Creating Real Jobs

Spreading the wealth isn't spreading employment.

Massive, but failed, federal jobs programs overlook two key sources of real job growth. Namely, exports and innovation.

“An increase in sales from exports creates twice as many jobs as a dollar from sales in domestic demand.” Technology firms “create even more jobs.” And jobs in exporting “pay 9 percent more” than work in firms that export less; while work in technology pays “90 percent” better than other jobs, according to the Information Technology & Innovation Foundation (ITIF).

Moreover, ITIF said, an increase in the federal research and development tax credit would not only pay for itself in added revenue, it also would encourage companies to increase hiring “within a matter of weeks.” ITIF is a non-partisan research and educational think tank.

Through June 2010, many industries “have not seen even one net new job” created since the $787 billion so-called stimulus act became law in 2009, according to a tabulation by Rep. Dave Hall (R-MN). Obama administration economists Christina Romer and Jared Bernstein on January 1, 2009, in a 13-page study, forecast that “at least 3 million jobs” and possibly “between 3 and 4 million” will be created or saved by the end of 2010.

Here are their job forecasts and the dismal results as reported by the U.S. Department of Labor: Construction Forecast—678,000; Loss—853,000. Manufacturing—408,000; Loss—707,000. Financial—214,000; Loss--310,000. Retail—604,000; Loss--286,000. Professional & Business Services—345,000; Loss—211,000. Information—50,000; Loss—158,000. Transportation & Warehousing—98,000; Loss—155,600. Wholesale Trade—158,000; Loss--135,400. Other Services—99,000; Loss—72,000. Leisure & Hospitality—499,000; Loss—69,000. Mining—26,000; Loss-16,900. Utilities--11,000; Loss—7,500.

The only sectors where jobs would be created, as forecast by Romer and Bernstein, were: Government—244,000. Actual increase—201,000. Education, Health & Social Services—240,000. Actual increase—434,000.

The U.S. is lagging “far behind” other major economies in putting the jobless back to work, The Wall Street Journal reported July 10, in an analysis of employment in 11 countries. Total employment in June in this country was down 4.8 percent from December 2007, the article said.

In its report in January, the ITIF made a convincing case that if the federal research and development tax credit were increased a bit, it could help to create 162,000 jobs and “boost innovation and U.S. economic competitiveness, thus laying the groundwork for long-term prosperity.” ITIF estimates that expanding the tax credit from 14 percent to 20 percent would lead to an “increase in annual GDP by $90 billion, an increase in patents issued to American inventors by 3,850, and an increase in tax revenues by $17 billion, much more than the cost of expanding the tax credit itself.” The current tax credit spurred private-sector research through the 1980s. But, ITIF’s study pointed out, “Other nations soon learned” from our success and began to allow more generous tax credits. So, by 1996, the U.S. had fallen to seventh in R&D tax credits among the 30 OECD nations. By 2004, we had fallen to 17th.

The R&D tax credit, created in 1981, was never made a permanent part of the tax code. Congress has had to act each year to keep it alive. Leading up to the July 4 congressional break, the Senate tried three times to pass the bill. But it was entangled in “paygo.” This is the law requiring that any new spending increase or tax cut be offset by other spending cuts or tax increases. As tax hikes were proposed on more and more industries, businesses finally balked, at least until something can be worked out.

America’s economy is “in danger of losing our greatest competitive advantage: our genius for innovation,” John C. Lechleiter, CEO of Eli Lilly and Company, wrote in a July 10 Wall Street Journal op-ed piece. “[W]e are facing today nothing short of an innovation crisis in America’s life sciences. The industry I know best, biopharmaceuticals, is facing unprecedented pressure. R&D costs continue to rise, fewer new medicines gain regulatory approval.” New molecular medicines approved by the Food&Drug Administration (FDA) are lower than in the late 1970s, he said.

A society that “appreciates scientific inquiry and free markets where innovators can expect to be rewarded...has always been an American strength.”

ITIF President Robert D. Atkinson called on Congress, in testimony before the Senate Commerce, Science and Transportation Subcommittee on Competitiveness, Innovation and Export Promotion, June 22 to lead a drive to spur innovation. “For over 50 years after World War II,” he said, the U.S. was “the global innovation leader.” But in the past decade, we had “lost that lead and our rank seems to be rapidly slipping.” He said the government needs to “better support innovation” and “charge the Administration with the creation of a national competitiveness and innovation strategy.” Atkinson told the Senators, “Government’s role in addressing the innovation economy is not to regulate business or to direct the path of technological development....Government should be a facilitator that spurs firms to innovate in ways that serve the public interest.”

The U.S. Department of Commerce in an April 13 White Paper called for patent reform legislation citing a backlog of 750,000 applications, costing the economy billions of dollars in “foregone innovation.” It pointed to technological innovation as a “key driver of a pro-growth, job-creating agenda.”

The government agency which has been a well-spring of innovation that has created jobs, new markets, and new technology through the years is the National Aeronautics and Space Administration (NASA). But when President Obama announced his new budget in February, he scrapped NASA’s moon-bound Constellation program saying the nation “plans to work with international partners in future space exploration.” This seemed to contradict the words as recently as Feb. 1 of NASA Administrator Charles Bolden, emblazoned on the NASA website:

“Today we are launching a bold and ambitious new space initiative to enable us to explore new worlds, develop more innovative technologies, foster new industries, increase our understanding of the earth, expand our presence in the solar system, and inspire the next-generation of explorers.”

But a stunning and far-reaching restatement of the space agency’s goals was set forth by Administrator Bolden, and reported widely, including by FrontPage Magazine July 12. Bolton said President Obama had ordered him to pursue three new objectives: to “re-inspire children” to study science and math, to “expand out international relations,” and to “reach out to the Muslim world.” Bolden said the mission to reach out to Muslims is “perhaps foremost” because it will help Islamic nations “feel good” about their contributions to science, math, and engineering.

It’s doubtful few jobless Americans “feel good” about anything.