Thursday, October 29, 2009

Hundreds Of Jobs, Thousands Of Jobs

The United States (as well as the rest of the world) is suffering through the worst economic contraction since the 1930’s. Millions of men and women have lost their jobs through no fault of their own. Nationally, the unemployment rate has risen to 9.5%. Here, in the Commonwealth, we have been more fortunate. Our statewide unemployment rate is about 6.5% (as of August). The only states with lower unemployment rates are Montana, Nebraska, North and South Dakota, Utah, Vermont and Wyoming, all with smaller populations and economies than Virginia.

Experts in economics give various explanations for this mega-recession. They all involve greed, under-regulation, large numbers of defaulting loans, and stuff like that. (Despite Republican Bill Bolling’s attack ads, none of these experts blame the recession on the “tax and spend” policies of Democrat Jody Wagner.) The damage to our economy has been severe and it has taken significant actions by the Federal Government, under both Presidents Bush and Obama, to avoid an even greater catastrophe.

Most experts believe that the economy has probably reached its lowest point and that recovery is starting. However, unemployment rates stay high and people are hurting. Despite our lower rate, here in Virginia tens of thousands of people are still unable to find work. Further, in some areas of the state unemployment rates are much higher.

So, along comes snake-oil salesman Bob McDonnell and dubs himself the “Jobs Governor.” Despite the world-wide recession, despite the fact that economic recovery in Virginia is tied to economic recovery in the rest of the country, despite the fact that Virginia is already one of the best-managed states and one of the best in which to do business, Bob McDonnell wants us to believe that he alone can bring jobs to Virginia.

Well, dear reader, we will look at the “Jobs Governor’s” plans in just a moment. First, however, the maven must give a very short and overly simple economics lesson. Why, you ask, do people lose jobs during a recession? The answer is quite simple. During a recession many businesses, both large and small, experience a significant drop in revenues. To offset these losses the company must cut its expenditures if it is to stay in business. One of the easiest ways to do that is to cut its payroll. Therefore, the loss of jobs. When will companies start hiring again and create more jobs? They will start rehiring when they are doing enough business to produce sufficient revenue for them to conclude that bringing on more workers will be profitable. Until that time it is unlikely that they will rehire their laid off workers (or other workers).

Despite the economic realities, the “Jobs Governor” is promising that if we elect him he will bring large numbers of jobs to Virginia. How will he do it? For sure, he won’t do what Franklin Roosevelt did during the 1930s depression. FDR put people to work by having the Federal Government hire them to perform needed work in the country. Bob McDonnell’s philosophy of government precludes him from turning the Virginia government into a major employer of those currently unemployed. So, how is Dr. McDonnell going to cure our unemployment sickness? Let’s take a look:

First, Bob proposes some “New Job Initiatives.”

1. He will expand the use of the Governor’s Opportunity Fund
2. He will appoint Bill Bolling as “Virginia’s Chief Jobs Creation Officer."
3. He will designate one Deputy Secretary of Commerce to work exclusively on rural economic development.
4. He will provide a tax credit of $1,000 per job for every company that creates 50 new jobs. In economically distressed areas the employer would only have to create 25 new jobs to qualify for the credit.

Governor’s Opportunity Fund : I won’t comment on this one because Creigh Deeds, the Democratic candidate is proposing more or less the same thing.

Making Bill Bolling the jobs “czar:” As my children would say, “Big Whoop!” Reader, what has Bill Bolling done in his entire private-sector and public careers that would qualify him to be “Virginia’s Chief Jobs Creation Officer?” Hey, I’m not even sure what a jobs creation officer does. Does he run a big manufacturing plant that turns out 20 or 30 new jobs every day? Does he lead posses into other states to capture jobs and bring them back to Virginia? Does he kidnap business executives and hold them until they agree to hire more people in the Commonwealth? Give me a break, Mr. Jobs Governor. This is nothing more than an idea to make Bill Bolling feel more important and to deceive the electorate.

Designating a rural development Deputy Secretary of Commerce to work exclusively on rural economic development: You know, I had no idea what this meant until I looked at the details of Dr. McDonnell’s economic plan. There it says, “We will place a greater emphasis on rural economic development by designating a Deputy Secretary of Commerce and Trade to do nothing gut recruit new business to rural parts of Virginia, where jobs are desperately needed.” Mr. Jobs Governor, this is another case of merely giving somebody a more glorified title. How exactly can a deputy secretary recruit new business during a massive economic downturn. Do you really think there are thousands of potential entrepreneurs out there that would gladly open businesses in rural Virginia if we only had a designated deputy secretary to recruit them? How can a designated deputy secretary convince existing businesses to move to rural parts of Virginia? If it was in their economic interest to do so, they would have already moved. This is another case of voter deception.

$1000 tax credits: Look, Dr. McDonnell. Whether they are large or small businesses, companies exist to make money. They will only hire more workers when they believe those workers will produce more revenue for the company than the cost of their salaries. Your plan is to grant $1,000 tax credits for each job when a company creates at least 50 jobs. (The threshold is only 25 new jobs in an economically distressed area.) Okay, let’s say that the average salary of the workers in these new jobs is $25,000 per year. To hire 50 new workers is going to cost the company $1,250,000 in salaries. The tax credits you will give them total $50,000. I may not be a businessman, Mr. Jobs Governor, but it doesn’t make sense to me to increase my company’s costs by $1,250,000 in salaries per year to save $50,000 in taxes. That’s a net loss of $1,200,000 I’ve incurred by creating jobs in Virginia. I’m sorry Bob, your offer of tax credits will not produce a single job in Virginia so long as the country is suffering through this recession.

Well, it seems that looking only at his “New Jobs Initiatives,” Bob McDonnell is not much of a jobs governor. So what else does Bob propose? To find out, tune in later.

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