Politicians and jobs

Washigton Post (Jonathan Weisman) reports: "Democrats Can't Get Firm Grip on Jobs Issue"

Democratic presidential candidates have made the loss of U.S. jobs to international competition the centerpiece of their campaigns, but even some of the candidates' economic advisers acknowledge that remedies offered -- such as closing tax loopholes on overseas income and offering tax breaks for domestic hiring -- would probably do little to stop the bleeding. . . .

The movement of jobs to low-wage countries . . . has been driven by powerful forces of economic globalization that may be beyond a politician's control . . . . The two leading Democratic candidates have fallen back largely on one economic factor that Washington does control: the tax code.

Kerry . . . and . . . Edwards . . . both have said that tax law rewards corporate expansion overseas. And both would cut taxes for domestic manufacturing and offer temporary tax credits for hiring manufacturing workers in the United States. . . .

Many economists and some business officials agree that companies are reaping tax benefits from overseas expansion. Citigroup executives told industry analysts last month that the banking firm lowered its effective tax rate from 31.3 percent to 30.6 percent last quarter, boosting income by $52 million, by putting more money into overseas operations.

The decline from a 33.7 percent tax rate in 2002 "primarily represented benefits for not providing U.S. income taxes on the earnings of certain foreign subsidiaries that are indefinitely invested," a company document says.

In addition to an incentive for shipping away jobs, this may be a significant loss of revenue to the US Treasury, contributing to the deficit, though perhaps but a drop in the huge bucket (sea?) of red ink.

But virtually no one would say that taxes are a primary -- or even a significant -- factor in the movement of as many as 300,000 white-collar jobs and many more manufacturing jobs abroad in the past several years. No matter how sweet the tax incentive is to expand in India, for instance, it could not be more enticing than lowering a software developer's pay from $60 to $6 an hour. . . .

Kerry and Edwards have embraced pending congressional legislation to create a lower tax bracket for domestic manufacturing operations. Kerry would give employers tax credits to offset payroll taxes for new hires. Edwards would renew tax incentives for business investment in impoverished areas, but target them at regions hit hardest by international job losses.

Both candidates have promised programs to finance alternative energy development and to lower the cost of employer-sponsored health care, programs they say would make U.S.-based industries more internationally competitive.

Kerry has also said government contracts, when possible, should go to U.S.-based businesses, and that call-center phone operators should at least be required to identify what country they are in.

["Good afternoon. Thank you for calling All-American Software Company. This is Indira in India. How may I help you today?"]

[Kerry] has called for a government study into outsourcing, its scope and costs, and has backed a law requiring companies to keep records of what jobs were sent abroad and why. . . .

Roger C. Altman, chairman of the Wall Street investment firm Evercore and a Kerry economic adviser, said some jobs for which the wage differences are vast will not be saved. But, he said, an integrated response focused on taxes and lowering business costs will save "certain jobs that are susceptible to a competitive response."

Meanwhile, back at the ranch-White House, reports the Washington Post (Dana Milbank): "Bush Backs Off Job Forecast; Economic Advisers Project 2.6 Million More Positions This Year"

A Feb. 9 report by the White House Council of Economic Advisers predicted that payrolls would grow to an average of 132.7 million in 2004 from 130.1 million in 2003, an exceptionally rapid employment gain for an economy that has shed 2.3 million jobs during Bush's tenure. Facing the prospect that Democrats would make a campaign issue of Bush's failure to meet his own projections, Bush and top administration officials declined to endorse the 2.6 million jobs forecast.

Asked Wednesday if he agreed with the prediction, Bush would not endorse the figure, saying, "I think the economy is growing, and I think it's going to get stronger." . . .

The annual CEA report has had difficulty in the past with its forecasts for jobs growth. Previous reports predicted the economy would add 1.7 million to 3 million new jobs in 2003, but in fact the nation lost 53,000 jobs.

Federal Reserve Chairman Alan Greenspan said Tuesday that the 2.6 million jobs forecast was "a credible forecast" if productivity gains decrease this year. But the Fed issued a report Tuesday saying rapid productivity gains are "likely to be sustained" this year.

Productivity growth, then, which ought to be a blessing (it certainly is on the "micro" level of the individual firm that can thereby become more profitable), may be the curse that is one of the downfalls of the Bush administration.

This paradox is beautifully illustrated and discussed in "Ramifications of Increased Productivity: A Paradox In Approaching Paradise," a chapter of "Ethical and Philosophical Foundations of Economics" an online book by Richard Garlikov, an interesting freelance online writer and "Philosophical Counselor."

Some of his thoughts:

Yet what we are talking about here is simply greater productivity, which ought to be a boon to civilization, since greater productivity always lets there be either an increase in goods and services available or an increase in leisure (which is essentially a decrease in required labor). The challenge is to find a reasonable and fair way under the circumstances to deal economically with increases in labor productivity (and perhaps concomitantly in those situations where labor decreases in productivity through reductions in available resources or skilled labor, etc.). The mechanism needs to be fair simply because morality prima facie requires fairness where possible. And the mechanism needs to be reasonable, as does any economic mechanism, in at least the sense that it does not cause any unnecessary loss of incentive to achieve and thus cause an overall decrease in productivity. . . .

Diminishing leisure and adding work to an economy seems to be easier and less problematic from a fairness perspective than does diminishing work and adding leisure. Yet the various points along the way going in either direction might be the same. It is just generally socially easier to distribute work acceptably than to distribute leisure acceptably.

And one of the places where this is most apparently problematic now is in the kinds of cases above where machines and other mass production techniques can add leisure by doing work for people and where an increased supply of labor (such as in developing countries) holds the potential for allowing everyone to do less work overall and thus have more leisure. But we don't have a good automatic economic or social mechanism in place for adding workers in order to increase leisure for all, instead of having the new workers simply replace the previous workers, thus forcing more "leisure" on them than they can afford to have. . . .

Apart from some clearly unfair ways of assigning new, increased labor (as in drafting only economically disadvantaged people, "blue-collar" workers, or people not in college, in times of war to do the labor of fighting), as we increase the amount of work that needs to be done, we seem to have less social economic difficulty than when we decrease it. That is because we have few mechanisms (such as reduction of hours in the standard work week, decreasing the age of retirement, or increasing paid vacation time) for distributing newfound substantial (potential) amounts of leisure in ways that are and that seem both fair and not damaging to the work ethic. As technology and globalization brings the potential and the promise of more abundance, more leisure, and less potential need for work for everyone, it is increasingly important to bring into the economy mechanisms which will distribute that abundance and leisure fairly, productively, and reasonably.

And that, my friends, is the true essence of the "problem" we face that we see manifested as a frightening loss of jobs rather than a pleasurable increase in leisure (and overall societal material wealth). Don't expect the politicians to discuss it in these terms, though.