Will Obama’s Job Council Actually Create Jobs?

Back in 1979, there were 19.5 million manufacturing jobs in the U.S. Today there are 11.6 million. That represents a decline of 40 percent during a time period when our overall population experienced tremendous growth. With the crash of 2007, another 20 million jobs were lost in the economy.

As a response to unemployment, President Obama created the Council on Jobs and Competitiveness (Jobs Council). Its mission is to provide non-partisan advice to the President on continuing to strengthen the Nation's economy and ensure the competitiveness of the U.S. and on ways to create jobs, opportunity, and prosperity for the American people.

The Jobs Council is supposed to work collaboratively with all agencies and offices within the Executive Office of the President toward the fulfillment of these goals. The 26-member jobs council has set a specific goal for companies to create 1 million jobs within two years by approximately February 2013.

Council Recommendations

Over the last year the council has released recommendations detailing how the U.S. It can be more competitive. The recommendations include:

1. More Drilling for Oil and Natural Gas  — The jobs council called upon the White House to consider "expanding and expediting the domestic production of fossil fuels — including allowing more access to oil, gas, and coal opportunities on federal lands."
2. Investing in education — There is some vague language about improving education, but there is a specific recommendation to develop training partnerships with community colleges and vocational schools to help fill what they said were more than 2 million job openings in advanced manufacturing in the U.S. But the recommendation does not spell out the type or length of training.
3. Reforming the tax — “Among the steps the council sees as urgently needed is long delayed reform of the corporate tax system, which it says is outdated and hurts both business competitiveness and American workers. The panel calls for lowering corporate tax breaks to internationally competitive levels while broadening the tax base by eliminating tax deduction and loopholes.” [1]
4. Research and Development — The council also wants tax breaks for private industry engaged in research and development.
5. Reforming Regulatory Systems — Although there is a lot of general complaints about government regulation the recommendations specifically focuses on streamlining the federal permit process for construction and infrastructure projects.
6. Investing Aggressively in Infrastructure and Energy — Encourage retrofitting of commercial buildings to be more energy-efficient, creating additional construction jobs.
7. High Growth Enterprises — Targeting high-growth enterprises that create new jobs such as startups and small firms.
8. Increase Travel and Tourism Industry Jobs — The recommendation specifically asks to make it easier for foreigners to get visas to visit the U.S. and spend their money.
9. SBA Loans — Make it easier for companies to obtain Small Business Administration funding. How many times have we heard this request over the last five decades? Getting loans from any government agency is still problematic and they haven’t solved the bureaucracy problems and loan procedures yet. I would not hold my breath.
10. Support the Manufacturing Sector — I agree with the report’s emphasis on the role of a vibrant and growing manufacturing sector in supporting a strong middle class and a healthy, innovative U.S. economy. But, there are no real specific recommendations to do this and small and midsize manufacturers who are 96 percent of all manufacturers are left out.

What Chance is there to Create Real jobs?

In January 2011, President Obama chartered the Jobs and Competitiveness Council with a mission of leaving "no stone unturned" in the search of ways to boost the country's anemic job growth. But you could tell from the start that this council would have trouble even finding those stones, let alone turning them over.” [2]

Speaking to the Economic Club of Detroit, Immelt outlined what he called an American industrial renewal driven by emphasis on manufacturing and exports, investment in new technology, and research and development, innovations in clean energy and affordable health care. He said” The U.S. should aim to have manufacturing jobs comprise at least 20 percent of total employment, about twice what it is now”

G.E. said on August 5, 2011 that it planned to create 13,800 new jobs in the U.S, and it’s annual report says that 10,000 people have been hired in the U.S. during 2011, but at the same time, GE continues to move more infrastructure to China. Under Immelt, GE makes more medical-imaging machines than anyone else in the world, and now GE has announced that it "is moving the headquarters of its 115-year-old X-ray business to Beijing."  Apparently, this is all part of a "plan to invest about $2 billion across China" over the next few years.[5]

Fortune 500 Dominance

A quick glance, these 10 recommendations seem to come right out of the Republican and multi-national corporation playbooks. How many times do we hear these companies demand more drilling of oil and natural gas, less government regulation, and reforming of the tax codes? These demands have everything to do with what the Fortune 500 companies want to achieve in increasing profits and little to do with producing immediate jobs for working. I don’t think there is any empirical evidence that supports the claim that significant net new job creation would result from such reforms.

Contrary to what President Obama has said that “he's 100 percent focused these days on creating jobs”, the fact is that the recommendations are long term by definition. It is hard to see how a corporate tax overhaul, expanded domestic drilling, new regulatory reforms, and improvements in education and investment in R&D are going to lead to job creation in the near future.

Another problem is that most of these recommendations will require Congress to pass legislation particularly if there is funding needed. The recommendations on investing in education, tax breaks for R&D, and investing in infrastructure projects that encourage retrofitting of commercial buildings must go through congress to be funded. Political gridlock has prevented Congress from doing much in the way of helping the staggering U.S. economy, and I think it is too optimistic to think that the Republicans are going to help President Obama create jobs or anything else in an election year. A good example is the President's $447 billion jobs bill, which was defeated in the Senate.

Also, who came up with naïve notion that increasing the travel and tourism industry by making it easier for foreigners to get visas is a good idea? These are service jobs that don’t pay well and don’t meet President’s Obama’s objective of insuring that we are putting people to work right now.

There is also a national investment initiative that is supposed to boost job creating inward investment in the U.S., both from global firms headquartered elsewhere and from multi-national corporations headquartered here. When you review the Interim Report "Taking Action Building Conference: Five Common-Sense Initiatives to Boost Jobs and Competiveness," the explanations read more like general goals with very little description of who or how these things are going to get done.

I must admit that I have strong reservations about government appointed committees or councils getting anything done, or President Obama accepting the final recommendations. I thought that the recommendations for the Simpson-Bowles committee made a lot of sense but the administration totally ignored them. These councils also seem to find security in lofty themes and slogans like "Investing in our future, building on our strengths, and playing to win”, and are most comfortable with vague (long-term) recommendations

The Bureau of Labor Statistics (BLS) shows that there were 2.1 million private sector jobs created in 2011. About 40 percent of the new jobs came from companies over 1,000 employees or 800,000 jobs. So the data is there to measure real progress in job creation.

Since the committee’s specific goal is to create 1 million jobs by Feburary 2013, we have a measurable objective. The administration and the committee could ask the BLS to find a way to trace newly created jobs in the U.S.  back to GE and the other committee members. This should not be very difficult to do unless the committee has political reasons for not publishing the data.

There is another opportunity to measure job creation that is completely controllable by the fortune 500 companies. The multi-nationals want tax cuts and Obama is talking about lowering the corporate tax rate. Since 1980, there have been at least six major pieces of legislation which gave tax cuts to the corporations and to the wealthy. I cannot find any quantitative study that proves beyond a shadow of a doubt that tax cuts have led to new jobs.

Wouldn’t it make more sense to offer new tax cuts only to those corporations that create good jobs in the U.S., and bring back jobs and products from overseas?

Obama’s jobs council has made recommendations that are too long term, too dependent on Congress and government funding, too dependent on Corporate CEOs that have a history of job reduction in the U.S., and a committee that does not represent small manufacturers or labor. But I hope the committee can prove me wrong by using the BLS to link job creation data directly back to the Council on Jobs.