Hatto, our culture editor, has boldly met our hour of national need by turning his thoughts from the aetherial to the mundane, and writes us thus:
I’m not an economist, but figured I’d throw this out there. Tear it apart.
Here is an estimate of US companies untaxed foreign profits overseas:
General Electric – $90 billion
Pfizer -$45 billion
Merck – $40 billion
Johnson & Johnson – $35 billion
Exxon Mobil – $35 billion
Citigroup – $30 billion
CSCO – $30 billion
IBM – $30 billion
Procter & Gambler – $30 billion
Microsoft – $25 billion
TOTAL – $390 billion
These companies are reluctant to pay the 35% tariff in order to bring these profits back into the US. So the cash remains abroad.
35% represents over $135 billion in tax revenue. To put that in perspective, the same figure could represent over 2.2 million jobs at an average of $60,000 a year, 3 million at $45,000 a year, or close to 20% of total military spending for 2010 estimated at $685 billion. The number is significant.
The Left is concerned that the cash brought back into the US will be re-distributed to shareholders through dividends or stock buy backs. The Right suggests a “tax holiday” for those companies that bring the profits back into the US.
Let’s assume that it is in the best interest of the said companies and the US to get these untaxed profits back to shore. What if the private sector are given a “tax holiday” for untaxed foreign profits under the condition that they must reserve 35% for “job creation” and a 5% tax on the balance. The jobs would need to be US based, but otherwise entirely designed and created by the private sector for whatever means.
Out of the $390 billion…approximately….
$135 billion would go towards job creation
Around $33 billion would be assumed in taxes
A further $20 billion would go to payroll tax – half paid by the private sector and $12 billion would be collected on the imported balances of the unpaid profits
That’s $65 billion to the Government, $233 billion to the private sector, and close to 2 million new jobs through a multi-billion private sector hiring initiative.
The private sector can invest and innovate through hiring with cash that otherwise was doing nothing for them overseas and reward shareholders at the same time. The Government can ignite an otherwise anemic economy through job creation by the people who know best and without having to print another dollar bill.
Any thoughts or ideas?
Well, yes. We are happy to have an opportunity to explain why the whole notion of “job creation” is a chimera:
The problem here is the same problem Obama faces when people demand that he create jobs: doing what?
We can’t just “create jobs.” Before you can hire people, there has to be something for them to do. Hiring 2 million people just for the sake of paying them a salary makes no sense. If companies actually need more people, they will hire them. That is, if adding to payroll will actually improve revenues beyond the additional payroll and associated costs, they would do so. Any good manager would.
The hilarious but oft-repeated notion that “putting money in people’s pockets will make them go to the stores and buy more and then the companies will make more and so just have faith and employ more people anyway and then you’ll see, I promise” is just political horseshit of the first water. It’s nonsense aimed at people too ignorant or too stupid to see through it. Forgive me if this seems to include a large number of Democratic voters.
What “store” will people shop in to buy more drugs from Merck? Pfizer? More bandaids from Johnson &Johnson? Will these newly-employed people buy more gas from Exxon? More software from Microsoft? More mainframes from IBM? More electric toothbrushes from GE? More soap from P&G?
The fact is, there has been a large and fundamental shift in the value of labor, disguised for many years during the 1982-2007 economic boom by fat corporate margins and a politically-driven reluctance to cut jobs. But when things get tough, the marginal jobs get cut, and they never come back, except in the government.
The solution to this problem is less obvious.
The main engine for job creation in this country has never been large corporations. It has always been small businesses. And yet, no one has yet devised a way to encourage small business creation; rather, the opposite effect seems to be the rule of the day. The bureaucratic obstacles to starting a business are formidable, and sufficient to discourage even the hardiest entrepreneurs. And trying to solve our current problems by making this process easier won’t work; it just takes too long. That’s also why the notion that “we need to put people to work fixing our crumbling infrastructure” is another hollow promise. Both of these ideas are very good oones, and ought to be addressed right now — but their effect on employment will be years in the future.
Politicians don’t like good ideas if they don’t pay off for three or more years. And that’s part, if not all, of the real problem. If we had started putting together projects to fix bridges, airports, and all the rest, three years ago, we’d be very happy now. We’d have all the permits, conducted all the environmental impact studies, addressed all the inevitable lawsuits from the well-intentioned protectors of this and that, and we’d be ready to put 2 million people to work.
Any chance of that happening now? Any chance of any of those ossified myopics in DC putting a five-year plan in the works? Not as long as they serve four year terms.
But thanks, Hatto. Keep the ideas coming. It’s good to know that someone is actually thinking out there.