I'm from the government. I'm here to hurt

If there's one skill the government lacks, it's the skill to create jobs in the private sector. Yeah, sure, the government can create more government jobs. But that's the last thing we need. More burdens for taxpayers offering no visible benefit to the economy.

Five Ideas to Kick-Start Job Creation
Entrepreneurs don't want government money. They want the chance to invest their sweat equity

Now that the debt-ceiling gyrations are over, the Obama administration is "pivoting" to its biggest problem—jobs. Unemployment ticked down to 9.1% in July, but the real unemployment rate, including discouraged workers, is still 16.1%. The stock market is not pleased. Why? Because the president's calls for "patent reform" and an "infrastructure bank" won't move the needle. It's time to go big or be sent home.

Can we agree that throwing money at the problem doesn't work? The 2009-10 stimulus package wasted more than $800 billion. The Federal Reserve's frantic quantitative easing, QE1 and QE2, printed money and bought mortgage paper on the street, helping banks and financial institutions recapitalize, but it hardly created jobs—not lasting ones anyway. Sadly, the economy grew at a subpar 1.3% rate in the second quarter instead of the typical 5% rocket out of a recession. What's missing is not capital, it's opportunity.

As Otter famously said in "Animal House," this situation "absolutely requires a really futile and stupid gesture be done on somebody's part." Well, at least a gesture that might appear stupid and futile but in reality kick-starts whole new industries and massive job growth. And all it will take is the stroke of a pen. Here are some instant job creators:

• Free spectrum. AT&T is trying to buy T-Mobile to get hold of valuable spectrum for wireless. But there's loads of spectrum lying around that is not being used. Try this: Tune into channel 37 on your TV. Static? Bingo. Put this spectrum in the hands of entrepreneurs and you'll create a million new jobs, not to mention new devices and apps not thought possible in our bandwidth-starved world—phones that work in elevators and subways, remote auto and medical diagnostics, real-time ads on smart phones and other devices ("Hey, your friends ate here last week!"), and that's just in the first six months.

But how? Either allow spectrum to be sold by current owners, typically broadcasters inefficiently using this spectrum, or implement a "use it or lose" it rule. The Federal Communications Commission can declare that if a swath of spectrum is not being used for a real application, then they will open it up to the public, the same way that Wi-Fi is open to all—anyone can use it as long as they don't interfere with others. (AT&T and Verizon will fight this, but so what?)

This is also true of government-owned spectrum. If an entrepreneur can prove far greater potential usage, it should revert to the public. Chips are available today that can be tuned to virtually any new spectrum. Apps can be written in weeks. Venture capitalists and Wall Street would gladly provide access to capital. So what are we waiting for? Start making those "Free the Spectrum!" T-shirts.

• Disease diagnostics. Have the Department of Health and Human Services declare that Medicare will pay for any diagnostic test or device that can be proven to save money over five years—for example, detecting a cancer at Stage I when it's cheaper to treat versus at Stage IV, when it is expensive and often fatal. Some will prove worthy, others won't. But it's a self-correcting process—if a test or device doesn't save money, then reimbursements stop. That will help focus entrepreneurs' efforts, and the resulting innovation will both save money and create private-sector jobs.

• End the mail monopoly. The U.S. Postal Service, which posted a net loss of $3.1 billion in the third quarter alone (there is only so much junk mail and Hallmark cards to deliver anymore), is finally starting to rationalize small post offices, recently putting 4,000 of them on a list for possible closing. Accelerate this task by ending the USPS monopoly on first- and third-class mail. Entrepreneurs will jump into action. Online bill payment will become ubiquitous. UPS and FedEx and a host of new companies will create more productive forms of delivery. The Postal Service won't end, it will just slowly fade away.

• Frack this. The revolution in natural-gas extraction, driven by hydraulic fracturing, or "fracking" of America's huge shale deposits, has boosted shale gas to 25% of America's gas supplies from 1% in 2001. But environmentalists are pushing to close down this booming industry due to concerns over contamination of water supplies. Here's a solution: Declare all hydraulic fracturing legal with the caveat that drillers put up a bond equal to the potential cleanup cost of environmental damage. This will force large players to consolidate what is mostly a "wildcat" market. The big guys will be much more careful in their extraction techniques, knowing mistakes cause huge losses.

• Government platform. The hardest thing to do is interact with the government—the Department of Motor Vehicles being the most painful example. I have yet to see any government agency with an up-to-date user interface. But this is easy to change.

In the technology world, companies view themselves as platforms for others to build on, and they publish what they call application programming interfaces (APIs) so others can easily tap their ecosystem. All government agencies should be required to publish their own APIs by the end of the year. What will happen next is a sea of programmers will emerge to write iPhone apps and other code to integrate government functions into our everyday lives. And yes, this will eventually get rid of entire layers of inefficient government workers, but new companies nowhere near the Beltway will proliferate with virtual connections to the government.

• Rental society. Create a six-month foreclosure amnesty, i.e., initiate foreclosure proceedings on your underwater mortgage, and it doesn't show up on your permanent record. Foreclosure then becomes an individual's choice, not something mired in government red tape or stuck in a bank's back office. This would lead to millions of homes and condos hitting the market at fire-sale prices. This is exactly the price discovery that the finance sector both dreads and needs to move forward. Within weeks, we'd see the rise of Web-based rental agencies and real-estate auctions.

I understand the politics against all these opportunities and doubt any administration has the political will to enable so much change so quickly. But any one of these ideas, while a futile gesture on the surface, would sound like a starting gun for entrepreneurs and get them off to the races. They don't need money—they need somewhere to invest their sweat equity. And that's the only true job creator.

Hot Job Market in Cold North Dakota

What's the big driver for the job market in North Dakota? In a word: Energy. Everything else trickles down from there. Very simple. North Dakota offers a model that many other states could emulate. But other states have other ideas, which, in the end, are contributing to economic problems rather than overcoming them.

FEBRUARY 26, 2011

Help Wanted: Fargo Strains to Fill Jobs

North Dakota boasted a 3.9% average unemployment rate in 2010, the Labor Dept. said Friday, the third consecutive year the state has notched the lowest rate in the nation, or tied for it.

After such bulletins, North Dakota staffing agencies often are flooded with calls from out-of-staters looking to work there. Yet, few of those conversations translate into hires.

As the U.S. struggles with 9% unemployment, many companies in North Dakota are struggling to find workers and recast a reputation that some local officials blame on cold weather and a bad image stemming from "Fargo," an Oscar winner with the tagline: "A lot can happen in the middle of nowhere." (Most of the 1996 movie actually was set in Minnesota, locals are quick to point out.)

"It's not easy finding a candidate from the coasts who wants to move here," says David Dietz, vice president of Fargo staffing firm Preference Personnel Inc., which is trying to fill more than 80 positions. Three years ago a technology-sales vacancy—a typical Preference assignment to fill—would have had a maximum base salary of about $50,000; now that position will top out at $65,000, Mr. Dietz says.

Recruiting workers is a perennial struggle for the remote state. The low unemployment rate attracts lots of attention, but it's hard to convince many out-of-state residents to move there.

Most acutely needed: doctors, nurses and other health-care workers, as well as salespeople, from retail clerks to insurance agents. The western part of North Dakota, in the midst of an oil boom, is desperate for welders and engineers. Even truck drivers, who posted nearly 11% unemployment in 2010 nationally, are hard to find.

This year the state commerce department is hitting the road to find workers, scheduling job fairs in cities that tend to attract former Dakotans, starting with Minneapolis in May. The state expects between 40 and 50 employers and community organizations to attend and hopes to hold another fair in the fall.

Tech specialists are tough to hire, too. "We don't have people camped outside our office begging to work here," said Vern Dosch, chief executive of Mandan, N.D.-based National Information Solutions Cooperative. The 840-employee technology company plans to send representatives to the Minneapolis job fair.

In 2010, the number of out-of-staters who registered with the state's jobs site, jumped 25% from the previous year to 15,500, with many jobseekers coming from Idaho, Arizona and Texas. Yet the number of job postings increased even more, up 42% to 12,037. And the state isn't keeping up with demand in some professions. The state's total labor force grew by nearly 2,600 workers (including current and new residents) between 2009 and 2010, according to the Labor Dept.

In the meantime, North Dakota has about as many openings as jobseekers to fill them. According to the state's commerce department, there are about 12,000 openings on the state's website; an estimated 14,000 current residents are unemployed.

After reading about North Dakota's budget surplus and low unemployment rate, Bill Siderski, 42, and his partner, Jana Lynn, 39, moved to Fargo from Portsmouth, R.I., and Seattle respectively in April. Neither had job offers and within two weeks of arriving, they both found work through a temp agency. Now, Mr. Siderski is working as a researcher, and Ms. Lynn is in the midst of a yearlong contract position with Microsoft Corp., writing documentation for its call centers.

Mr. Siderski had been on unemployment since March 2009, after losing his job at a plumbing company. "We knew nothing about Fargo, but it was a chance for us to get jobs and start our lives over," he said. At times the flat terrain gets boring, says the couple, who once drove two hours to visit what was billed as a "rare North Dakota waterfall," to find a drop of about six feet. Mr. Siderski, who dabbled in Rhode Island's film community, says although Fargo's film scene isn't as vibrant, the couple are happy with the move.

"Your whole outlook on life changes when you have a job to go to every day," said Ms. Lynn.

Historically, North Dakota towns have had quirky ways of attracting newcomers. In 2005, Hazelton, N.D., began offering out-of-state movers free land and up to $20,000 toward a home purchase. Other towns have offered free memberships to golf clubs or curling clubs. Only one family took Hazelton up on its offer of free land. But last year, the family said they would move back to Miami, citing wind chills of 50 below zero and a poor relationship with their neighbors, according to news reports.

This year, state representative Joe Heilman introduced a bill that wouldo allow students who stay in North Dakota todeduct up to $2,000 in college student-loan payments from their state taxes, in part to try to retain skilled individuals.

"Our state situation in general should be attracting more people," Mr. Heilman said. "People don't like our winters, but aside from moving the state, I don't know what to do about that."

The bill was voted down last week

Obama and his Job Creation Fantasies

When crazed idealists hold power they make bizarre and harmful demands on citizens. Demands like pressing citizens to drive $40,000 electric cars rather than the cars they would rather drive, like $20,000 cars that get 30 miles per gallon. Or SUVs that travel 25 miles on a gallon.

Have these deluded people studied the facts of oil consumption in the US? The world? It seems they cannot calculate aggregate consumption, and as a result of that inability they believe if they push Americans hard enough to buy electric cars they cannot afford nor want, that somehow oil consumption will drop.

Are they unaware that a complete replacement of the US auto fleet takes about 17 years? However, as a result of rising car quality -- evident from longer and longer warranties -- the replacement cycle is likely to increase.

Here's a thought. If the government truly wanted to accelerate the pace at which new cars enter the economy, the government should offer price supports, like the price supports it gives farmers, and give those price supports to scrap-metal dealers. Permit them to offer a sufficiently high price to buy any car that is more than 10 years old. If Americans are offered top dollar for a 10-year-old car, they are likely to take the money and buy a new vehicle. I'll bet a government program to buy old cars would work as well as any other financial stimulus program the government has attempted.

Obamanomics Failing to Create Jobs

Tuesday August 31, 2010

With thousands of young college graduates moving in with parents and returning Iraq War veterans facing long-term unemployment, President Obama is scrambling for cover.

Irresponsible spending, largesse for big banks and subsidies for a broken health care system have busted the budget and failed to create jobs.

Economists expect the Labor Department to report on Friday the economy lost another 80,000 jobs in August after shedding 131,000 jobs in July.

Completion of the Census accounts for most of the loss, but the report will demonstrate that rewarding Democratic Party academics with new high paying regulatory jobs and general hostility toward business is causing America's largest enterprises to head for China and small businesses to wither and die.

The unemployment rate will likely creep up a bit closer to 10%, as more Americans drain their retirement accounts and endure the frustration of slammed doors in Barack Obama's jobs market.

In July alone, 381,000 adults chose to quit looking for work altogether, and that trend will continue in President Obama's land of dashed dreams and squandered opportunities.

Economists expect the private sector added about 100,000 jobs in August but that is an abysmal performance 14 months into a recovery from a deep recession.

The economy must add 13 million private sector jobs by the end of 2013 to bring unemployment down to 6%. President Obama's policies are not creating conditions for businesses to hire those 320,000 workers each month, net of layoffs.

Net of inventory adjustments, the economy's demand for goods and services is growing at only about 1% a year. The real potential is about 5% but with economic policies so ill conceived and with a president so ambivalent about private enterprises -- other than those run by Wall Street barons, Hollywood producers and union bosses -- that simply is not possible.

In the second quarter, consumer spending; investment in new structures, equipment and software; and government purchases added 4.4% to demand. But as imports grew much more rapidly than exports, the trade deficit tapped off 3.4%. The difference, 1%, is annual growth in demand for U.S.-made goods and services. That has been the pace since the recovery began in July 2009.

Businesses can accommodate up to 2% growth in demand just by improving productivity and not adding workers. Unless the rapid growth in imports can be curbed, the U.S. economy is headed for very slow growth and rising unemployment.

The president's economic policies -- more spending, taxes and regulation for Americans and appeasing foreign mercantilists like China -- is simply not working.

The massive permanent expansion in federal spending and regulatory oversight built into President Obama's budget is discouraging private hiring by raising fears of even higher taxes and yet more intrusive regulation.

Simply, higher taxes discourage purchases of non-essentials and high-line durable goods, like better appliances, more appointed automobiles and higher quality homes, and higher taxes and tougher regulation increase incentives to offshore production to China and other locations where those burdens are less and entrepreneurship is more welcome.

Prior to the 2008 crisis, President Bush spent 19.6% of GDP and the deficit was $161 billion; whereas two years into the economic recovery in 2011, President Obama's budget projects outlays at 25.1% of GDP and a $1.3 trillion deficit in 2011. The latter figures are like to be closer to 27% and close to $2 trillion if the president does not accomplish the 4% growth his budgets assume in stark contrast to the real world the rest of us struggle.

Too much spending will require new taxes, and not just pushing rates marginally above 50% on families earning $250,000. And, higher rates for those families will raise taxes on half the income earned by proprietorships -- those small and medium sized businesses the president is urging to create jobs.

Much of the $787 stimulus money was squandered on political hobby horses that create few jobs. For example, grants to build green buildings displace other, more cost-effective private construction and don't increase the amount of commercial space rented or built over the next several years. By delaying projects, those grants have slowed construction spending and killed jobs.

The biggest banks received more than $2 trillion in TARP and Federal Reserve assistance to clean up their balance sheets and recapitalize securities trading, while the 8,000 regional banks got little assistance and remain burdened by toxic real estate loans. Consequently, nearly 250 regional banks have failed, and small and medium sized businesses cannot get credit to expand.

In addition to credit, businesses need more customers to create jobs, and the trade deficit -- in particular, imports of oil and the imbalance with China -- cut a huge hole in demand for U.S. goods and services. Without addressing oil and China, other efforts to create jobs are futile.

The president's moratorium on deep water drilling, though popular with environmental fundamentalists, kills jobs by laying off workers in the oil, gas and supporting industries and by sending too many consumer dollars abroad that could be spent here.

Detroit has the technology to build much more efficient gasoline-powered vehicles now, and a shift in national policy to rapidly build these would reduce oil imports and create many jobs. Instead, the president proposes to replace stickers on cars that report gas mileage intelligent folks can understand with grade school letters -- A, B, C...

If we could only have those letter grades for the president's economic appointees, we might be better off

China's undervalued currency makes its products artificially cheap and deceivingly competitive on U.S. store shelves, but Beijing's promises of new flexibility on the yuan have not translated into meaningful revaluation. The president, like a provincial premier, stands patiently accepting Chinese largess -- bond financing for profligate spending in Washington.

If President Obama wants to fix the federal deficit and create jobs, perhaps he should spend less, get serious about better using and developing American energy resources and quit appeasing China.

Candidate Obama promised those things but President Obama's memory seems short on everything but the failings of presidents passed.

Time to End the Corporate Income Tax

If there is one thing we know about profitable corporations, it is that any taxes they pay, they collect from customers. So why should the government take steps to raise prices of goods and services and decrease total jobs if it's possible to take a simple step that will put tax-paying people to work without sacrificing overall tax revenue?

Moreover, if the corporate income tax were eliminated, the contrived concept of depreciation would lose all meaning. Capital investments would occur as needed, rather than on a tax-accounting basis. Meanwhile, ending the corporate income tax is a way to encourage more companies to locate themselves in the US. So what are we waiting for?

Time to Junk the Corporate Tax
Nobel Laureate Robert Lucas says reform would deliver great benefits at little cost, making it "the largest genuinely true free lunch I have seen.'

MICHAEL J. BOSKIN

President Obama has put tax reform on the agenda, but surprisingly little attention is being paid to fixing the most growth-inhibiting, anticompetitive tax of all: the corporate income tax. Reducing or eliminating the corporate tax would curtail numerous wasteful tax distortions, boost growth in both the short and long run, increase America's global competitiveness, and raise future wages.

The U.S. has the second-highest corporate income tax rate of any advanced economy (39% including state taxes, 50% higher than the OECD average). Many major competitors, Germany and Canada among them, have reduced their corporate tax rate, rendering American companies less competitive globally.

Of course, various credits and deductions—such as for depreciation and interest—reduce the effective corporate tax rate. But netting everything, our corporate tax severely retards and misaligns investment, problems that will only get worse as more and more capital becomes internationally mobile. Corporate income is taxed a second time at the personal level as dividends or those capital gains attributable to reinvestment of the retained earnings of the corporation. Between the new taxes in the health reform law and the expiration of the Bush tax cuts, these rates are soon set to explode.

This complex array of taxes on corporate income produces a series of biases and distortions. The most important is the bias against capital formation, decreasing the overall level of investment and therefore future labor productivity and wages. Also important are the biases among types of investments, depending on the speed of tax vs. true economic depreciation, against corporate (vs. noncorporate) investment, and in favor of highly leveraged assets and industries. These biases assure that overall capital formation runs steeply uphill, while some investments run more, some less uphill. It would be comical if the deleterious consequences weren't so severe.

Of course, the corporation is a legal entity; only people pay taxes. In a static economy with no international trade, the tax is likely borne by shareholders. The U.S. economy is neither static nor closed to trade, and taxes tend to be borne by the least mobile factor of production. Capital is much more mobile globally than labor, and the part of the corporate tax that is well above that of our lowest tax competitors will eventually be borne by workers. In a growing economy, the lower investment slows productivity growth and future wages.

There is considerable evidence that high corporate taxes are economically dangerous. In a 2008 working paper entitled "Taxation and Economic Growth," the Organization for Economic Cooperation and Development concluded that "Corporate taxes are found to be most harmful for growth, followed by personal income taxes and then consumption taxes." Virtually every major tax reform proposal in recent decades has centered on lowering taxes on capital income and moving toward a broad-based, low-rate tax on consumption. This could be accomplished by junking the separate corporate income tax, integrating it with the personal income tax (e.g., attributing corporate income and taxes to shareholders or eliminating personal taxes on corporate distributions), and/or allowing an immediate tax deduction (expensing) for investment (which cancels the tax at the margin on new investment and hence is the priority of most economists). The Hall-Rabushka Flat Tax, the Bradford progressive consumption tax, a value-added Tax (VAT), the FairTax retail sales tax, four decades of Treasury proposals and the 2005 President's Tax Commission proposals would all move in this direction.

Reducing or eliminating the negative effects of the corporate tax on investment would increase real GDP and future wages significantly. Junking both the corporate and personal income taxes and replacing them with a broad revenue-neutral consumption tax would produce even larger gains. Nobel Laureate Robert Lucas concluded that implementing such reforms would deliver great benefits at little cost, making it "the largest genuinely true free lunch I have seen."

Reducing taxes on new investment could help strengthen what is a historically slow recovery from such a deep recession. It would also strengthen the economy long-term. American workers would benefit from more jobs in the short run and higher wages in the long run.

However, if a new tax device is used to grow government substantially, it will seriously erode our long-run standard of living. The VAT has served that purpose in Europe and, while better than still-higher income taxes, the larger-size governments it has enabled there are the prime reason European living standards are 30% lower than ours. Trading a good tax reform for a much larger government is beyond foolish. No tax reform can offset losses that large. Hence, a VAT should only be on the table if it is not only revenue-neutral but accompanied by serious spending control.

Further, the fraction of Americans paying no income taxes is approaching 50%. That sets up a dangerous political dynamic of voting ever-rising taxes to pay for ever-rising spending. We need more people with a stake in controlling spending. Replacing corporate and personal income taxes with a broad-based consumption tax could increase the number of those with "skin in the game." But some reforms, for example a VAT, might be much less transparent and may not serve this purpose.

Congresses (and presidents) seem unable to avoid continually tinkering with the tax code. A tax reform that is quickly riddled with special features would lose much of its economic benefit. We need a stable tax system that changes much less frequently, so families and firms can more reliably plan their future. Current fiscal policy, loaded with immense deficits, ever-growing debt, and the prospect of higher future taxes, is the biggest threat to such stability. To balance proposed spending in Mr. Obama's budget in 2015, his Deficit Commission's target year, will require at least a 43% increase in everyone's income tax. Thus, spending control is vital to tax stability.

American companies and their workers compete in the global marketplace saddled with a costly, anachronistic corporate tax system. To compete successfully in the 21st century, we will need to reform corporate taxation. There are several paths to doing so, each with its advantages. Unfortunately, tax policy is headed in exactly the wrong direction, raising taxes on corporate source income. Business investment is growing again after the collapse in the recession, which is usual in a cyclical recovery with very low interest rates. But eventually structural drags, from our antiquated tax code to massive public debt, will impede investment and economic growth.