Tuesday, December 2, 2014

How to detect a Republican “non-job creating,. job creation” bill

Everybody is in favor of job creation.  Little wonder then that Republicans are touting that they have passed no less than 46 “job creation” bills that the mean old Democrats have blocked in the Senate.  See: http://www.huffingtonpost.com/2014/11/30/republican-jobs-bills_n_6227190.html

Now, before we examine some of these so-called Republican “job creation” bills lets give some thought to how job creation does and does not occur and what government can do to actually create jobs.

First, contrary to what you will hear from Republicans, governments DO create jobs.  For example, in 2012 nearly 3 million Americans worked for the Federal government and nearly 19 million worked full or part-time for state and local governments.  Today, about 9 million Americans are unemployed.  If we increased the Federal, state and local government employment by just 10%, we would automatically create 2 million jobs and cut the unemployment rate from 5.8% to 4.5%, which would bring the U.S. to or near “Full Employment” by just about any definition.  See: http://www.bls.gov/news.release/empsit.a.htm and http://newsbusters.org/blogs/tom-blumer/2014/10/04/ap-sells-new-normal-59-percent-unemployed-almost-consistent-healthy

In other words, if we really wanted to bring the country rapidly to full employment, all we need is for the Republicans to pass some legislation funding hiring at any or all levels of government.
Of course, that is not going to happen.  Anyway, when most people talk about job creation, they are talking about private sector job creation.  So, let’s look at how and why that happens.

Imagine for a moment that you run a business.  You have employees.  Now, when and why would you decide to hire more employees?  Let’s say you suddenly find yourself with more profits because, for example, you got a tax break?  Would you: (A) give yourself a bonus, (B) buy some piece of technology that might make your company more efficient, so you would need to employ fewer people, or (C) hire more workers even though you really don’t have any work for them to do?  If you said (C), you are not much of a businessman.

Now, let’s say that you suddenly find that your company’s products/services are in great demand.  Customers are beating down your door.  You’ve increased overtime, but your employees are exhausted.  You are having to turn good customers away because you can’t produce enough product or provide the services your excited new customers are demanding.  Do you: (A) give yourself a bonus, (B) buy some piece of technology that might make your company more efficient, so you can handle the new customers with the same workforce or (C) hire more workers to meet the demand?  If you said (A), you’re not much of a businessman.

Think about it.  Businesses DO NOT hire people when there is no work for the new employees to do.  Businesses hire workers reluctantly when they have to choose between turning away paying customers or adding to their payroll so that they can meet the needs of these new customers and increase company revenues by a sufficient amount to overcome the increase in their payroll cost from the new hires
It is an issue of supply and demand.  When the current SUPPLY of employees is SUFFICIENT to meet the current DEMAND of work, businesses DON’T HIRE.  When the SUPPLY of employees is INSUFFICIENT to meet the DEMAND of work, then businesses DO HIRE.  It’s that simple.
Now, let’s examine the Republican “non-job creating” job-creating bills.


First, Republicans are proposing all kinds of ways to deregulate the energy sector in the name of job creation.  Supposedly these bills will save companies money they must now spend to comply with government regulation, such as hiring workers to ensure that regulatory requirements are met.  So, how do these bills impact the issue of employee supply and demand?  If you said, they DECREASE demand, you are right.  Deregulation is a job killer, not a job creator.  Companies will need to hire FEWER people to ensure that regulatory requirements are met.  But, what about the money companies save?  Knowing what you know about employee supply and demand, do you think employees will use those saving to hire more workers they don’t need or will they just pocket the savings or turn them into big bonuses for the top guys and gals? 

Tax Cut Bills

Second, Republicans propose a variety of tax cuts for corporations in the name of job creation.  Do these bills create DEMAND for more employees?  Will corporations use the tax savings to hire more workers the DON’T NEED or will they just pocket the savings?  You know the answer.  You understand employee supply and demand.

But, what about investment in research and development?  Wouldn’t these companies take the tax saving and invest in new research and development thereby creating jobs?  Maybe.  If, they have R&D that they would like to undertake, but could not afford before the tax cut.  However, as a Brookings Institution economist has noted much of the R&D work companies undertake is done overseas.  There is no guarantee that companies would use any tax savings to hire additional American workers, even if they used the tax savings for additional R&D.
Of course, tax cuts could create jobs if they were the right kind of tax cuts.  For example, if governments CUT taxes paid by poor and middle class Americans, these Americans would most likely spend the tax savings to purchase goods and services from the private sector, thereby INCREASING DEMAND and changing the employee demand/supply ratio causing private companies to hire more employees.  Note that Republicans are rarely, if ever, in favor of cutting taxes for the middle or working class
Education Bills

Republicans offer at least four education bills that they say are job creators.   Two have to do with requiring colleges to provide more counseling concerning student debt.  They may result in colleges hiring a few more counselors, but these bills have little or nothing to do with creating very many jobs.

The other two bills have to do with either allowing states to spend federal education funding as they see fit and/or providing more funding for charter schools.  It’s hard to see how these bills will have any positive impact on employee supply/demand.   

Welfare Bills

Two of the Republican "non-job creating job creation bills" would overhaul welfare policy to make poor Americans poorer by reducing benefits and to require recipients of welfare to get a job even if no jobs are available for them to get.  As some economists have noted, these bills are actually job killers since they reduce the spending power of poorer Americans whose spending helps to INCREASE demand for products and services thereby requiring companies to hire more workers to meet the demand.

Bills To Repeal The Affordable Care Act

Finally, Republicans say that Obamacare is a job killer and repealing the Affordable Care Act would create jobs.  So, what impact has Obamacare actually had on job growth?  Forbes reports that the healthcare industry has ADDED almost 1 million jobs since the Affordable Care Act became law.  Why?  More people got health insurance.  More people went to the doctor increasing DEMAND.  Health providers had to HIRE additional workers to meet the DEMAND. 

When is a “job creation bill” actually and “non-job creating, job creation bill”?

So, what should you ask Republicans when they tout their “job creation” bills?  Ask them specifically how their proposed bill will lead to an increase in the DEMAND for employees by increasing the DEMAND for products and/or services from the private sector?  If they can’t show how their proposal will alter the employee supply/demand ratio in a direct and positive manner, what they are proposing isn’t a “job creation bill” but a “non-job creating, job creation bill” that helps somebody but doesn’t do a damn thing to put more Americans to work.

Real “job creating, job creation” bills

What do the real “job creating, job creation” bills look like?  They are bills that CREATE INCREASED DEMAND FOR PRODUCTS AND SERVICES FROM THE PRIVATE SECTOR THROUGH DIRECT GOVERNMENT SPENDING.  For example, when governments spend tax dollars to repair roads and bridges, they hire private contractors who in turn hire workers to meet the increased DEMAND for road repair/construction products and services that governments have created.  When governments change education policy such as reducing student/teacher ratios, they create INCREASED DEMAND for teachers and teaching assistants.  When governments go to war, they INCREASE DEMAND for soldiers and for war making materials/supplies provided by the private sector that often must HIRE additional workers to meet the INCREASED DEMAND governments have created.  Government spending, particularly government spending that directly results in an increase in DEMAND for products and services from the private sector CREATES JOBS.  Why do you think the leaders of just every town in America would jump at the chance to have the feds locate a major military base or research facility in the city?  Republican or Democrat these local politicians know that government spending CREATES jobs?  Notice this.  Republicans almost always OPPOSE real “job creating, job creation” bills in the name of REDUCING government spending.

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