By Robert Romano — Over the next ten years, the working age population in the U.S. will grow by about 21 million people. In addition, there are currently 22 million people who cannot fine full-time work in the U.S. economy, plus another 5 million that have given up looking.
So, to keep up with the growth rate of the population, and to eat into the present unemployment problem, going forward the economy will need to produce about 4 million jobs a year. That works out to approximately 333,000 new jobs a month, or 40 million new jobs this decade.
That is problematic because this year, the economy is only growing at a tepid 1.76 percent annualized rate so far, and in the past two years, the economy has only averaged an additional 179,000 jobs a month.
With 143.3 million people employed currently, to get out of this mess, the workforce will need to grow by about 2.8 percent annually to create the jobs needed in the next ten years.
But how to get there?
One idea policymakers might consider in the upcoming calendar year is the elimination of the corporate income tax for goods and services produced here in the U.S.
Senator Rick Santorum touted a similar proposal on the campaign trail during the Republican presidential primary.
At 35 percent, the U.S. has the highest such tax rate in the developed world, more than even Japan. Combined with an ever-weakening dollar, high labor costs, and a regulatory environment that would make Soviet Russia blush, there is an enormous disincentive for new companies to ever set up shop here.
But, with the population growing as fast as it is, the private sector in particular, which employs 85 percent of workers, will need to expand robustly in order to get everyone back to work and the economy back on track. We cannot all work for the government.
So, it needs to become a whole lot cheaper to do business here. And until it does, there is little reason to expect the job market to improve dramatically as the U.S. fails to compete globally for capital.
U.S. exporters should be encouraged too to repatriate profits made overseas back into the country by restoring the foreign income tax credit. They should not be paying any taxes either on those profits.
Relative to individual income and payroll taxes that raise $2 trillion annually, the corporate tax does not raise that much revenue anyway — just $240 billion.
But if eliminating it for goods and services produced here — and halving it as Santorum suggested for all other firms — could help create just half of the jobs needed this decade, much of that revenue would eventually be made up for. The deficit would be reduced further by saving hundreds of billions from unemployment, food stamps, and other welfare programs.
Some will object to favorable treatment or incentives for domestic industries, label it protectionism, or warn of a trade war with overseas competitors. But would those not be the same arguments against a stronger dollar or rolling back restrictive domestic regulations that might make it cheaper to do business here? Those policies would be beneficial to many U.S.-based firms, too.
With any policy, there will always be winners and losers. In this case, the idea would be to create jobs here to accommodate a growing population, not to favor any particular industry’s bottom line.
Consider the alternative, which is to stay on the path we have laid out for ourselves as a nation the past many years.
A failure to create 40 million jobs this decade will mean millions more people becoming dependent on government benefits — essentially creating a permanent underclass. Making matters worse, already dire public finances would become even more swamped, as a dwindling base of taxpayers are expected to pay more of the bills.
At that stage, politicians will be tempted to raise taxes further to reduce the deficit — only even worse than is being called for today. All of which would place even further pressure on job creators, shift more capital overseas, and push more Americans into the ranks of the unemployed — a vicious cycle.
That is why the best social program is a job. The most urgent question facing the nation now is how best to create new ones here.
In the meantime, now is not the time to raise taxes on the job creators we do have during this month’s fiscal cliff negotiations. If anything, politicians need to find ways to make it less expensive to do business here so we all can get back to work. Assuming anyone’s listening, eliminating the corporate tax for U.S. businesses might be a good place to start.
Robert Romano is the Senior Editor of Americans for Limited Government.