline would create hundreds of thousands of jobs, domestic jobs that would carry on for years. The oil industry will fight it because they have a great business right now. Bring in the oil, refine it, sell it at the pump. Only four or five competitors. Charge as much as $4.00 a gallon. Raise or lower prices at will. Make obscene amounts of money and pour a tiny fraction into buying off Congress to keep things as they are.

The many benefits are: probably 50,000 to 100,000 new jobs in the next two years. Less money going to the Middle East. Better balance of payments which strengthens the economy. Cleaner atmosphere. Also, you can run your car on almost anything.

    Passenger vehicles, trucks, utility vehicles and agricultural and industrial vehicles.

We should be able to add at least $50 billion in U.S. vehicles of all kinds with a simple re-direction of emphasis. If we commit to bringing a third of the passenger-car and light truck business to this country that is now imported ($125 billion) we can add many other vehicles that will bring the total to $50 billion and we can still permit other countries to compete in this market. Simple farm vehicles that can run on anything can be exported.

We would need to do some things with tariffs, and work with unions to develop an incentive-based wage. We already have all the plant and facilities necessary. It is merely a job of re-directing financial incentives. This should create at least 150,000 jobs over several years at good wages. We export some cars, but very few to countries that now send cars here. Consequently, we would suffer almost no blow-back from slightly higher tariffs. But quality control technology must switch from tanks and planes to peacetime products. We need the kinds of redundancies in our domestic vehicles that will make them the envy of the world, not merely in our drone aircraft.

    Consumer and Industrial Goods.

There are another $800 billion of products that are made elsewhere that we could also make here. In addition to the $225 billion in flex fuels and vehicles of all kinds we could make for domestic consumption and export, we could add another $100 billion easily, with some small additional balancing tariffs. So that is a lot revenue and additional jobs of jobs. But not enough. Remember, we have a $14 trillion economy.

So, we would still have about $1.75 trillion of imports. Of that we export some of the same things we import. Auto parts we export at the rate of about $40 billion and we import about $70 billion. We could turn some of those products around. Import $40 billion and export $70 billion. Or we could do something else.

This country is the biggest and best market in the world. We could charge a very small, say a 2% tax or all imports…a very broad, shallow tax…on all products made abroad but imported back into the U.S. while avoiding the employment of U.S. labor. So let’s say that our imports by American companies making things abroad amount to $1.2 trillion of the $1.75 left over from our $2.1 trillion in imports.

Let’s get some help for Emerging Enterprise Corp. This very slight re-importation tax would generate something like $24 billion a year. Not huge, but it could be earmarked to guarantee loans to Emerging Enterprise. Emerging Enterprise could then try new fields of manufacture, expanding the job market. That $24 billion could very conservatively guarantee $100 billion in business loans for second-level development.

How many jobs would this create? Well, first of all it will create some, as opposed to…none. Since U.S. manufacturers and importers, like Walmart will probably pass the duties on to Americans, products will cost 2% more. A $1.00 piece of cheap crap from Walmart will now cost $1.02. If it costs more than that, people may start to go to American companies and buy really good products, made by American workers, for $1.25. But this tax, this very small duty, allows us, Americans, to stop giving away our biggest asset, our wonderful economy to other nations completely free. And this alone will create 2 million more jobs. It will continue, also, year after year.

When you start to add everything up…the amount we import from other countries in products we used to make here, the oil we import from the Middle East, the amount of product that U.S. manufacturers send abroad to have made and then bring back to the U.S. to sell to the workers they circumvented…there are a lot of jobs.

But there’s more. We said that we would borrow another $400 billion and simply create one-year, useful jobs for people while we are reorganizing the economy as we have shown we can do. Over and above the initial $70 billion in immediate taxes from the 10 million one-year Emerging Enterprise jobs, there would be another perhaps $50 billion in revenues from various tax adjustments…the income taxes from workers in the private service sector, the import duties and the retirement of the Bush tax breaks to the wealthy. So, we would have about $120 billion back fairly quickly.

And before we go further, recall that Ben Bernanke has loaned $7 trillion over the last several years to banks and financial institutions, even before Obama took office, and before the crash, and he has not said and legally does not have to tell us the name of one bank or financial institution receiving funds. So how many jobs did that create?

An investment of $400 billion is not small but more attractive at currently minus-interest rates to “Emerging Enterprise” to create millions of jobs and re-start our economy. Remember that, if we were compartmentalizing budgets in the federal government, this $400 billion would be $40 billion a year for ten years. We obviously have more than enough to retire that loan from existing and future taxes on those who become employed from this investment and do so in less than ten years. Not from the taxes of Emerging Energy workers, who have only one year to contribute. They will pay for the first year, and the second, as many of them go into private businesses, and others come in to use the balance of the entire amount. The payoff really comes from all the other workers and firms whose taxes would provide much more than necessary to repay that investment.

The size of the investment, remember, is the key to re-starting everything because it shocks the rest of the private sector into action. Once the effects of ten million employees and their impact on the economy is felt, many companies will not be left behind. Let’s do the math here to see if this all makes sense. If it does, then we’ll talk about why it is not happening and why tea party members are chasing their tails.

Remember we said that we have almost 15 million people out of work. But what we didn’t say was that we have about 147 million working. So Emerging Enterprise will only add 10 million. The key factor, however, is that it will begin to move those other corporations employing the 147 million to add employment before the number of available top people begins to thin out.

It’s like the NFL draft. You want to get the best players for the least amount of money. So you go into the draft and find great players and hope that they will contribute to your team for a long time, thus amortizing their costs. But the key thing, the goal, is to win. So you need to get in early, up high in the draft, to get those players. The same is true of industry when it becomes productive. Things get tight.

Next we must put the country back on a solvent basis. Before the crash, the Bush Administration had created about 7 million jobs. Since the crash we have lost that many jobs. So not only did they leave us a huge recession but they also left us with no new net jobs. We are back to where we were in 2000, only now we have more people who need to work, and we have a gap of between 10-15% between high employment and recession-era level employment. Clinton created 22 million jobs in his two terms, and even if you discount 2 or 3 million for a recession that certainly was brewing after the dot-com bubble fell off. Nineteen or twenty million jobs is still 3 times pre recession Bush totals and…what…ten times current post-recession levels? It is staggering.

And what do the Neocon Republicans offer as a solution? Tax cuts, which, although they are for everyone, in the Republican versions are primarily for the very wealthy. It is exactly the opposite of what we need to do. We have transferred about 20% of the entire wealth of the country to the top one-half-of one percent of Americans since 1980, so that they now own about half of everything. The problem is that, unlike other countries, they have never set up systems in this country, such as health care, such as pension funds that cannot be looted, such as large financial firms that cannot run roughshod over society, or credit card companies and oil companies who can simply charge whatever they please.

We have so secure social safety net. We have no reliable way to care for ourselves or loved ones when we become seriously ill. We are scammed and cheated and then lied to by Neocon Republicans about rectifying the situation. The two Senators Bunning and Kyl proved, as if it were necessary, where Neocon loyalties lie. Not with the average citizen. That we now know conclusively.

No, the answer is not more tax cuts for the wealthy. We need to institute a top tax rate of about 50%, at least, among those with incomes of $500,000 and more. The tax rate must be scaled down and everyone share in it. But as those making $1,000,000 per year and more benefited most from previous tax cuts, it is only proper that they should return to paying some of the $43,000 per million that they earned every year of the Bush Administration back to the Treasury in our time of need. Or we could go back to the 74% top marginal rates that were in effect for 20 very comfortable years before Reagan.

We can do this, of course, without touching Social Security or Medicare, given the fact that these funds…are your money, remember…your money? Even though the funds have been looted by Neocon Republicans since 1981 and continue to pay for the tax cuts for the rich. Now the Neocons want to scale back the Social Security and Medicare programs, saying that there is no alternative. That is preposterous. There is an alternative, an alternative in several parts, all of which are written down here. Change the employment situation to substantially increase domestic manufacturing. Increase the tax base to reflect the real needs of the country. Change mild tariffs on products across the board being made for American firms elsewhere and brought in here for sale to Americans. If we do these things, we will pay down substantially on the debt and become the most substantially sound nation in the world and our society will be the envy of the world.

Before the recession at the end of the indebted portion of the Clinton years…before he had surpluses…we were short about $250 billion a year, plus or minus a few tens of billions. Here’s how you fix that equitably and with a look towards the future. Cut the military budget by 10%. It is now greater than all the military budgets of all the countries in the entire world, including Russia, China, the Middle East and all the terrorist groups huddled in caves in Afghanistan. Then…

Remove the Bush tax cuts = + $100 billion a year. Cutting military budget only 10% (maybe by finally bringing troops home from Iraq and closing some of the 700 bases around the world!) = + $60 billion/yr. Pass health care reform. = + $20 billion/yr. Tax increases, as described, over and above the Bush tax rescissions. = + $40 billion/yr. Change the tariffs on products using this market. = + $25 billion/yr. Cut all other non-defense, non-social services, non-research and non-essential programs by 10%. = + $20 billion/yr. Total: $265 billion. Budget balanced. Next, use the expanded economy…and it will be expanded greatly, if we take back the domestic economy for American workers, to write down the national debt. It can be completely eliminated over 20 years. As it is eliminated, both Social Security and Medicare, (under a reformed health care system) will be solidified.

One more thing. This is a great country if it is not run for the personal entertainment of a few very wealthy individuals, who number a million or fewer. We can use the growth of the economy to partially fund real, strong, well-managed retirement program that will can not only replace Social Security but guarantee every worker a much more comfortable retirement with a combination insurance and 401K program.

This would be nothing like the scam that the Bush Administration tried to foist on the American people and, thankfully, failed. Certainly with a stock market at currently lowered levels, with new companies coming into the domestic market, we can invest wisely for our citizens. Once we no longer give our markets away to foreign investors and wealthy Americans who own two-thirds of all business equity in the country, there will be enough left over to increase Social Security, not cut it. A smaller part would be insurance, a larger part, a portable 401K program, handled like the government pension programs.

There is life after Bush. But it will require strong effort by concerned Americans. One need only to look at the enormous battle the health insurance industry has waged to continue the fiscal enslavement of 40 or 50 million Americans to see the kind of fight we are talking about to return this government to the American people.

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