Meanwhile, the eurozone had to face the possibility that Greece would not be able to pay its soon to mature sovereign debt much of it created pursuing man-made-global-warming. The principal other country having difficulty managing its sovereign debt is the USA but fortunately its debt is expressed in dollars and it has the ability to print as much of it as it needs. Greece does not. The euro standard is much like the gold standard. If a country runs out of euros, there is nothing it can do except tighten its belt.
Net investment in U.S. manufacturing (gross investment minus depreciation) was 0.08% of GDP n 2010 up from 0.02% in 2009, according to statistics released in August by the BEA. By way of comparison, in 2008, net investment in U.S. manufacturing was 0.41% of GDP, in 1996 it was 0.95%, and in 1981 it was 1.54% of GDP.
As we wrote a few days ago, Pres. Obama's so-called Jobs Act is more appropriately titled a "No Jobs" Act. Is it a coincidence that three of the major causes of our stagnant economy were ignored in the president's proposals. The three are 1) doing nothing about the foreign trade deficits, 2) preventing the development of our huge reserves of oil and natural gas, and 3) imposing enormous costs of government subsidies to green energy onto taxpayers and enormous regulatory costs on businesses.
As the bankruptcy of Solyndra, whose $535 million of borrowed capital was guaranteed by the federal government under the 2009 stimulus plan and which received other benefits such as tax credits, demonstrates the fact that the President favors green energy plants over more efficient fossil fuel plants. And as his opposition to private oil and natural gas development on public lands and offshore in the Gulf, Alaska, and the Arctic shows, he is willing to sacrifice millions of jobs to create an uneconomic green economy that will impoverish the American workers. As Tapan Munro, a "clean energy" proponent wrote on August 8, 2011, in an article entitled "U.S. Clean Energy's Bubble is Set to Burst", because "Clean energy today is more expensive and less reliable than coal- and natural-gas-based energy. Large subsidies artificially maintain clean energy's price competitiveness. These subsidies are likely to cease in a few years because of severe budgetary cutbacks proposed for coming years. This should not be a surprise to us. The industry has crashed before -- in the mid-1990s, in 2002 and 2004 -- mostly because Congress did not extend the tax credits that made the industry commercially viable.' The Energy Department has closed $37.8 billion in loan guarantees for 36 nuclear, wind and solar projects. Solyndra is not the largest loan guarantee. The DOE reported a $967 million loan guarantee for the Agua Caliente Solar Project.
The President's proposed American Job Act will not stimulate the economy at all even though it proposes spending a huge amount of money, $447 billion, in the form of grants, tax credits, special funds, a government sponsored National Infrastructure Bank, and other costly new government programs.
The largest expenditure is the cut in the social security taxes paid by businesses from 6.2 percent to 3.1 percent on the "first $5 million in payroll", grants a tax holiday (no payroll tax) for "added workers or increased wages" up to the first $50 million of wages and wage increases. This benefits businesses which are now paying the tax. Workers will have the payroll taxes reduced similarly to 3.1 percent. But these are "conditional" tax benefits. The government will deposit into the Social Security Trust Fund the revenues lost by the reduction of the payroll taxes, paying for it out of the general budget so it will have to be paid by taxpayers in general or borrowed to be paid by future taxpayers. Where is the net benefit? It looks like an attempt to buy votes by making a one-time gift to businesses and workers in an election year. Because it is a one-time gift, it will not encourage new investment or even additional consumption or the hiring of new workers at all. It does not benefit the unemployed or even encourage hiring new workers because it is a one-time deal. Businesses and households base their decisions to invest and consume on "permanent" expected income. Moreover, nothing else in the jobs act actually raises the prospect of sustainable future demand. The only jobs created will be the increased bureaucracy required to administer the Act.
Writing in the September 4th Washington Times, Harold Meyerson presents stark and sobering statistics about the decline of America, and the increasing interest in regaining American manufacturing power. What he does not discuss is a road to get there. But it is good that he and others are increasingly advocating efforts to strengthen manufacturing by ending the blythe policies that have produced imbalanced trade and deindustrialization.
If the President in the forthcoming joint session of Congress is serious about creating jobs he would look not at the construction industry which has an oversupply of housing but at all of the following job-creating policies, none of which requires increased government expenditures and at least one earns billion of dollars of revenue.
1. Reign in the outsourcing of manufacturing jobs and the increase in the trade deficits. Economists observed the increasing trade deficits over the last decade or two but very few have suggested a way of reversing the trend. Indeed most, including the President's Council of Economic Advisors hailed the increase as an increase in trade. An increase in trade is fine as long as trade is in balance. After all the purpose of trade is to exchange a bundle of goods that has less value in the domestic market for a bundle of goods produced abroad that has more value in the domestic market. Exchanging Treasury debt for goods postpones the day of reckoning.
Free trade is an ideology dating from the work of Adam Smith and David Ricardo. The increasing trade deficits over the past three decades put millions of Americans out of their well paying manufacturing jobs. The trade deficits did not affect jobs at the universities or on Wall Street. Americans in 2008 imported $800 billion dollars worth of goods, including automobiles and other motor vehicles, tractors, computers, appliances, i-pads and cellular telephones, clothing for men and women and children, electronic games, and, of course, crude oil, and much more. How many jobs were involved? We lost five to six million according to our calculations. Andy Groves, former CEO of Intel, pointed out earlier this year that our high tech companies like Apple, H-P, Dell, and many others, have ten times as many employees in China as they have in the U.S. And then they import those products to the U.S. duty-free.