Floss to Gold? Asking Better Economic Questions

While Nevada sits with an 11.6% statewide unemployment rate, an 11.8% rate in the Las Vegas Metropolitan Area, an 11.5% rate in the Reno-Sparks area, an 11.7% rate in Carson City and environs, (Elko County micro area is at 6.1%) [DETR] the national debate over jobs and economic policy gets waged in Sound Bites and Furious Advertising.  Everyone feels “our pain,” but there are two very different ideological positions for dealing with it.

The General Policies

The Romney Campaign summarizes the candidate’s Job Creation formula as follows: “His plan seeks to reduce taxes, spending, regulation, and government programs. It seeks to increase trade, energy production, human capital, and labor flexibility. It relinquishes power to the states instead of claiming to have the solution to every problem.”  [Romney]

The categories on the Obama website promote the President’s interest in  (1) Investing in American manufacturing and innovation, including doubling the tax deduction for domestic advanced technology manufacturing from 9% to 18%, and offering a 20% tax credit against expenses incurred in relocating jobs back to the United States;  (2) cutting taxes for small businesses and streamlining the patent process; and (3) restraining the excesses of the Financial Sector and curbing practices on Wall Street that leave American taxpayers holding the bag for financial sector errors in judgment.

Both campaigns are heavy on tax cuts, but diverge from that point.  Both campaigns place the jobs category in a wider economic framework.  The frames are very different.  Romney’s summation is a classic compilation of conservative notions all predicated on the assumption that government is the problem.   Obama’s summation is a centrist amalgam of tax policy and consumer protections.

Bush 2.0

The Romney proposals are little more than Bush Redux, the Trickle Down Theory of economic growth.  As noted previously:

“We should also bear in mind that what Governor Romney is calling a “job creation” proposal would more accurately be labeled a tax reduction plan which he hopes might could would should in some idealized ideological world of Trickle Down economics produce the job growth we want IF it works — we’re still waiting for the tax reductions on corporations and wealthy individuals to work from the last round. [DB 7/9/12]

Governor Romney also hits all the correct notes in the stump speeches about small businesses, but once again it’s with a philosophy which assumes that if the yachts are rising, with the tide or not, then everyone’s boat will float a bit higher.  [DB 7/10/12]

When the components of the Gross Domestic Product were discussed in terms of what kinds of economic growth would we need to convince firms to add more employees we found there volatility in private economic investment, negatives in government spending, and the overall GDP muddling along.  [DB 7/10/12]

Simplistic prescriptions like “cutting regulations,” and “increasing labor flexibility” from the Romney camp should be looked as as closely as the proposal to fast track the Trans-Pacific Partnership — or, NAFTA on steroids. [DB 7/9/12]

He Did It Too!

One of the weaker arguments made by the Romney campaign is that the Obama Administration has been derelict in its duty to protect American jobs.   The first charge was “he did it too.” From the former Massachusetts Governor campaigning in Colorado:

“It is interesting that when it comes to outsourcing that this president has been outsourcing a good deal of American jobs himself by putting money into energy companies — solar and wind energy companies that end up making their products outside the United States,” Romney said. “If there’s an outsourcer-in-chief, it’s the president of the United States, not the guy who’s running to replace him.”  [CNN]

First, there’s an interesting split here.  The former Massachusetts Governor is speaking only of the products used to transform solar and wind energy into electric power — not the power itself.   It would be nice if the Chinese didn’t manipulate their currency, and it would be well if there were more American manufacturers of solar and wind energy components.  It would be nicer still if the U.S. were not so dependent on fossil fuels to produce electrical power.

Secondly, the slap at solar and wind technologies implies that Governor Romney is firmly in the Fossil Fuel camp, and the attempt to equate renewable energy with off shoring jobs is a rhetorical trick, not necessarily the explication of any policy not already associated with the Bush Administration.

The second charge was a bit more nuanced, but not much:

“In addition to Priebus’ event, Romney’s campaign is also pointing to a new story in The Washington Post that details criticism of Obama for allowing domestic jobs to shift overseas. “American jobs have been shifting to low-wage countries for years, and the trend has continued during Obama’s presidency,” states the article, published online Monday night.”  [CNN]

Now, why would “jobs shift to low wage countries” for years?  Any reference to tariffs is asking for an immediate torrent of “Protectionism!”  And, an obvious question to ask at this juncture is whether trade agreements promote economic growth or “high productivity poverty?”

Any globalized corporation seeking to reduce its labor costs is going to locate plants in regions with a competent labor supply and a local infrastructure capable of supplying energy needs and providing adequate transportation and distribution for products.  “If only labor costs could be reduced, and union contract  requirements be eliminated — then we would have prosperity,” cry the manufacturers.  The numbers don’t seem to validate this contention.

If unionization and hourly compensation costs are the down fall  of economic growth, then why is Germany seven places above the United States?  However, as long as Chinese workers are comfortable with monthly compensation of $636, or workers in India will accept wages averaging $295/mo. or Pakistan’s labor force averages $255/mo. [BBC] then manufacturers who seek low hourly compensation costs will “shift jobs to …..” and there won’t be much any chief executive can do about it.

Asking Better Questions

A better question is how to replace manufacturing jobs for clothing or textiles — already long gone — with new manufacturing in new technologies.  We can ante-up to create new firms, or in the worst scenario, throw up both hands and allow the Germans and the Chinese to take the field.

We can get entangled in small arguments about whether Ralph Lauren, Inc. should have clad our Olympic team in Chinese manufactured clothing, or we can ask whether we want “Buy American” provisions in government procurement processes.   Conservatives, such as Governor Romney,  have generally been opposed to Buy American legislation.  [OF]

We can spew and sputter about backing start up loans to individual niche market solar panel manufacturers — or, we can ask how we might best coordinate the efforts of our manufacturing and higher education resources toward creating energy technology for the 22nd century.

We can bash unions, create more “right not to work” states, and restrict workers’ capacity to bargain for wages, hours, and working conditions; or we can focus more attention on retraining employees for modern jobs.  We can grouse about environmental regulations to abate air and water pollution, or we can put additional effort into devising and manufacturing the best quality filtration systems on the planet.

In short, we can cut taxes and regulations until every cow in the Intermountain West comes home — but until we broaden our focus from a narrow view of what is good for the financial markets to a wider perspective including what it will require to advance our manufacturing capabilities, we’re still going to be stumbling in the sagebrush trying to transform “high productivity poverty” floss into “high employment opportunity” gold.

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Filed under 2012 election, Bush, Bush Administration, Nevada economy, Nevada politics, Obama, Romney

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