Consider this a companion thread to my other one on government spending:

http://www.businessweek.com/the_thread/economicsunbound/archives/2009/06/a_lost_decade_f.html

Over the past decade, if you throw out government job creation, the U.S economy has show pathetic job growth.  The Bush tax cuts were extended, and Obama lowered the social security payroll tax.  These tax cuts haven't been producing jobs at all.  Well, jobs in America.  China has seen its economy go off the hook, and India showed major economic growth with a ton of IT jobs outsourced there.   In the other thread, this was said, "This is because of government regulations and meddling".  Well, the Republicans controlled government 2001-2006 and job creation was bad then also.  So, how could it be government regulations and meddling if they were in charge?

Government doesn't create jobs. That should be rule number 1 embedded into the brains of everyone in government.

Tax cuts do not create tax by themselves. That should be rule number 2.

Overregulation and meddling hinder job growth regardless of which party controls the House or Senate should be number 3.

Capital creates jobs. Is rule number 4.


Sadly these are rules the government will always ignore because it gives the appearance of doing nothing and the appearance of doing nothing doesn't get you re-elected.

Jobs aren't being created because businesses are afraid to invest when the government has expanded their regulatory footprint considerably.

Here's a great transcript from a conference call by a CEO to shareholders. The CEO is a Democrat, and voted for Obama:

I believe in Las Vegas. I think its best days are ahead of it. But I'm afraid to do anything in the current political environment in the United States. You watch television and see what's going on on this debt ceiling issue. And what I consider to be a total lack of leadership from the President and nothing's going to get fixed until the President himself steps up and wrangles both parties in Congress. But everybody is so political, so focused on holding their job for the next year that the discussion in Washington is nauseating.

And I'm saying it bluntly, that this administration is the greatest wet blanket to business, and progress and job creation in my lifetime. And I can prove it and I could spend the next 3 hours giving you examples of all of us in this market place that are frightened to death about all the new regulations, our healthcare costs escalate, regulations coming from left and right. A President that seems, that keeps using that word redistribution. Well, my customers and the companies that provide the vitality for the hospitality and restaurant industry, in the United States of America, they are frightened of this administration.And it makes you slow down and not invest your money. Everybody complains about how much money is on the side in America.

You bet and until we change the tempo and the conversation from Washington, it's not going to change. And those of us who have business opportunities and the capital to do it are going to sit in fear of the President. And a lot of people don't want to say that. They'll say, God, don't be attacking Obama. Well, this is Obama's deal and it's Obama that's responsible for this fear in America.

Read more: http://www.businessinsider.com/wynn-ceo-steve-wynn-conference-call-transcript-obama-2011-7#ixzz1SVyYgyXR

Tax cuts won't create jobs when the government is doing all it can do to discourage private investment. Remove regulations and reform those that must remain to ensure that businesses have every incentive possible to hire, and compete against businesses overseas.

Furthermore, you assume that Republicans are innocent in regards to regulations - they are not. The Republicans passed things like the Patriot Act (which meant that transferring significant amounts of monies were required to be reviewed by specific agencies) and Medicare Part D. Both sides are implicit in this, although Obama's administration has done far more it seems.

The tax cuts don't go one way or another. What would fix the revenue hole is a capital gains hike

I don't think that'd do it as much as you think.

IMO, the best way to fix it would be an across the board flat tax on capital gains + income, ect.... 20 or 23%, with a minimum threshold of $30,000. No loopholes, no tax credits. You either pay or you don't. Our revenue problem isn't based on what the rate is, because our collections as a percentage of GDP has been the same regardless of the marginal rate or capital gains rate. Our problem lies with the Laffer Curve, and who is actually paying. The rich in many cases are not paying their tax rate due to loopholes - and of course, the poor are getting monies they didn't pay in because of credits. Both need to be eliminated. There should be no incentive to stay poor, or game the system.

(of course, this assumes that we stay on our current path of near-insane federal spending. I would also argue we must cut government spending by 50-60% thereby allowing us to lower the tax rate from 20-23 to 15-17 or so).

How exactly did a lack of regulations cause the housing bubble and the dotcom bubbles of the last decade?  There is an entire derivates market has been completely unregulated and engaged in credit default swaps and chopped up housing loans into tiny pieces and mixed good with bad and then sold those as assets that were badly rated by private rating agencies, because of flaws in their mathematical models.  If you bring in the Fed being a big problem with its easy money policies, I wouldn't argue against that.   Nor, would I argue against you saying that a large amount of problems are caused by what the government does.  However, I will argue if you lay every single problem at the foot of government, and say that, somehow, if government got out of the way, we would have some sort of paradise, or, oh well freedom does cost lives, but what do you expect?

If you were to argue the case of investment being something that actually produces goods and services in the nation that offers the tax cut, it is fine.  But what I see today is what is called investments is a ton of money flowing into derivates and paper, which doesn't produce jobs.  Or investors feel that they get a better return in corrupt places like China, because they growth rate is larger, and also they wages are lower and polution standards are non-existent.  So, to make things more competitive in America, get rid of minimum wage, allow people to be paid pennies per hour, and also get rid of all polution standards.  In other words, race to the bottom.  

First off, the dot-com bubble and housing bubble are not the same.

Secondly, the housing bubble started well before the derivatives market was even established in the context of the housing bubble. Home ownership began to spike in 1994 thanks to acts initiated by Bill Clinton and Executive Order 12898 among other things. The bubble was firstly initiated by a government that wanted to artificially inflate housing demand, thus creating market growth. Once established, we then know that loans were incentivized due to meddling by the Federal Reserve's historically low interest rates (again to create growth) which helped spur on the sub-prime mortgage schemas, and the derivatives market to cover up the bad deals that were being made. 

Having said that, I do not fault the government for 100% of the problem. Obviously, businesses took advantage of government policies that sought to enable them to take on high-risk clientelle and socialize their defaults (remember, the government pays back the banks that foreclose, thus creating a huge incentive for them to simply write off the losses and get the monies back in taxes, then sell the house at a later date and make money). Finally, you have an idiotic population that bought into the idea that home ownership is a must-have, which got people to purchase these houses they couldn't afford with money they did not have.

Its my view, however, that government 'primed the pumps'. They were the ones that incentivized the activities with adjusting interest rates, promoting minority home ownership against market policies, and generally pursued a strategy of incentivizing bad markets. Without government being there as the sugar daddy of bad policies, I do not believe the banks would have taken on such bad loans, and if they did, it would have been to a much lesser degree. Additionally, those that would have taken on bad loans would have went bankrupt, and the market would have corrected quicker.

Richard, its not about 'racing to the bottom'. Its about making our industry globally competitive. You argue minimum wages would cause our workers to be paid pennies on the dollar, but I can't think of a single manufacturing job that pays minimum wage. Better yet, I don't think I can name more than 5 or 10% of jobs that even pay minimum wage right now. If minimum wage were abolished, it wouldn't effect current jobs, but would create new ones for markets that are ultra-low skilled that cannot exist under current wage floors.

In regards to regulations, we're cutting our throats by enacting legislation that discourages jobs in the name of insane requirements. For example, America has the most stringent requirements for diesel in the world. So stringent, that we cannot produce many types of vehicles here such as Ford's new 68MPG vehicle which is being sold in Europe right now. I am not saying that we must care about the environment as much as China does, but we can be far more reasonable and business friendly (after all, why do you think these jobs went overseas? Its not just wages, its regulations that have driven many jobs away because the government decided that it would take more and more capital to meet requirements to build factories here).

America has the capability to be a producer of high-tech goods, far greater than anywhere else in the world due to our unique access to resources, massive amounts of capital, and a decently educated labor force. The issue, however, is that these capital-intensive projects (such as......a Space-X or Tesla car plant) need lesser regulations in ensure these jobs stay here, forever. Remember: Our jobs aren't just going overseas to China, they are also going to Europe, Japan, and other OECD countries that have lowered their tax rates, regulations and such while we've either remained stagnant or increased regulatory requirements.

I'll leave a few charts here for you:

Just a few things to think about.

The best way for the government to "create jobs" is to produce a business environment with low unnecessary overhead and low costs; and this is typically achieved by having a straightforward tax code and reasonable taxes, with a lightweight but effective regulation and low levels of crime and corruption. Beyond this there might be some role for the government in ensuring that the workforce is well educated, highly skilled and well motivated but this may be best handled by private institutions.

In other words, the government could create jobs by acting in the complete opposite way as it is acting today.

On the bolded part, the answer is simple ... Just because the Republicans were in charge does not mean that they eliminated the heavyweight government regulation that has over-reached for decades. Much like how the patriot act and guantanamo bay prision are still in place today after the Democrats had full control of the government, it is rare for a political party in the United States to remove power or control in the government once it has gained it.

We should legalize marijuana then go on a global campaign of dropping barrels of weed on all countries instead of bombs. Then instead of having to pay for dropping bombs, pissing people off/making them hate USA, etc.. they will pay us for the weed and be happy. Sounds like a win/win to me. Too bad the pharmaceutical, paper, cotton, oil, etc.. companies would give their left nut to keep marijuana illegal.  We could be leaders in the marijuana economy.

PS..  Trickle down (literally taking a piss on the poor)/voodoo economics doesn't work....  You usually just have the rich holding onto more money.  When you have <1% owning a vast majority of the wealth then it is pretty obvious that economic system isn't working.  Seems like we are just back in the middle ages.  You have the ultra rich protected by the military against the poor.  If you want to call that democracy then so be it.  I call it a monarchy or oligarchy.

Obama should have shown some balls and just went for the middle class cuts to stay.  He should have restored the rich tax rates to what they were under Clinton.  OMG I have to give up so much money...  The rich cry.  It is so hard to live off of 500k a year....  Try living off of 20k a year you pricks.  I worked my ass off for most jobs and they barely pay shit because they know they can get away with it considering the economy is pure shit.  Take a look at CEO pay rates for the past 40 years compared to the workers pay.  CEO's are getting paid way too much and have increased their salaries leaps and bounds past the average worker salary growth rate.  Just study and work hard is all they tell you to do to be successful.  Well, it helps a hell a lot more to be born into a rich family than trying to work your way out of the shit infested job market that is available to most people.  American dream must be a dream of debt.  Keep you in debt thus placing you forever in the rat race.