A Texas-size pri­vate jobs pro­gram

The Washington Times Weekly - - Commentary -

The fed­eral gov­ern­ment should take a les­son from one of the 50 states as it strug­gles to de­velop a “stim­u­lus” pro­gram that will lift the sag­ging U.S. econ­omy. The Texas model of eco­nomic de­vel­op­ment pro­duces pos­i­tive re­sults with low taxes, fis­cal re­straint and reg­u­la­tory re­form.

But the Demo­cratic ad­min­is­tra­tion and Congress in­stead seem de­ter­mined to fol­low the Cal­i­for­nia model — high taxes, fis­cal mis­man­age­ment and reg­u­la­tory overkill. To see the likely re­sults of ap­ply­ing such a model na­tion­ally, all we have to do is look at what is hap­pen­ing in Cal­i­for­nia. To see what could hap­pen if Wash­ing­ton adopted sane poli­cies, look at Texas.

Cal­i­for­nia is strug­gling to over­come a bud­get deficit of more than $40 bil­lion. Texas’ main bud­getary chal­lenge is to avoid be­ing tempted into over­spend­ing its sub­stan­tial bud­get sur­plus.

In his State of the State ad­dress on Jan. 15, Cal­i­for­nia Gov. Arnold Sch­warzeneg­ger said dra­mat­i­cally, “The truth is that Cal­i­for­nia is in a state of emer­gency.” The deficit “is a rock upon our chest and we can­not breathe un­til we get it off.” The state re­port­edly is per­ilously close — a mat­ter of days or weeks per­haps — to not hav­ing enough money to cover all its bills.

Cal­i­for­nia can­not blame na­tional and in­ter­na­tional prob­lems for its fi­nan­cial woes. Jean Ross, ex­ec­u­tive di­rec­tor of the Cal­i­for­nia Bud­get Project, ad­mits that “Cal­i­for­nia went into this down­turn in a very weak po­si­tion.”

Texas, on the other hand, can boast that its poli­cies cush­ioned the blows its econ­omy re­ceived from the out­side. Texas’ un­em­ploy­ment rate is more than a point be­low the na­tional av­er­age and more than 3 points be­low Cal­i­for­nia’s rate.

As An­dres Al­can­tar, my fel­low com­mis­sioner at the Texas Work­force Com­mis­sion has noted, “Texas em­ploy­ers have added a sig­nif­i­cant num­ber of jobs in the past 12 months while the United States has lost mil­lions of jobs.” That’s be­cause “state leaders have laid a strong foun­da­tion for Texas as a busi­ness-friendly state with low taxes and less reg­u­la­tion.”

Texas has learned the most im­por­tant les­son of job cre­ation: Gov­ern­ment can­not cre­ate jobs — only the pri­vate sec­tor can.

While the gov­ern­ment may seem to cre­ate jobs when it hires peo­ple or buys things, it de­stroys at least as many jobs as it cre­ates when it does so. It has to get the money to pay the peo­ple it hires from some­where, and that some­where will have that much less money to hire peo­ple and buy things. Of course, John May­nard Keynes, the in­tel­lec­tual found­ing fa­ther of deficit spending, said he didn’t care whether the gov­ern­ment paid some peo­ple to dig holes and other peo­ple to fill them in. But that means money is un­avail­able for other, more pro­duc­tive projects.

The fed­eral gov­ern­ment does not need to spend tril­lions of dol­lars in a vain at­tempt to “stim­u­late” the econ­omy. In­deed, one of the most im­por­tant things the gov­ern­ment could do to en­cour­age eco­nomic de­vel­op­ment and job cre­ation would be rev­enue neu­tral. Over time, this change in eco­nomic pol­icy would bring in ex­tra money to the Trea­sury: The time has come to re­form our econ­o­mykilling busi­ness tax sys­tem.

At the na­tional level, we have to scrap a busi­ness tax pol­icy that re­wards busi­nesses for bor­row­ing money and ship­ping jobs over­seas and pe­nal­izes them for sav­ing money and in­vest­ing in the United States. This must change if we are to re­duce our de­pen­dence on for­eign en­ergy and re­build our man­u­fac­tur­ing base.

Our tax struc­ture pro­vides in­cen­tives for com­pa­nies to in­cur debt in or­der to avoid tax­a­tion. Com­pa­nies can write off debt, but sav­ings and in­vest­ment in­cur heavy taxes. The tax struc­ture also makes it dif­fi­cult for Amer­i­can busi­nesses to com­pete with their for­eign ri­vals. The United States is the only mem­ber of the Or­ga­ni­za­tion for Eco­nomic Co-op­er­a­tion and De­vel­op­ment (OECD) that does not have a bor­der-ad­justed value-added tax, or VAT. As a re­sult, our goods carry the full bur­den of fed­eral, state and lo­cal taxes, plus an added tax av­er­ag­ing 18 per­cent when they are shipped to for­eign mar­kets.

What’s worse, for­eign goods shipped into the United States en­joy an 18 per­cent VAT abate­ment. Econ­o­mist Doug In­gram says we are “ex­port­ing pros­per­ity,” I be­lieve be­cause of our fa­tally flawed busi­ness tax sys­tem.

Austin busi­ness­man David Hartman has an idea on how to level the play­ing field for U.S. busi­nesses so we can re­build our man­u­fac­tur­ing base. For ex­am­ple, we could re­place the cor­po­rate in­come tax, re­duce the es­tate tax (the in­fa­mous “death tax”), and cut pay­roll taxes sub­stan­tially with an 8 per­cent bor­der-ad­justed, val­ueadded tax (VAT). The VAT would raise as much money as th­ese other taxes but would be much less of a bur­den on the econ­omy. In the long run, it would bring in a lot more money than the taxes it would re­place be­cause the econ­omy would grow much faster. We would have a tax sys­tem that would en­cour­age com­pa­nies to cre­ate jobs in the United States and keep them here.

There are other ways to pro­vide an eco­nomic “stim­u­lus” without deficit spending. We need to rekin­dle that strong work ethic whereby in­di­vid­u­als take pride in their work and in us­ing the tal­ents God gave them. We should res­cue those young Amer­i­cans trapped in the de­struc­tive drug cul­ture. And, our ed­u­ca­tional sys­tem must pre­pare stu­dents for real jobs in the real world with a greater em­pha­sis on the kinds of skills train­ing that can en­cour­age our young peo­ple to be­come more self-suf­fi­cient.

Pri­vate-sec­tor job cre­ation, along with a re­newed em­pha­sis on skills de­vel­op­ment and a good work ethic, would pro­vide the kind of eco­nomic stim­u­lus plan we need to put Amer­i­cans back to work.

Tom Pauken is chair­man of the Texas Work­force Com­mis­sion in Austin.

Newspapers in English

Newspapers from USA

© PressReader. All rights reserved.