Job creation and capital flight
Paul Ryan made a powerful point about job creation in his speech at the Republican National Convention:
“What did the taxpayers get out of the Obama stimulus? More debt. That money wasn’t just spent and wasted – it was borrowed, spent, and wasted. Maybe the greatest waste of all was time. Here we were, faced with a massive job crisis – so deep that if everyone out of work stood in single file, that unemployment line would stretch the length of the entire American continent. You would think that any president, whatever his party, would make job creation, and nothing else, his first order of economic business.”
This point has occurred to me every time President Obama announced one of his many risible “pivots to job creation,” which happened well over a dozen times over the course of his presidency. (It is sometimes difficult to pinpoint where one “pivot” ended, and the next began.) Many times we heard Obama say that job creation was his top priority. For example, during his 2010 State of the Union address, Obama talked about some jobs ostensibly created by his “stimulus” bill, then declared:
“There are stories like this all across America. And after two years of recession, the economy is growing again. Retirement funds have started to gain back some of their value. Businesses are beginning to invest again, and slowly some are starting to hire again.
“But I realize that for every success story, there are other stories, of men and women who wake up with the anguish of not knowing where their next paycheck will come from; who send out resumes week after week and hear nothing in response. That is why jobs must be our number-one focus in 2010, and that’s why I’m calling for a new jobs bill tonight.”
How are you enjoying all that business investment and hiring, folks? Hope you remembered to fasten your seat belts for the roaring “recovery” Obama gave you the heads-up about!
Now, some allowances must always be made when politicians talk about their “number one focus” or “top priority.” This is broadly true in private life, as well. Declaring a top priority doesn’t usually mean all other priorities are completely rescinded. That’s really a matter of the urgency of your situation, isn’t it? When you’re drowning, getting some air really is just about all that matters. At other times, some attention is still paid to secondary considerations while a person or organization pursues their primary goals.
If job creation really was as important to Obama as he claims, he would have set aside far more of his other agenda items, such as thwarting American energy development. In reality, by any rational standard, promoting the creation of healthy private sector jobs has never been in his Top Ten.
But once Obama is gone, what would a real focus on job creation look like? Deliberate Obama-era obstructions to certain industries can be removed, but what next?
Broadly speaking, job creation requires two things: profitable opportunities, and the capital to exploit them. Both of those requirements can be affected by government policies… more commonly in negative ways. Opportunities can be walled off by regulatory barriers. The cost of labor can be artificially inflated by mandates, making it more difficult to develop a profitable business model.
But one of the most urgent and immediate problems is that our corporate tax rates are driving investment capital out of the country entirely. The Wall Street Journal posted an article about this recently.
“More big U.S. companies are reincorporating abroad despite a 2004 federal law that sought to curb the practice,” the Journal reported. “One big reason: Taxes. Companies cite various reasons for moving, including expanding their operations and their geographic reach. But tax bills remain a primary concern. A few cite worries that U.S. taxes will rise in the future, especially if Washington revamps the tax code next year to shrink the federal budget deficit.”
(Emphases mine.) The article goes on to cite several examples, including the Eaton Corporation, which is re-incorporating in Ireland to save $160 million per year on U.S. taxes. They would have been mad not to reincorporate. Liberals love to paint “offshoring” as some sort of mean-spirited, unpatriotic outrage, but there comes a point where it simply does not make economic sense to remain in the United States, and serve as a revenue target for our increasingly desperate, bloated government. That’s the outrage.
Capital movement takes time. Many of these corporations are fleeing conditions they anticipate in the coming year, because they can’t afford to wait until they’re trapped beneath the weight of Taxmageddon. Everyone should understand that pre-emptive capital flight will get worse as business owners perceive the government as growing more desperate. The smartest, most aggressive investors – the people we desperately need to turn this economy around – will be gone long before Doomsday.
Are we serious about job creation? Then we need to reverse this absurd situation, fast. Investors should be flocking to America, not running away from it. We have a golden opportunity to attract capital from certain places where things are looking even worse. People with money are exiting France, Spain, and other European basket case economies in droves. They should be coming here. They shouldn’t be thinking about going anywhere else. We have incredible human and natural resources to offer them. We just have to set an attractive price for doing business.
That means growing up, setting aside childlike class-warfare obsessions, and reducing the burden of government. Would a historic cut in corporate taxes and capital gains taxes starve the government of revenue? So be it. Let government grow smaller, so that American may grow larger. Let Washington make all the “painful sacrifices” for a change. Let us have the confidence in our economic liberty to understand that a smaller slice of a rapidly growing economic pie would not leave the government short of cash for long.
And if we’re not willing to take such measures, let us stop the inane babble about “job creation” as our “number one focus,” and be more honest about the shallow grave America is climbing into. When Barack Obama was told by an interviewer, during the 2008 campaign, that lowering capital gains rates actually increases revenue, he responded that he would nevertheless “look at raising the capital gains tax for the purpose of fairness.” You will never have a true focus on job creation with such a man occupying the White House.