News: CJ Exclusives

Job Plans Abound, But Do Any Work?

Role of taxes, spending, and regulations debated

It seems that everyone has a “jobs plan” — a set of policies intended to jump-start employment and help the recession turn toward recovery. The outlines of the plans generally center on philosophical views of the economy.

Republicans and conservatives generally advocate reduced government spending and lower taxes to stimulate economic growth and employment. Democrats and liberals tend to focus on increasing government spending, protecting public workers, and pushing better training programs.

Behind the ideological debate over tactics, there are questions over not only the impact of policies at the federal level versus state-based initiatives, but also the role of government in job creation generally. The answers to these questions could dictate the direction of taxes, regulations, and government spending — in Washington and Raleigh as well.

Federal jobs plans

In May, Rep. Eric Cantor, R-Va., the House majority leader, released “The House Republican Plan For America’s Job Creators.” His plan called for a review of burdensome regulations, limiting business and individual income taxes to 25 percent, and expediting pending free-trade agreements with Colombia, Panama, and South Korea. It also called for fast-tracking visas for highly skilled immigrants, shortening the Food and Drug administration’s drug approval process, maximizing domestic energy production, and reducing spending to pay down the federal debt.

Contrast this with the American Recovery and Reinvestment Act of 2009, passed by the then-Democratic Congress and championed by President Barack Obama. Also known as the stimulus package, the $800 billion spending bill attempted to preserve and create jobs and speed up an economic recovery. Though supporters said the stimulus bill would prevent unemployment nationally from moving above 8 percent, in fact the seasonally adjusted U.S. unemployment rate peaked at 10.1 percent in October 2009 and remained at 9.1 percent in May.

In February, Obama took a separate approach when he formed the President’s Council on Jobs and Competitiveness, a 26-member committee of “distinguished citizens outside the federal government,” headed by GE Chairman Jeffrey Immelt. The Jobs Council was created to “provide nonpartisan advice to the president on continuing to strengthen the nation’s economy and ensure the competitiveness of the United States and on ways to create jobs, opportunity, and prosperity for the American people.”

Obama came to North Carolina June 13 to participate in the second full meeting of the council. At that event, the council released an 11-point plan for creating jobs. Suggestions included graduating 10,000 more engineers, enhancing community college training programs, and improving the small business loan process. Another solution called for speeding up the permitting process for large projects. None of the solutions involved reduced government spending or lowering taxes.

Meantime, U. S. Sen. Kay Hagan, D-N.C., introduced her own jobs bill in June. “Job creation is my number one priority, and the America Works Act will connect people looking for work to employment opportunities,” she said in a press release. Hagan said there is a disconnection between community college training programs and the needs of employers. Her bill would create a nationwide credentialing program in all industries to address the problem. She said eight community colleges in North Carolina have a skills credentialing system that could be a model for the nation.

Former President Bill Clinton recently released his 14-point “jobs blueprint.” Clinton acknowledged that further federal stimulus spending and additional incentives targeted directly toward creating jobs were unlikely. Among his suggestions: a program to paint all black roofs white to save energy costs, government-funded on-the-job training, and teaching skills that employers need. His plan also recommends cutting U.S. corporate tax rates that he said were the second-highest in the world.

Jobs debate in N.C.

Those contrasting approaches have played out in North Carolina’s budget debate.

The $19.9 billion budget proposal Gov. Bev Perdue offered in February extended three-fourths of the 1-cent sales tax increase that was set to expire at the end of June. By allowing the temporary sales tax to stay on the books, she also was able to include a cut in the state’s corporate income tax rate — the highest in the Southeast — from 6.9 percent to 4.9 percent.

The GOP countered with a $19.7 billion spending plan that let the temporary sales tax sunset and added a provision exempting from income taxes the first $50,000 of income generated by small businesses. Republican legislative leaders said the expiration of the sales tax would return money to consumers; they would spend it and create new jobs in the private sector, offsetting any positions eliminated in government agencies. They also said their small business tax cut would help more companies, since few N.C. businesses pay corporate income taxes.

Perdue vetoed the budget in June, but the General Assembly was able to override the veto.

Whose policies matter?

While a debate rages over the direction of national policy, can state-based initiatives drive job creation? North Carolina Chamber of Commerce President Lew Ebert told Carolina Journal he believes they can.

“When they let the temporary sales tax expire, legislative leaders sent a signal to the business community that should have a good impact on job creation,” he said. He also cited the workers’ compensation reform, regulatory reform, and tort reforms as examples of legislation passed in the current session that should boost job creation.

For her part, Perdue has focused on preserving the sales-tax hike and attending ceremonies announcing plant openings and other new business starts. She recently completed a statewide “Jobs Tour” and is quick to issue a press release any time a private company announces a business expansion.

Where does Perdue think the greater leverage lies — with federal officials in Washington, D.C., or state lawmakers and administration officials in Raleigh? Perdue did not answer the question directly.

“Governor Perdue believes the best way to create new North Carolina jobs is to strengthen our strong business climate and support our high growth and small businesses,” said spokeswoman Chris Mackey, in response to a query from CJ. “That means investing heavily in education at all levels, providing a well-trained, highly productive work force, ensuring capital and credit are available to growing businesses, knowing when to offer assistance and support and when to get out of the way. That’s why she has pushed for regulatory reform and submitted a budget that reduced North Carolina’s corporate tax rate to the lowest in the Southeast and provided a refundable small business tax credit.”

Michael Munger, an economist and the chairman of the political science department at Duke University, disagrees. “The employment situation in North Carolina is largely a federal problem,” Munger told CJ. He said bad federal policies and deficit spending are the problems. “Gov. Perdue and the General Assembly are stuck with having to operate with a balanced budget,” he said.

But Munger stressed that the purpose of an economy is not to create jobs.

“Jobs are a means to an end, not an end in themselves. We all want to have enough money to buy the things we need for ourselves and our families,” he said. “Only private workers can create the diversity of products we depend on. Government workers, at best, support the private sector by providing roads, services, and [police] protection.”

Don Carrington is executive editor of Carolina Journal.