Labor Day was originally created to celebrate the working folks.

Labor Day 2010 is not going to be a happy day for the 16 plus million unemployed or underemployed people in the country. There is no job to go to Tuesday morning for millions.

There is a lot of anger and frustration in the country now. Some politicians are exploiting this anger and frustration via making illegal immigration an issue, and fueling fear that our country is in ther grips of a socialist conspiracy that requires toppling Democratic Party control of Congress and ultimately the White House.

But the Republican agenda offers no real solutions to the core problems giving rise to the Great Recession. They just give folks straw men to rant at. The Great Recession has produced the Great Distraction in America. The Tea Party is just one manifestation of this misdirected anger.

One could (and many do) spend a lot of energy berating Republicans for exploiting the anger and frustration for their own political gain and their failure to offer real solutions that will put Americans back to productive work. No one is listening.

However, the Democrats must share the blame for all this anger and frustration.

Why?

Because no one from Obama on down is articulating an alternative path that will put us back to work without piling on even more debt and hidden agenda government regulation.

Keeping the GOP tax breaks for the rich isn’t going to “trickle down” to more jobs.

Passing another “stimulus” package to throw money at state and local governments for public works projects is not going to create a permanent new economy that allows us to make enough money day in and day out to pay our bills and buy homes and cars and all that stuff.

Our current situation is the product of both Republican and Democrat policies.

We’ve got some fundamental questions to ask and be answered to re-direct America onto a path that will create a new permanent economy.

The first and most obvious question is what is that new economy?

Our old paradigms about work are dying. They have been dying for decades as steel mills closed, manufacturing jobs were sent to low wage countries, and American consumers became dependent on “made in China” products to offset our loss of real income.

Corporations and their share holders and debt holders have obviously benefited from the restructuring of the global economy. Why should they care if their profits come from cheap labor in China as long as their bottom lines are intact?

What is fundamentally missing in our country is any sense that if the working people can’t afford to buy anything, the country as a whole is in deep trouble. This is highly evident in the problem facing state and local government budgets that were dependent on sales and property tax revenues. If people aren’t making money, they aren’t able to spend money.

We have a terrific opportunity to create an enormous pool of new and valuable jobs in the country by pursuing energy independence. That is not just expanding renewable energy supplies…while that is really important in the long run…no matter what the environmental whining…we still need a lot of coal, natural gas and oil to keep our lights on and our economy moving. This is not an either/or choice. We must do both.

Tax policies have always been used to manipulate the economy…stimulate investment here, discourage it there.

The issue here is whether or not we gain what we seek by providing tax cuts, tax incentives or whatever to business.

Just handing a lot of rich people a tax break doesn’t directly create jobs.

But there are lots of ways to use tax incentives to create jobs. The government must get a lot more targeted in how they use tax incentives to create jobs. If tax incentives create a flow of money into jobs, it is the employed people paying the taxes that keeps government running.

I once heard a US Treasury Department official explain money. “Money is not destroyed…it just moves around,” he said. “It is the job of government to manage the flow of money.”

We have done a really poor job of managing the flow of money in our country. It concentrated into Wall Street schemes. It flowed overseas. It went everywhere expect in creating employment here in America.

The consumer is the anchor of the American economy, and if the consumer has no money because it flowed elsewhere, then our economy freezes up.

Our credit practices and management has also distorted money flow.

Too many people who should not have gotten into debt did so in the housing bubble. That wrecked a substantial portion of the economy associated with all aspects of home building from real estate sales people to construction workers.

Obviously we are all very debt averse now and for good reason. We assumed we could carry large amounts of personal debt because we had jobs and the income to pay those debts. We mortgaged our futures and got a nasty surprise when our jobs evaporated.

Ironically, while our jobs evaporated, our monthly debt payments did not, and a whole bunch of people got into trouble.

Of course it is our fault we got into debt, mistakenly assuming we’d still have jobs to pay off that debt. If you have been on the receiving end of debt collectors, you know that they have no sympathy whatsoever that it wasn’t your fault that you are unemployed. You will be harassed to your grave by the debt collectors.

And of course if you crashed and burned after losing your job, your credit rating is in the toilet and you couldn’t borrow a penny now to buy a car or a new home. Even if you did finally get a job, you are still a pariah. Millions of families have been effectively removed from the economy because they defaulted their obligations…not by choice…but because the economy shrank and left them stranded. The money flowed somewhere else.

Something that ought to be considered is some sort of amnesty for those people who did get into trouble because their incomes vanished.

Of course the banking industry will object…and even though taxpayers bailed them out, the taxpayer money went to fat bonuses for the bankers. Again, a management issue of money flow. It would seem only fair that if the banks were bailed out, and they wrote off the unpaid debts, the debtors would get some benefit so they could rebuild their lives. Not going to happen when getting into debt and failing is seen in this country as a moral failure.

The core of the solution is getting America back to work with sustainable incomes not subsidized by more taxes. The goal must be to manage the money flow so that companies will hire people and pay them so the workers can again be a positive part of the economy.

How about a direct reduction in corporate income taxes equal to the percentage of a company’s work force that is in the United States. If 100% of their workers were inside the country, no corporate income tax on their US generated income.

Instead of blaming the unemployed and the unions for the situation, corporate America needs to be stimulated into flowing money to more production and more jobs in this country.

Tax incentives  directly tied to job creation is essential.

Interestingly state and local government indulge in incentives for job creation all the time…attracting new industries to their cities and counties. The feds could learn a lot from this and create a national pool of tax incentives.

In Arizona, just as one little example…is the property tax on “personal property”. This is a disincentive tax for job creation. It should be abolished.

Ultimately property taxes as a whole must be reconsidered. Only property taxes for capital improvements approved by 2/3rds of the voters voting in an election or 51% of all registered eligible voters should be allowed. No property taxes for operating budgets of any government should be allowed. Property values have nothing to do with real time economic activity. Just because your neighbor sold their home for $200,000 doesn’t mean you got $200,000 so now your peoperty tax bill should be increased.

While some claim sales taxes are regressive, they do in fact tie to real economic activity. If there is no income, there isn’t any spending and thus no sales taxes. The drastic reduction in sales tax revenues demonstrates the immediate impact of no income no tax revenues.

If government is going to live on sale tax revenues, then they absolutely must pay attention to job creation. A good linkage.

Credit policies need serious attention. I have a friend whose company has $35 million in order to make some water treatment technology…guaranteed sales. But the company cannot find interim credit to fund making the stuff they will sell for the $35 million.

Federal loan guarantees have worked in the past to stimulate lending and thus creation of jobs. Where this derailed was no serious vetting of the lender and business plan.

An egregious example of loan guarantees that fail is student loan guarantees. This has spawned a huge industry in private colleges who charge 2 or 3 times what a junior college charges for classes, the students” get into huge amounts of debt, can’t get jobs, default, and taxpayers eat the bill. A whole new racket has developed in the country with private education funded by federally guaranteed student loans. Again, a money flow management problem…lots of money is flowing in the wrong direction to make private business education a big cash cow without producing employable workers.

Every where we look we can see huge amounts of money being manipulated for the benefit of some special interest without producing any benefit to society.

But we are also now being frustrated by opposition to government management of the economy because (for good reason) no one trusts the government. Actually it isn’t the “government” that is the source of the misdirected money flow…it is the special interests who manipulate the government for their private gain without any regard for the broader societal benefits.

And that is the core problem…we have lost any sense of what ‘societal benefit” means, treating anything that tries to have broader implications as part of the socialist conspiracy.

Yet every decision we make has societal implications…some good, some not.

Rather than just reject considering broad social policies…we should instead ask if whatever is being considered in fact will have the intended benefits to the broader society…like reducing the employment rate permanently.

One thing we can be absolutely certain of is corporate America doesn’t give a rats ass for societal benefit. They will only act in their own narrowly defined zone of interest.

Tax policies and government regulation is the means by which the selfish goals of business are channeled to a degree to generate societal benefits.

Over and over this country had experienced selfish business behavior having broad negative impacts.

But we must develop a new paradigm to reach into the private sector and manage the flow of money to increase societal benefits…especially more employment.

What is lacking is any kind of unifying “vision statement” about what guides that process.

That’s where Democrats fail. They should be the ones espousing a new vision for America that puts people back to work. A new vision that even if business grumbles and whines, they will still be in business and actually growing and prospering as well.

We must have a “win win” approach that gives business the incentive to grow by creating jobs.

The problem with just taxing income is who decides where the money goes. There is a lot of legitimate distrust of government taking tax revenues and wasting it in pet projects for special interest constituencies. Bridges to nowhere. Most of us would rather control the use of our money than handing it over to government to essentially waste.

That’s were the new vision is needed…a yardstick to measure whether tax revenues are spent wisely for the public benefit. And the same yardstick to measure tax incentives. We do not have that yardstick. We have no voice or vision out there that we can rally behind about what is indeed good for us all.

The Republicans have defined what is bad. Government. Immigrants. Obama. Pelosi.

The Republicans offer only the solution of cutting taxes and government. That leaves where the money flows in the hands of a whole lot of folks that will make their bonuses whether the income is generated inside the US, or from Chinese factories.

This Labor Day, as we get calls from a 1-800 number harassing us about our unpaid student loan or credit card bill, wondering where we will be able to earn enough money to ever again own our own home, refusing to go to the doctor about that shortness of breath we are now experiencing because we lost our health insurance, rolling pennies so we can buy enough gas to go to a job interview nest week, we aren’t celebrating very much.

Sure, we will celebrate the fact we’re still alive, celebrate our children and families, burn some meat and drink a few beers, and try not to think about why Tuesday morning isn’t gong to be much better than last Friday morning.

We are all hard working people just wanting somewhere to go Tuesday morning to make enough money to dig out of our financial holes and feel good again. We have enormous untapped talents waiting to be put to good use. We are willing to re-invenmt ourselves to be self-sufficient. But we do not have any leadership pointing the way to that place we can be our very best.

In our anger and frustration we will probably throw a lot of rascals out of office in November. But will that really improve our personal lives? Has tougher immigration laws created more jobs for us in Arizona? Will we see any benefit personally if the GOP tax reductions are continued?

Republicans don’t have a positive agenda here.

But neither do the Democrats.

The Democrats are supposed to be the party of the working folks.  Democrats are supposed to be the party of opporunity. Democrats are supposed to be the party for hope. Got it Democrats?

This entry was posted on Sunday, September 5th, 2010 at 8:43 am and is filed under economy, politics. Tags for this post: economy, jobs, labor day, tax incentives, taxes, unemployment. You can follow any responses to this entry through the RSS 2.0 feed. Both comments and pings are currently closed.