Krugman’s Bottom Line: To Create Jobs in America, Create Jobs in America… Don’t Wait for Businesses to Do It Because You Gave Them a Tax Break

April 11, 2021 Leave a comment

Earlier this week NYTimes op ed writer and Nobel economist Paul Krugman offered a positive assessment of Joe Biden’s approach to job creation and yet another disparaging assessment of trickle down economics. Dr. Krugman’s  bottom line on job creation is summarized in his last two penultimate paragraphs:

The corporate tax plan, then, looks like a really good idea. In part that’s because President Biden, unlike his predecessor, has hired people who know what they’re talking about. And it also marks a welcome break with the ideology that says that the only way we can help American workers is indirect action: cutting taxes on corporations and the wealthy in the hope that they’ll somehow deliver a pot of gold at the end of the rainbow.

What the Biden team seems to have concluded, instead, is that the way to create jobs is to create jobs, mainly through public investment, rather than by chasing unicorns and leprechauns.To the (partial) extent that direct job creation must be paid for with new taxes, the new taxes should be imposed on those who can afford to pay.

This seems to be a very simple equation: create government jobs and pay for them with taxes raised on those who can afford it most. Why, you might ask, has this not been done of late? Because everyone who ran for President from Michael Dukakis onward based their platform on the same assertion… the Reagan credo: GOVERNMENT is the Problem. And what has four decades of giving corporations tax breaks given us? A yawning gap between the rich and poor, a class of individuals (like the former President) who inherited great wealth and used it to secure endless power, and a set of awesome jobs like those described in the Lego Movie.

“Mind Melting” Data Point: Public Education Lost Nearly $2,400,000,000 to Abatements for Businesses in 2018-19… And That’s from Only 27 States!

April 9, 2021 Leave a comment

In the Public Interest’s Jeremy Mohler interviewed Christing Wen, planning/fiscal policy coordinator of Good Jobs First, a national think tank that studies state and local job subsidies, including corporate tax breaks and one of the authors of Good Job First’s new study, Abating Our Future: How Students Pay for Corporate Tax Breaks. He leads the blog post that includes his interview with this:

The topline fact in Abating Our Future is mind-melting. School districts nationwide lost nearly $2.4 billion to corporate subsidies in fiscal year 2019. That’s money meant for students that ended up in the pockets of Amazon, Tesla, and other corporations.

And that’s based on data from only 27 states. In the other 23 states plus Washington, D.C., (which should be a state), school districts fail to disclose any meaningful information about how much money they’re losing to corporations.

Last week sure was a doozy for those of us who think corporations should pay more in taxes. The Institute for Taxation and Economic Policy (ITEP) also released a report revealing that at least 55 of the largest American corporations paid no federal income taxes on their 2020 profits.

How can we adequately pay for public goods, things we all rely on like public health and clean water, without raising taxes on those who can afford it? We simply can’t.We desperately need a more progressive tax system.

As noted in earlier blog posts frequently, the impact on school funding that results from Payments in Lieu of Taxes (a.k.a. PILOT) agreements is clearly harmful and the notion that it cannot be avoided in order for a community to attract business is shameful, especially when those same businesses seek subsidies from the State and Federal government at the same time. The only clear beneficiaries of PILOT agreements are the shareholders of the corporation and, in all probability, the highest paid executives whose salaries are based on earnings.

And how much districts are losing from PILOTs? Christine Went reports that one hundred and forty-nine districts reported having foregone more than $1,000 per student… and those districts tended to be the ones who serve the neediest children.

And here’s what’s even worse: the abatements don’t demonstrably improve employment nor are they really necessary! Christine Wen:

A lot of times, tax incentives create no net new jobs. They just shift the existing jobs or investments from one locality to another, sometimes within the same metro area. It’s a zero-sum game. Even if growth happens, it often can’t be traced to the incentives.

Taxes are just too small a fraction of a typical company’s expenses for abatements to be the decisive factor in where to relocate or expand. A company may choose its location regardless of the subsidies offered.

Basically, subsidies are often wasteful, and places do fine without them.

These abatements, like trickle down economics favored by anti-government libertarians, assume that business’s largesse and the “rising tide” of the local economy will offset the short term tax losses. Absent hard data on the issue, the public relies on anecdotal evidence, like a business that donates $10,000 to a school to help them get laptops. What the public fails to read about is how much that corporation benefitted from the tax breaks they received at the local level…. and it makes $10,000 look like chump change.

Here’s hoping that Congress will close the loopholes on corporate taxes and use those funds to shore up the infrastructure… including the dilapidated public schools that exist across the nation while corporate campuses get new roads and sewers.

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Free College for All Gets Headlines… Free Entry-Level Training for Diesel Mechanics, Though, Makes a Difference

April 8, 2021 Leave a comment

Count me among the group who believes that college is oversold and job training for careers that require gritty soap are under-respected. Unfortunately, during the past several years, fly-by-night profiteering programs that offer federally backed loans have gotten far too large a market share in job training leaving prospective trainees without work and saddled with debt and the profiteers with full pockets. What’s the solution?

The NYTimes offered one way out of the woods in “Job training That’s Free Until You’re Hired is a Blueprint for Biden”, and article by Steve Lohr that describes a model developed by Social Finance. Social Finance is described on its webpage as a nonprofit

dedicated to mobilizing capital to drive social progress. We bring uncommon partners together around a common purpose: to measurably improve the lives of those in need.

Through a set of outcomes-based financing strategies called Pay for Success, we work to disrupt the status quo, shifting mindsets to align resources with impact.

As described in Mr. Lohr’s article, I would offer this prosaic description: Social Finance matches employers seeking skilled workers with prospective workers seeking skills that will yields higher pay. And based on my own prejudices for cooperative work-study and an emphasis on the work-ethic in a team setting, I see this model as a great way forward. As much as I wish major corporations would offer their own in-house training programs and wish that schools could create the kinds of networks that Social finance can create, I don’t foresee it happening any time soon. One of the key elements of the job training described in this article is mobility. That is, there is no assumption that those getting training in, say, Ohio, will work in that state. And though Mr,. Lohr does not say as much, it is evident that those who sign on for training enter knowing that this might be the case. As one who moved frequently as a youngster and as an adult, I see no problem in moving from one community to another. But as one who did extensive consulting in rural communities, I can also appreciate why some people would be very unsettled in moving from their home town to a community of strangers.

Will this work to scale? It will if the higher-minded mission of Social Finance works— that is if workers seeking higher wages are willing to shift their mindsets to align their opportunities with where the work is…. AND… employers are willing to align their compensation so that workers feel assured that their commitment to relocation is worthwhile.