JOBS: THE DISCONNECT BETWEEN BUSINESS AND GOVERNMENT

There is a disconnect between companies and politics in bad times. The business of companies is to provide profits (not jobs) whereas the voting public demands that the government provide jobs and will change the Federal management political party when they cannot do so.


Under the present situation, the government is further to provide jobs at no cost to the taxpayer, a very difficult thing to do. There are those who wish to stimulate the economy by lowering personal income taxes; however, this is a very inefficient way to stimulate the economy as I have said elsewhere.*


During good times, everything is fine, companies will tend to provide jobs to increase profits, even more, the politicians get a growing workforce, and nearly everyone is happy (“nearly” because some are always left behind).


Now there are companies that will keep their workforce during bad times, at least for a while, because they feel that the training costs and startup costs outweigh the savings from letting the workforce go and shutting down some of all of their facilities, either selectively or en masse.


There are even a few companies that will keep their workforce for moral reasons and not business reasons.


The workforce is the elastic dimension of capitalism, even though many companies do all they can to minimize the size of the workforce through all sorts of automation. They will also minimize the size of their domestic workforce if they can find cheaper labor elsewhere through outsourcing. Still, it is by increasing and decreasing the workforce that companies mainly regulate their expenses.


A good example of automation eliminating jobs was when the cotton gin was invented which eliminated the need for all sorts of northern slaves to work at picking the seeds out of cotton but an increased need for slaves on plantations growing increased amounts of cotton. Thus the more difficult ones were shipped down the Ohio and Mississippi rivers to Natchez to work at growing cotton. This is where the saying sold down the river came from* * At one time, Natchez was a thriving community but is now just a small tourist town with no other industry to speak of.


There is a move again to cut the taxes on profits from foreign operations that are repatriated into the U.S. (e.g. John Chambers of Cisco).*** Right now companies must pay the difference between taxes paid to the foreign government and the taxes that would be paid if the profits were obtained domestically. It is felt that money would be brought back if the taxes in doing so were eased to the low single digits. I (who, of course, have no influence what so ever) would like to try a 5% tax on bringing foreign earnings back into the country. The danger of leaving this money overseas is that the companies will start wanting to do something with it and build factories and labs overseas rather than in this country. (The fear with encouraging the money to be repatriated is that companies would use the money to buy back stock and increase dividends, neither of which is productive and even more phonier acts. This is what happened the last time this was done in 2005 as a result of the “Homeland Investment Act”.****)


But easing the corporate tax burden on returning profits could enhance the prospect of building factories and labs in this country instead of overseas and thereby encourage some hiring if companies would cooperate. This the government could not only do at no cost to the American taxpayer, but bring in some tax revenue as well. It is felt that there is something like one or two trillion dollars of corporate profits overseas so at 5% we might be talking about $50 to $100 billion dollars of tax revenue. True this is only a baby step regarding our Federal deficit, but I think the solution is to take many baby steps and do so gradually so our system can adjust. And there could be a multiplier as well through construction of factories and labs (both of which involve labor) plus staffing such as mentioned above.


* http://stopcontinentaldrift.blogspot.com/2010/05/effectiveness-of-taxes.html
**http://www.bigsiteofamazingfacts.com/what-does-the-expression-sold-down-the-river-mean-and-how-did-the-phrase-originate
*** http://www.msnbc.msn.com/id/39173765/ns/business-personal_finance/
**** http://www.nytimes.com/2009/06/05/business/05norris.html