Jobs, Jobs, Jobs

“Jobs, jobs, jobs.” That was the mantra of every politician from both parties in the recent election. With real unemployment in the US at around 16% (at least) and a subject very much on the mind of every rational voter, that was unsurprising. When you think about it though, nearly all of these politicians have never created a job. And, in many cases, never actually had a real one, having spent their whole career in politics or entombed in the vacuum of academia. What do these guys know about creating a job?

Then too, for all the talk about a “wave election”, when you get right down to the numbers, 86% of the incumbents got re-elected. In other words, 86% of the idiots who got us into this mess are still there. True, that’s down from the usual 98% but still insufficient to effect real change in policy. I mean, why should the incumbents who got re-elected suddenly change policy? There’s no upside. For them, what they’re doing now is working fine.

To get an idea on how to create jobs it might be useful to look at why and how we lose them. I gave that a try in the recent piece “The Buffaloization of America”. Buffalo and all the other “rust belt” cities lost their manufacturing industries by a series of policies that made it difficult or impossible for companies to compete and make a profit. Aggressive and demanding unions, stifling regulations, predatory lawyers and excessive taxation drove companies to either move to more favorable climates (literally and figuratively) in the south or over seas … or die.

Corporations are not charitable organizations. They have to show a reasonable profit for their activities or their stockholders, many of whom are union retirement funds or the IRAs or 401Ks of average citizens, will demand the head of the CEO. If they can’t make a profit in Buffalo or California on their production of widgets they will simply move to where they can.

Then there is the matter of competition. If your company that manufactures in the US or Canada and is competing with a company making a competitive product manufactured in say, China you are going to be at a serious disadvantage in your cost of goods. The cost of any product is a function of the materials, labor, overhead and profit. The usual suspect in any discussion of “jobs going overseas” is labor. And it’s true as far as it goes. In the past much lower labor costs in Third World manufacturing was mitigated by improved productivity i.e. automation of the process. Of course, the foreign manufacturers eventually got the same sophisticated machinery and caught up.

Union work rules represent a bigger problem than the wage differential. These often conflict and cause work stoppages and productivity declines. Strikes are even more destructive.

Then there are labor laws and the employees and lawyers who game the system. In one of my businesses we had an employee who made a career out of getting fired. She would make everyone around her miserable until she finally got fired. She then sued for “unfair termination” or some such and won a big settlement every time. To my knowledge she has done this at least three times. We were the second company to hire this bit… er, pro. The company that got stung before us could not warn us because they would get sued again for saying something negative about her. Nor could we warn the next company in line. We were instructed by our lawyers to answer when asked for a reference on this crook to only say, “She worked here from X date to X date” and nothing more.

We had another employee at a different company who we fired for stealing from the company. She filed a sexual harassment complaint with the EEOC… not against me, thank God, but against some of our other employees. Of course, the charges were totally bogus. One of them was that she was out drinking one night after work with a bunch of her young fellow employees and someone said something offensive. Imagine that. The leap here is that my company is responsible for the speech of my employees when they are on their own time drinking in a bar? Yep, apparently so. It cost us a lot of money.

And let’s not forget product liability. I once dropped in on a friend that was baby-sitting her grand daughter who was a year old or so. It was a hot day and they had a “swimming pool” set up for the tyke. It had to be less than 4 feet in diameter and maybe 3 or 4 inches deep. Emblazoned on the tube was the following warning: “No Diving!!” Ya think?

If you make something some idiot will figure out a way to injure himself with it and sue you. The annual cost of torts on businesses in the US is something like $300 to $400 billion, depending on which study you prefer to believe. Clearly, that direct cost does not even consider the cost of defensive measures and both add to the cost of producing that widget making it less competitive with the foreign produced product. Congress has been passing these laws for years giving lawyers hunting licenses to sue companies. These lawsuits drive up costs and drive business owners absolutely nuts.

The loss of manufacturing jobs has been going on for years and is not going to be reversed overnight, if ever, in the US and other “developed” countries. However, there are some things that the new US Congress could do immediately that would help the situation in the near term.

1). Ratify the free trade agreements with Columbia, S. Korea and Malaysia that were negotiated during the Bush Administration. The Democrats have been sitting on these agreements for two years as payback to the labor unions that object because… well, they object and the environmentalists object because that’s what they do. The US Chamber of Commerce estimates that the S. Korea agreement alone is second only in importance to NAFTA and could create 345,000 jobs.

2). Extend the tax rates due to expire on January 1^st for everyone. Keep the rates where they are for everyone and forget the class warfare shit. Not increasing capital gains and dividend taxes alone will be beneficial, not to mention eliminating uncertainty.

3). US international corporations are sitting on some $400 billion in cash in their foreign subsidiaries. If they bring it back to the US they get whacked for 35%, so in the past they have been reinvesting that in further foreign expansion. The Democrats want to tax that cash whether they bring it back or not. Instead, I suggest that they offer a limited time window for them to repatriate that money at a very low rate… say 5%. That would encourage a flood of new capital back into the US.

4). They should immediately lift the defacto moratorium on deep water drilling imposed by the Obama Administration. The have ostensibly lifted the ban but in fact have issued no new permits. If they would start issuing permits again they could put a lot of people back to work immediately on the Gulf Coast.

None of the above addresses the long-term reforms that need to be accomplished to really restore an economic boom and create the eight million jobs that have been lost. That would include: serious tort reform; deep sixing Obamacare; reducing the corporate tax rate to 25%; taking a brutally sharp knife to spending and letting oil and coal start again on US soil. None of the long-term reforms can possibly happen until after 2012 and unless a conservative President gets elected along with more, many more, conservatives to Congress.

Major Ebb

After the tsunami sweeps ashore all that water has to eventually go back where it came from, taking with it all manner of flotsam and the carcasses of critters drowned in the flood. The election tsunami on Tuesday swept away a lot of Democrats with some 60 House seats swinging over to the GOP and with a half dozen or so races still counting chads. (Hennepin County where Minneapolis is located was trying to figure out how they had 880,000 votes to count and only 708,000 registered voters. I wonder if that’s how Al Franken made it to the Senate?) The Republicans also picked up five governorships and five Senate seats with Alaska and Washington as yet undecided.

The wave washed away three Democrat committee chairmen, seven Dems with more than 20 years of experience and most of the freshman representatives that came in two years ago on Obama’s coattails. James Oberstar, MN (18 terms), John Spratt, SC (14 terms) and Ike Skelton, MO (17 terms) were among the notables who now need to go find a real job. Actually, I suppose if you have spent 34 or 36 years in the House of Representatives you likely stole enough that working is no longer a necessity.

In one of the more satisfying purges, Alan Grayson of Florida, perhaps the most obnoxious politician in the US, got his ass handed to him. Good riddance.

Of course, this being US politics where incumbency means almost certain re-election, many Democrats more than worthy of being sent off to new careers, survived. Barney Frank, MA and 30 year veteran of the House prevailed over his first opponent even given a fleeting chance at beating him. Barney, who’s only real job was pumping gas at age 18 and the individual most responsible for the housing crisis, showed that in some liberal enclaves you can get away with almost anything and get re-elected. Pete Stark of CA is another example. He’s a very cranky 78 years old and 18 termer. Viral videos of him insulting his constituents at town hall meetings didn’t hurt him any. He got 72% of the vote. Yes, it is California.

Harry Reid survived. Although most polls showed him tied with Angle or slightly behind, he won easily. Pundits said he “had a good ground game” which means that the labor unions hired a fleet of buses, catered lunches and dragged people to the polls. Boxer thumped Forina and Brown showed Whitman what the California Democrat machine could do when threatened. McMahon in CT also got whacked.

To me the three highly successful businesswomen that entered politics for the first time in this election; Forina, Whitman and McMahon represent the biggest surprise.

All were enormously successful CEOs and rose to the top of male dominated industries. All three are smart, articulate and honest and all dumped millions of their own money into the effort. Yet they all got their asses handed to them. Why?

OK, they chose to run in notoriously liberal states but it’s got to be more than that. Is it possible that powerful women threaten men or is it that women are turned off by these assertive gals? Both? One would think that the feminist groups would be pounding the pavement for these accomplished women. But no, these are conservative, capitalist women not enthusiastic about abortion. The feminists wouldn’t go near them.

Whitman dumped $140 million of her own money in the campaign to try to get the job of Governor of California that, to me, is one of the least desirable jobs on the planet. Maybe she did want to save CA, but I can think of other things to do with $140 million. The “fruits and nuts” elected Jerry Brown. Good luck. If you’ve got any California bonds, this would be a good time to unload them.

So what can we learn from this and what can we expect for the next couple of years? A lot of the political wags say that Obama will now try to pull a Clinton and govern more from the center and find practical solutions with the new Republican majority in the House and new balance of power in the Senate. I’m not so sure about that. He is buggering off on an absurdly expensive trip to India and Indonesia tomorrow without meeting with the new leaders in the House. Not sure if that’s symbolic. Compromise and finding middle ground has never been his style and doesn’t fit his Chicago politics/ Saul Alinsky philosophy. He once said he didn’t mind if he’s a one-term president. Maybe he means it. If he and Harry Reid obstruct GOP efforts to preserve the Bush tax cuts and refuse to cut spending, then he will certainly get his wish. Maybe the Dems will even nominate someone else.

Another interesting thing to watch will be what happens to the Tea Party movement. Will the grass roots movement fade away? Will the enthusiasm die or will it persist? The Tea Party enjoyed some successes in this Tuesday with the election of Marco Rubio and Rand Paul. They also experienced some failures, most notably the selection of Christine O’Donnell and Sharon Angle. Both were elected in the primaries by the Tea Party folks based on their ideological purity and both got hammered in the general election. In both instances there were other Republicans in those states that would have had a better chance. Will the Tea Party folks be a little more pragmatic next time around?

Then there is the Sarah Palin question. What’s she gonna do for the next couple of years? Personally I think that her ego is going to get the best of her better judgment and she will run for President. Mistake. While I personally like her, I don’t think she’s right for the Oval Office. Most polls I’ve seen agree with me on that one.

Well, as the Chinese say, “May you live in interesting times.” No problem there.