There are numerous ideas and recommendations on how we could create jobs that range from the cautious to the extreme. Most job creation programs proposed by commentators, politicians, and economists involve either increased government spending or reductions in income or employment taxes at a time of soaring budget deficits and decreased government revenue. Other recommendations would require legislation to change policies on taxation, regulation, or trade that would be difficult to accomplish. Many of these solutions involve borrowing money or taking money from one group of citizens or a future generation to give to another. Let’s start with what we as individuals can do from the viewpoint of entrepreneurs, business owners, employees, and consumers.
If you are an entrepreneur starting a company, find a niche product for which customers will be willing to pay more for a “Made in USA” product. Plan to sell your product on the basis of its “distinct competitive advantage” rather than on the basis of lowest price. Select your suppliers from American companies as this will create jobs for other Americans.
If you are the owner of an existing manufacturing company, then you could do a Total Cost of Ownership analysis for component parts that you are having made offshore to see if you could “reshore” some of all of them to be made in the United States. Check out www.reshorenow.org for a TCO worksheet estimator to conduct your analysis. Also, you could choose to keep R&D in the United States or bring it back to the United States if you have “offshored” it. Every manufacturing job you keep or bring back to the United States will create an average of three to four support jobs for other Americans. If you are a service company, you could choose to keep your customer service department in the United States or bring it back if it is “offshored.” If enough manufacturing is “reshored” from China, we would drastically reduce our trade $600 billion trade deficit . We could create as many as three million manufacturing jobs, which would, in turn, create 9 – 12 million total jobs, bringing our unemployment down to 4 percent.
If you are an inventor ready to get a patent or license agreement for your product, select American companies to make parts and assemblies for your product as much as possible. There are some electronic components that are no longer made in the U. S., so it may not be possible to source all of the component parts with American companies. As I’ve written previously, there are many hidden costs to doing business offshore so that in the long run you may not save as much money as you expect by sourcing your product offshore. Don’t forget about the danger of having your Intellectual Property stolen by a foreign company that will use it to make a copy-cat or counterfeit product sold at a lower price than your product.
If you are fortunate enough to have a regular, stable job, do everything in your power to contribute to the success of your company. Do your job to the best of your ability. Be willing to learn new job skills to increase your value to your employer. No matter what your job, adopt the marketing mindset where you realize that everyone in a company is part of the marketing team regardless of their job function. Every interaction that a customer or potential customer has with anyone in a company influences his or her opinion about doing business with that company. Even though you are being paid by your employer, it’s actually your company’s customers that provide you with a job.
You may not realize it, but you have tremendous power as a consumer. Even large corporations pay attention to trends in consumer buying, and there is beginning to be a trend to buy ‘Made in USA” products. Pay attention to the country of origin labels when you shop and buy “Made in USA” products whenever possible. Be willing to step out of your comfort zone and ask the store owner or manager to carry more “Made in USA” products. If you buy products online, there are now a plethora of online sources dedicated to selling only “Made in USA” products. Each time you choose to buy an American-made product, you help save or create an American job. There is a ripple effect in that every manufacturing job creates three to ten other manufacturing jobs, depending on the industry. If 200 million Americans bought $20 worth of American products instead of Chinese, it would reduce our trade imbalance with China by four billion dollars. During the ABC World News series called “Made in America,” Diane Sawyer has repeatedly said, “If every American spent an extra $3.33 on U. S.-made goods, it would create almost 10,000 new jobs in this country.”
Now, let’s consider what Congress could do to create jobs. First, Congress must enact legislation that addresses China’s currency manipulation. Most economists believe that China’s currency is undervalued by 30-40% so their products may be cheaper than American products on that basis alone. To address China’s currency manipulation and provide a means for American companies to petition for countervailing duties, the Senate passed S. 1619 last fall. Even though the corresponding bill in the House, H. R. 639, had bi-partisan support with 231 co-sponsors, GOP leadership bottled up the bill in committee and prevented it from being brought up for a vote, so the session ended without action to address this serious issue. The 112th Congress lasts two years, starting in Jan 2011 and ending December 2012, so there is the opportunity for the bill to be voted on this year.
We voters need to pressure our elected representatives in the House to pass this bill this year so that American products can compete against Chinese imports. It’s an obvious fact that if American companies can increase sales of their products, then they will be able to hire more workers.
Second, Congress should pass legislation allowing American corporations to “repatriate” income earned by plants in foreign countries at a reduced tax rate of 5-5.5% if the income is permanently reinvested in the United States. This would bring nearly 1.2 billion dollars of monies back to the U. S. to be invested in R&D, plants, equipment, and hiring workers.
Third, Congress should strengthen and tighten procurement regulations to enforce “buying American” for all government agencies and not just the Department of Defense. All federal spending should have “buy America provisions giving American workers and businesses the first opportunity at procurement contracts. New federal loan guarantees for energy projects should require the utilization of domestic supply chains for construction. No federal, state, or local government dollars should be spent buying materials, equipment, supplies, and workers from China.
My other recommendations for creating jobs are based on improving the competitiveness of American companies by improving the business climate of the United States so that there is less incentive for American manufacturing companies to outsource manufacturing offshore or build plants in foreign countries. The proposed legislation would also close tax loopholes and prevent corporations from avoiding paying corporate income taxes. They are:
- Reduce corporate taxes to 25 percent
- No negotiation or ratification by Congress of any new Free Trade Agreements
- Make capital gains tax of 15 percent permanent
- Increase and make permanent the R&D tax credit
- Eliminate the estate tax (also called the Death Tax)
- Improve intellectual property rights protection and increase criminal prosecution
- Prevent sale of strategic U.S.-owned companies to foreign-owned companies
- Enact legislation to prevent corporations from avoiding the U.S. income tax by reincorporating in a foreign country
- Change the tax code to a “partial exemption system” to eliminate incentives for companies to move offshore by taxing all corporate income at a reasonable rate once
In this election year, it is unlikely that legislation proposing any of these recommendations would have a chance of being passed by Congress. The problem is that no Democrat would want to allow any credit to go to a Republican, which might help them win re-election, and no Republican would want to allow any credit to go to a Democrat, which might help them win re-election. We will need to wait until after the 2012 election before we have any hope of such legislation being considered.
Finally, the Obama administration is considering a high-level task force to manage China trade enforcement issues. Such a task force is desperately needed and long overdue. The challenge will be to ensure that the task force has the authority to take bold steps to lower our trade deficit with China. Holding China accountable for their compliance with terms of their membership in the World Trade Organization would be a major step in helping American manufacturers compete in the global marketplace to be able to succeed, grow and create jobs in America instead of China.
