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VIDEOWhere Will the Jobs Come From?
I wish the administration the best.
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DeVol says that the key to this is a cut in corporate taxes and a research-and-development tax credit. The United States has some of the highest corporate taxes in the world. If the R&D tax credit is increased by 25% and made permanent, this will lead to a 1.2% increase in GDP. If corporate taxes are cut from 35% to 22%, it would equal other levels of other OECD countries. This would add 2.2% to our GDP.
According to DeVol, these measures would create 327,000 manufacturing jobs, 2 million transit jobs (highway), 576,100 for clean coal and smart grid, and waste and clean drinking water jobs would increase 27,500 for every $1 billion spent. All of these numbers are on an annual basis. It would be 11 million jobs by 2019.
It’s true that our highways and bridges are crumbling. It’s true that our water system needs updating. It’s thought that if an earthquake the size of the one that hit Haiti hit northern California, the dams that supply much of the water to the state would break. These dams were built decades ago by farmers with horse-drawn plows.
As for clean coal, I’m not sure if that’s going to happen. It doesn’t seem that the technology is there. Nuclear seems to be the way to go. No one seems to have the appetite to close old coal plants. Coal is the cheapest form of energy but the dirtiest. On top of the US embassy in Beijing is a clean air monitor. It goes up to 500 on its scale. Guess what it reads most days in Beijing? 500
When speaking of tax cuts, one must also talk about the other two legs of the three-legged stool: spending and debt. We are going to spend $3.8 trillion and take in $2.5 trillion in taxes in 2011. That leaves a deficit of $1.3 trillion. That gets added to the $10 trillion of debt that we have outstanding. That of course is Treasury bills and Treasury bonds, what China and Asia are buying. What if they stop buying? The Federal Reserve has the ability to step in and buy from the Treasury -- called money printing.
We'll spend $844 billion on defense, $530 billion on non-security (highways, agriculture, education, etc.), $730 billion on Social Security, $492 billion on Medicare, $271 billion on Medicaid, and $596 billion on other programs. We’re going to have to slice off some of this spending and raise taxes. We take in $1.126 trillion from individuals and $293 trillion from corporations. I don't see any political appetite to cut corporate taxes.
Two plus two equals four. The only way to balance the budget is to raise taxes and cut spending. The leftover money should be used to pay down the debt. Unfortunately, the Office of Management and Budget has stated that the US debt will rise to $24 trillion by 2020: Looks like there might be some more money printing.
Many folks believe that cutting taxes will increase production. That might be true. It would leave more money over for capital expenditures like upgrading plants. But this isn't the old days. Our 80 million Baby Boomers are retiring every day. The succeeding generations lack 15 million. We won’t have that demographic drive of the '80s and '90s. The Baby Boomers bailed us out of many problems by the fact that they worked and spent like crazy. Now, they're saving and worried that their money won’t last them until they live to be 95.
If there's more money printing, the oil and steel that's used to build roads will rise. The dollar will fall, food prices will go up, wages will increase, etc. It’s a tricky game, trying to jump-start an economy. I wish the administration the best. I’m buying gold (GLD).
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