How To Create Jobs

By Paul K. Wright.

The economy of 2012 should look very similar to the economy of 2011, and it’s likely that we won’t see any change in this low-growth environment for a number of years. Consumers and corporations have been spending less and paying down debt, and while this lower rate of spending restrains growth it also reduces the likelihood that we’ll build up the excesses that cause most recessions.

In other words, high unemployment and slow growth are not a reason to worry that we’ll slide into another recession.  They’re a reason to think that we could go for many years in the environment that we’re experiencing now.

We still need to address our 9% unemployment rate.  The President wants more infrastructure spending, and while I refuse to get aboard high-speed rail it’s certainly possible to create infrastructure jobs that have a lasting future impact.

Alternate energy is a sensible area of emphasis, because our foreign trade deficit is almost entirely made up of oil imports.  Homegrown energy will create homegrown jobs.  But from here forward we should focus on energy sources that don’t require government subsidies or mandates.  Natural gas is the cleanest of the fossil fuels, and we have trillions of cubic feet of newly-discovered gas that can produce electricity or power cars and trucks, if we can only get it to market.  The government’s role should be to encourage new uses for gas, and to remove any impediments to its distribution.

A gas pipeline is exactly the kind of infrastructure project that everyone should be able to support.  Yet a recently-opened gas pipeline from Wyoming to Oregon was forced to endure years of EPA, BLM, Historic Preservation, and Federal Energy Regulatoryreview, thousands of pages of detailed regulations, and many miles of detours.  Construction was halted from March to May of this year accommodate the mating season of a bird that is not endangered.

When the Chinese government wants to build a pipeline it draws a line on a map and starts digging.
Here we’ve discovered that there is no such thing as a “shovel ready” project.   And it’s even harder to get permission to produce oil, despite the fact that our consumers are going to burn huge quantities of the stuff without regard for whether it’s imported from Iran or produced here in the United States.

“The surface of the sea, which was perfectly smooth and tranquil, was covered with a thick, slimy substance . . . . The light breeze, which came principally from the shore, brought with it a strong smell of tar, or some such resinous substance.”

— George Vancouver, Captain Cook’s navigator, describing naturally-occurring oil seeps in the Santa Barbara (Calif.) Channel in 1792.  The seepage has been reduced by oil drilling.

The economy of North Dakota, home of the massive crude-oil-producing Bakken Shale, is on fire.
The state has an  unemployment rate of just 3.3 %.  For many years we’ve been outsourcing jobs by importing oil, but shale oil is putting people back to work;  and the same magic will touch the Gulf states when deep-water drilling is allowed to suck the oil out of the natural seeps that are polluting the Gulf of Mexico.

It’s true that greater oil production could lower prices and spur consumption, but the nation can respond by simply raising gas taxes to raise revenue while ensuring that gas prices do not decline.  In fact, our tax policy should generally be designed to discourage consumption and encourage savings.  The Value-Added Tax has been applied successfully in most other developed nations, and it would have the added advantage of taxing imported goods—while leaving exports untaxed.

The nation’s ports are essential to those exports, but today it would be impossible to re-create the ones we have.  If we want to reduce unemployment we’re going to need a nationwide assault—a program bigger than the moon landing—on creeping bureaucracy and regulation at every level of government.

So there are many options. And we haven’t even mentioned the simplest way to cut the unemployment rate, which is to address the fraud that has resulted from the decision to extend benefits to 99 weeks.  Workers now boast openly about it, including four 20-something men in a bar at a golf resort who confided to a friend that they’ve been working under the table “for cash” while collecting unemployment benefits.

Last winter we (the Lumbard Investment Counseling investment advisory board) shared a ski lift with a Boston-based brick mason who told us that he was living in a ski house with several other masons who collect unemployment benefits all winter, every winter.  They call themselves the Government
Ski Team.

 

 

 

 

 

 

 

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