Tax policy keeps recovering from gaining traction
Let's be nonpartisan here. You probably know that one of the candidates has said we'll see 12 million new jobs if he's elected president on Tuesday.
Turns out it's not such a crazy idea.
“Seven to nine million more people would be working right now,” says Stanford University's John B. Taylor, if this were a “normal recovery” from the last recession. The reason it isn't, and they aren't is wrong-headed direction from Washington.
“Gee, that's so big” is a typical first-blush reaction to the idea of 12 million more jobs vs. the 4 million-odd that are claimed, economist Taylor told a gathering at Stanford's Hoover Institution, a conservative think tank. In fact, he says, 12 million might even be lowballing the power of free markets to put people to work.
A pro-growth taxation package would help do it. Likewise a step-up in toughness at trade negotiations. And the surprise of new shale gas and oil resources is an “incredible opportunity,” Taylor said. It's altogether a shout-out to enterprising spirits.
But instead, business is stuck in hesitation and fear of new taxes, penalties and health care burdens. Trillions in investable cash sits on the sidelines.
“Policy is the problem,” said Taylor.
“We've had a binge of federal spending. The government used to be 19 percent of the economy. Now it's pushing 24 percent (on enormous borrowings). We need a real recovery (at least 4 percent growth). And we do not have to raise taxes.”
Taylor said it's grown clear that more “Keynesianism” — centrally-planned government spending to trigger growth — doesn't work.
“But for some reason we have slipped back,” he said. “People forget. And a slump brings tremendous pressure on politicians to ‘do something.'”
Another Hoover researcher, Joshua Rauh, warned that public employee pensions — well into six figures annually for some unionized jobs, compounded by abuse of overtime and early retirements — are bankrupting state and local governments.
A major culprit, he says, is the prestigious General Accounting Standards Board. It lets politicians get away with figuring on 8 percent annual returns for their pension funds. That's way too optimistic, he says. The result is that government bodies aren't pressed to set aside enough each year for future pension obligations. So government at all levels has built up unfunded pension liabilities in the trillions. In effect, virtually all states, whether they admit it or not, are in deficit.
Gary Roughead, a retired Navy admiral now doing research at Hoover, warned against the possibility of deep defense cuts if no overall budget deal is made, post-election, to head off the so-called fiscal “cliff.”
Anti-terrorism obligations are just one thing, he said. A hefty navy also should protect mining of the sea bottom and new shipping lanes that may open up in the Arctic as polar ice melts. There's a danger of technological slippage, too, in the country's industrial base if contractors give up on defense work, according to Roughead.
The admiral offered sobering views on current global bloodletting. “We'll be disappointed with the outcomes in Iraq and Afghanistan,” he said. “And there may be more seasons to the Arab spring.” Happily the U.S. Navy, at just 286 ships, remains far and away the world's best, he said.
Jack Markowitz writes on Thursdays for Trib Total Media. Email him at email@example.com.