Bustos, Schilling Ignore Best Job-creator: the Private Sector

 

In Viewpoints [last] Sunday, our two candidates for Congress in the 17th District, Democrat U.S. Rep. Cheri Bustos, and Republican challenger Bobby Schilling, stated the action they would take to help create and retain jobs in the area.

What struck me in what each wrote was that both seemed clueless as to how jobs are created in America. Both seemed wedded to the notion that jobs are created by "government spending." The programs of both harkened back to the 1930's New Deal programs of FDR. Neither wrote of what they would do to facilitate the creation of private sector jobs.

Rep. Bustos spoke of Cheri on Shifts, the Make it in America initiative, her "one-on-one visits," and the new Goose Island Digital Manufacturing Lab which was funded by the U.S. Department of Defense (according to U.S. Sen Dick Durbin, D-Ill.).

She also talked about the opening of the Thomson prison facility, which is expected to create "1,100 good paying jobs," and upgrading "aging locks and dams along the Illinois and Mississippi rivers."
Mr. Schilling touted his efforts to keep the Rock Island Arsenal going strong, and his belief in the need to "invest in public infrastructure," such as "transportation networks," highways and the Interstate 74 bridge.

Do not misunderstand me. The jobs at Goose Island, at Thomson and at the Arsenal are important. But to create them, the government taxes all of us to raise the money needed to pay the salaries and their related fringe and retirement benefits.

The advantage of jobs created by the private sector is that you and I are not taxed and are not paying the salaries with their related fringe benefits and retirement benefits.

When John Q. Public opens a yoga studio in downtown Moline, he pays the salaries, fringe and retirement benefits allotted to himself and his employees.

To understand the significant difference, consider this:

If there were only 11 American taxpayers, and if all earned $110,000 per year, each would have to be taxed $10,000 per year to pay the salary of one government employee being paid $110,000 per year. If two of the 11 were government employees, all 11 would have to be taxed $20,000 per year. If all 11 were government employees, each would have to be taxed 100 percent of his 2014 salary to pay his 2015 salary of $110,000. And of course, the above figures take no account of fringe and retirement benefits!
There is no question but that we must have arsenals for our nation's defense and road and bridges. Similarly, there is no question that the people who work in our arsenals and who build our roads and bridges work at necessary jobs; good jobs.

But there is a limit to how many people can be on the government payroll before the system crashes. Putting it another way, there is a limit as to how much people working in the private sector can be taxed to support people working in the public sector. At some point in time, taxes on the private sector make it unprofitable for the private sector to remain in business and pay taxes. Neither candidate discusses that.

The key issue in job creation is not how to create public sector jobs; rather, it is how to create private sector jobs. Public sector jobs are funded by taxation. True private sector jobs are funded by ordinary people who go into business and the people who work in the businesses; not by the government.
Any candidate for Congress discussing "jobs" needs to address not only government stimulus and public works programs, but how to get the private sector going.

President Obama and the Democrats have had six years to get the economy going. Unemployment is decreasing only because people who don't have jobs and have quit looking for work are erased from the unemployment roles, and moved to the role for people who are no longer looking for work. It is a cruel shell game.

Some people believe our Internal Revenue Code is about raising money to finance government operations. Others believe it is about income redistribution.

In either case, the best way to increase revenues is to increase the labor force participation rate from 62.8 percent. It is not complicated. If 62 people pay $1 each in federal income taxes, the government gets $62. If 95 people pay $1 each, the government gets $95.

The question that these two candidates need to be discussing is, how do we increase job creation in the private sector? Small businesses create most of the jobs. Are they over-regulated? Are they being taxed out of existence? What needs to be done to encourage them to hire? The labor force participation rate, according to Mr. Schilling, is at a 36-year low.. If 62.8 percent is too low, what are you going to do, Mr. Schilling and Rep. Bustos, to make it easier for private businesses to succeed and hire?

Government stimulus is good; it can create jobs. But it is dependent on taxation. Tax too much and you depress the private sector. One-hundred percent of Americans can't work for the government.

Posted Online:  Oct. 3, 2014, 11:00 pm - Quad-Cities Online
by John Donald O'Shea

Copyright 2014
John Donald O'Shea

Reducing the Deficit: Government Jobs vs. Private Sector Jobs

President Obama and Gov. Mitt Romney have two very different visions of how the U. S. government should "raise the revenues" it needs to pay the nation's debts, and to provide for the common defense and the general welfare.

Assume for a minute

-- a. That the U.S. government needed revenues in the sum of $2,000 to do all of the above,

-- b. That there were only two American citizens,

-- c. That the "First Citizen" has a salary of $5,000 and pays $1,000 in federal income tax, and

-- d. That the "Second Citizen" is unemployed, has no income and pays no federal income tax.

I use this simple "two citizen" example for ease of understanding because nearly half of the American people (47 percent ) presently pay no federal income tax while the other half (53 percent) do.

So, assuming the government needs $2,000 in revenues to meet its needs. What are the government's options? There are only four:

-- Run the printing presses, and print more money;

-- Reduce government expenses to $1,000;

-- Raise taxes on First Citizen from $1,000 to $2,000;

-- Create a job for Second Citizen that pays him $5,000, and have him pay the same $1,000 in taxes that is already being paid by First Citizen.

Neither the Mr. Obama nor Mr. Romney advocates "running the printing presses." That may be implied in their policies, but neither would dare overtly advocate it. To do so they would also have to espouse "inflation" which always follows "running the presses."

As to "reducing government expenses," the record of the "$1 trillion-plus (!) deficits for the last four years demonstrates that President Obama is less likely to "cut government spending" than the Cubs are to win the pennant.

Mr. Romney may cut some spending, but he is candid enough not to tell the voters that he can eliminate the deficit simply by cutting expenses.

As to the third alternative, "raising taxes on the rich (about 3 percent)," President Obama tells America that this is his plan to eliminate the deficit. Gov. Romney says he will lower federal income tax rates for middle class and wealthy Americans, but eliminate deductions for richer Americans. But the governor states that his tax reforms will be "revenue neutral."

Gov. Romney's honestly admits his tax revision plan will not eliminate the deficit. The president's claim that that he can eliminate deficit by taxing the rich and extra 3 percent is utter nonsense. You can run the numbers yourself.

If the deficit is to be eliminated, it will have to be eliminated by creating good paying jobs, and by getting those who are presently not paying income taxes onto the federal tax rolls.

President Obama's solution seems to be to create more "government" jobs by hiring more teachers, more policeman and more government workers. If you hire a teacher and pay that teacher $50,000 a year, and if he then pays $10,000 a year in federal income tax, you have spent $50,000 in federal revenues (tax dollars) for a return of $10,000! You are merely redistributing tax dollars taken from First Citizens and giving them to the Second Citizens.

This is what Mr. Romney describes as Mr. Obama's plan "Government trickle-down economics." (This does not mean that teachers and policemen are not "necessary;" but it does mean that tax dollars are spent to hire them.)

Gov. Romney's solution is to let the private sector to create the new "good paying" jobs. One example of how he would do it, is seen in his energy policy. He would drill for more gas and oil, and dig for more coal. Under Mr. Romney's plan, the wages of the people who drill for gas and oil, and dig for coal wouldn't be paid by the American taxpayer. They would be paid by private industry. If the oil worker was paid a salary of $50,000, it would come from his employer, without cost to the government. But that individual would still pay $10,000 in federal income tax.

Under Mr. Obama's "government" employment plan, the government loses $40,000. ($50,000 to pay salary generating $10,000 in taxes). Under Mr. Romney's Plan the government has a net gain of $10,000 (no government salary generating $10,000 in taxes.)

If 50 percent of the American people pay $1 trillion in taxes, the goal should be to get 100 percent of the American people paying $2 trillion -- without cost to the government!

Posted Online: :   Oct. 09, 2012, 2:46 pm  - Quad-Cities Online

by John Donald O'Shea

Copyright 2012
John Donald O'Shea