Grim report sharpens focus on job creation

More payroll tax cuts. A break for manufacturers. Less red tape. An "infrastructure bank" to encourage spending on highways and rail.

From President Barack Obama to Gov. Jerry Brown, political leaders are scrambling to revive a weak job market.

The tough task ahead of them was made vividly clear Friday. On the eve of Labor Day weekend, the government reported there was zero net job creation in America last month. That left unemployment stalled at 9.1 percent.

The news sent the Dow Jones average tumbling 253.31 points, to 11,240.26, while renewing anxiety about a double-dip recession.

Even as Obama prepares to unveil a jobs program in a speech to Congress on Thursday, some analysts questioned whether governments can do much to create jobs in the short run.

"There's no short-term fix for any of this," said Michael Bernick, a San Francisco labor lawyer and former director of the California Employment Development Department.

More realistically, Bernick said, officials should be asking, "What can we do to set the stage for the next five to 10 years, or three to 10 years?"

The limits of government power – and cutting-edge new industries – were highlighted earlier this week. Fremont solar-energy manufacturer Solyndra, the beneficiary of a $535 million federal loan guarantee and $24 million in state tax breaks, announced it's closing its 1,100-employee factory and filing for bankruptcy protection.

Other businesses, sensing elected officials' desperation over the economy, are dangling jobs as leverage to get what they want from government.

Folsom's Waste Connections Inc. threatened this week to move its headquarters to Houston, citing the Legislature's inaction on a bill that would overturn locally adopted limits on the trash it can receive at its Solano County landfill.

Amazon.com promised 7,000 warehouse jobs if the Legislature gives the online giant a two-year reprieve on a new requirement that it collect sales tax from online customers. AT&T Inc., trying to salvage its controversial takeover of T-Mobile, promised to bring 5,000 outsourced jobs back to the United States.

Everything, it seems, is about jobs. Leaders of the Sacramento City Hall task force pushing for a downtown sports arena talk regularly about 4,000-plus construction jobs the facility would generate – and rarely mention that the arena is being built to keep the Sacramento Kings in town.

It's not surprising that political leaders are rolling out job-creation strategies like mad. The question is whether any of them will work.

Media reports say Obama is expected to call for another extension of the payroll tax cuts approved during the Bush administration, as well as a separate tax credit for businesses that expand payrolls. The president might also propose a multibillion-dollar "infrastructure bank" to lend money for roads, bridges and other public works.

With partisan gridlock at absurd levels – even the timing of Obama's speech became an issue this week when it initially was planned at the same time as a debate among Republican presidential candidates – it's not clear what will happen to Obama's proposals. His infrastructure plan, in particular, is likely to run into friction from Republicans.

But one prominent economist said infrastructure spending would do more for the economy than cutting taxes.

"If you want to get people to work now, you've got to spend money now," said Chris Thornberg of Beacon Economics in Los Angeles.

He said the infrastructure component of the 2009 federal stimulus package was barely enough to offset cuts in state and local government spending – and even that is tapering off.

He contends that tax cuts, though they improve consumer spending, don't help the economy much. The extra spending "doesn't go into U.S. production," he said. "It goes into Chinese production."

In California, the Employment Development Department said in its "Labor Day briefing" that 189,000 jobs have been created the past 12 months. But those new jobs haven't done much to budge the unemployment rate, which is sitting at 12 percent – the second highest level in the country, after Nevada.

That explains why Brown is focusing more on jobs lately. He recently named a jobs adviser and proposed a rejiggering of the corporate income tax structure as a way to spur economic growth. The tax plan appears to be dead, though.

Separately, Democratic legislators are pushing a bill designed to curb red tape – a proposal that sparked a strange-bedfellows press conference Thursday with Senate President Pro Tem Darrell Steinberg, Assembly Speaker John A. Pérez and California Chamber of Commerce President Allan Zaremberg.

In return for the legislation, Zaremberg said the chamber might support Democrats on a November 2012 ballot initiative to raise taxes.

Other business leaders responded with cautious optimism to the red-tape proposal.

"I applaud everybody saying we've got to do something about the regulatory climate, but it's got to have some teeth," said Scott Hauge, a San Francisco insurance executive who runs the lobbying group Small Business California.

A recent informal poll of his members showed that red tape and access to investment capital are the two biggest concerns of small business owners in California.

But even if government could fix those problems overnight, it wouldn't immediately lift the economy out of its stupor.
"That's going to take some time to sort itself out," Hauge said.

Source: Sacramento Bee
September 3, 2011

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