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Raymond Richman       -       Jesse Richman       -       Howard Richman

 Richmans' Trade and Taxes Blog

Here Is a Real Jobs Plan in Contrast to Pres. Obama's No-Jobs Plan
Raymond Richman, 9/15/2011

As we pointed out yesterday on this site, President Obama’s American Jobs Act does not, for practical purposes, create any jobs at all. He proposed one-time cuts in payroll taxes for businesses and their employees when business needs long-term solutions. It makes huge transfers to the States to pay teachers’ salaries which is not a federal responsibility at all and does not create any new jobs at all. It is nothing but a list of earmarks for his voting constituencies none of which wants to create any real jobs in the private sector. Nothing in the proposed bill would be a stimulus to business to invest here rather than abroad nor discourage outsourcing which has been increasing for decades. 

As the bankruptcy of Solyndra, whose  $535 million of borrowed capital was guaranteed by the federal government under the 2009 stimulus plan and which received other benefits such as tax credits, demonstrates the fact that the President favors green energy plants over more efficient fossil fuel plants. And as his opposition to private oil and natural gas development on public lands and offshore in the Gulf, Alaska, and the Arctic shows, he is willing to sacrifice millions of jobs to create an uneconomic green economy that will impoverish the American worker. As Tapan Munro, a “clean energy” proponent wrote on August 8, 2011,  in an article entitled “U.S. Clean Energy's Bubble is Set to Burst”, because “Clean energy today is more expensive and less reliable than coal- and natural-gas-based energy. Large subsidies artificially maintain clean energy's price competitiveness. These subsidies are likely to cease in a few years because of severe budgetary cutbacks proposed for coming years. This should not be a surprise to us. The industry has crashed before -- in the mid-1990s, in 2002 and 2004 -- mostly because Congress did not extend the tax credits that made the industry commercially viable.’  The Energy Department has closed $37.8 billion in loan guarantees for 36 nuclear, wind and solar projects. Solyndra is not the largest loan guarantee. The DOE reported a $967 million loan guarantee for the Agua Caliente Solar Project.

Not one green plant would be profitable without government subsidies. By contrast private corporations paid $304 billion in federal corporate income taxes in 2010, although all you hear or read in the media is about those companies like General Electric (an administration darling!) that paid no corporate income taxes last year.  Private corporations, except when the president wants to rescue his union supporters as was the case with GM, got few subsidies and no protection from foreign competition.

 The latest news from the US Census Bureau is that 2.6 million people slipped into poverty in the United States last year and the number of Americans living below the official poverty line, 46.2 million people, was the highest number in the 52 years the bureau has been publishing figures on it. And median household incomes fell last year to levels last seen in 1997.  What has been happening since 1997 to cause this? Foolish government expenditures, guaranteed loans, eliminating incandescent light bulbs, and huge penalties on coal mining and carbon emitting enterprises.

 To create a job-creating program should cost no money at all. It would mean ending the government’s anti-business policies, getting the government out of the way and freeing private business decision-making.  Indeed, a sound job-creating program, as will be shown below, would immediately increase government revenues.

 The principal cause of this recession was the financial crisis caused by the collapse of the housing bubble. This left us with a huge surplus of vacant housing. The government has been wasting huge resources trying to protect home-owners from the consequences of their mistakes which does not create any jobs at all. It is charity. The best thing we could do to restore the housing markets is to create new industrial jobs. The newly employed or re-employed workers will need housing and restore the housing sector. This will take time. We are stuck with a depressed housing market for at least a year or two depending on how fast we create new jobs.

The most promising sector for creating new jobs quickly is the traditional energy sector. End the numerous government roadblocks to drilling for oil, gas, and coal. Oil reserves have been discovered on public lands in Alaska and offshore in the Arctic which Russia is already exploiting and we are one of its customers. We have huge reserves in oil sands like those Canada is exploiting and we are one of its customers.  

This sector, thanks to the discoveries of gas in shale and new drilling technologies, is already creating hundreds of thousands of jobs in North Dakota,(an unemployment rate of 3 percent!), Pennsylvania, West Virginia, Texas, et al. and is capable of making us a leading producer and exporter. Shipping terminals are being built to handle the expected huge foreign demand.  As large vehicles and buses convert to natural gas as a fuel, the few stations that have been built already will be augmented by thousands along the interstates and in our cities. Honda has already marketed autos with engines powered by natural gas. It has the potential to revolutionize motor transportation and create a real boom. 

All we have to worry about is sabotage from the environmental extremists. They have already caused prohibition of fracking in New York and Pittsburgh (a city in receivership because of unsustainable pension obligations.)

A second source of jobs that can be exploited quickly is closing our huge foreign  trade deficit, every $100,000 of which costs an American job. Take a look at the trade balances in goods and services from 1996 to 2010:






Goods 1
































































 The rules of international trade permit countries to impose barriers to imports from countries with which they are experiencing unfavorable trade imbalances. Our Presidents since 1996– Bill Clinton, George W. Bush, and Barack Obama – have been too proud, which goeth before a fall, to take advantage of the rules of the World Trade Organization. Ideal Taxes Assn invented the single-country-scaled (variable)-tariffto be used to compel countries to buy as much from us as they sell to us. The purpose of trade is to exchange goods that we can produce more efficiently for a bundle of goods of equal value but which other countries can produce more efficiently. Countries like China are growing their economies at the expense of American workers by employing mercantilist practices limiting imports and subsidizing exports and getting foreign capitalists that Lenin described as “useful idiots” to build factories in China and share their technologies. Of course, we do not need to balance our trade with every country but our trade with the rest of the world does need to be near balance, at least.

In the first six months of 2011, we had our largest trade deficits with the following:

China                             $160. 4  billion 

OPEC                                 76.7  billion

Canada                      59.8  billion

Mexico                      39.3  billion

Japan                                  31.8  billion

Germany                   26.7  billion                       

Russia                       15.3  billion

India                            8.6  billion

Korea                          7.8  billion

Annualized, these deficits amount to $426.4 billion, equivalent to four million jobs.

 Our trade deficit with China, Japan, and Germany consists primarily of consumer goods and industrial goods and machinery nearly all of which have been and can once again be produced competitively in this country.  Our single-country-scaled (variable)-tariff could be very effective in inducing American corporations to start and restart their factories here. Canada and Mexico are in the North American Free Trade Area, which was promoted  by politicians and  economists in the U.S. who claimed that it would help balance trade.  Obviously it did not; it worsened the trade balance.

  Our trade deficit with OPEC and Russia and to a large extent with Mexico is due to oil imports. We can be self-sufficient in oil and gas as a result of the discovery of immense reserves of natural gas in shale and of oil in sands and offshore in Alaska. We forbid drilling on public lands in the U.S. and the Arctic although we have opened public lands to wind and solar energy, which cannot compete without huge subsidies. The windmills are an environmental catastrophe by themselves; they are noisy and  kill large numbers of birds. While traditional energy plants  have to file papers proving little or no harm to the environment and animals, environmentalists overlook these requirements in the case of wind, solar, and other green enterprises. We believe they their support of zero carbon emissions is because their leaders aim for the destruction of American free enterprise. We believe the American worker is paying a huge price for our misguided environmental policies. The President himself shares this goal; otherwise, how can his policies be explained.

 Moreover, the very basis for our restrictions on carbon emissions, the theory of man-made global warming, as we have pointed out on this site, now has a competitive theory first advanced by Prof. Svensmark of Denmark in 1997 and earlier that it is the sun’s cyclical magnetic attraction of cosmic rays that mainly causes global warming and cooling.  If true, then man’s emissions of carbon dioxide does not have a decisive effect on climate change and the billions that the federal government and the states  have already spent and the expenditures they forced on industry to prevent carbon emissions was a total waste of taxpayer money.  

 The environmental change that we really need to create is the anti-business environment. We recommend abolition of the corporate income tax and taxing corporations as we do partnerships. Indeed, as we pointed out in our book, Trading Away Our Future (Pittsburgh: Ideal Taxes Association, 2008), most of our trading partners impose a value-added tax which, under international trade rules, can be rebated to their exporters and imposed on imports. Income taxes cannot be rebated. Moreover, so far as products produced in this country and sold in this country, the corporate income tax is like a sales tax and the tax is passed on to consumers while insofar as exports are concerned, the tax cannot be passed on because the product price is market-determined by the competition of sellers from many countries.

The government places socialist objectives at the forefront of its multitudinous regulations and they can and are being changed at the whim of the administrator. A prime example is the EPA which can cause the demise of industries by its regulations. It recently made hundreds of traditional fueled power companies engage at huge expense to reduce their emissions on the grounds that they are polluting the air in neighboring states. Many will simply shut down because of the expense involved. Its main purpose may well be to force the plants to shift to wind and solar power. This means higher prices for electricity and lower standards of living for American workers. Another outrageous example is the ruling by the National Labor Relations Board that Boeing cannot build a plant in a right-too-work state. Banks cannot lend freely. Businessmen have complained that the new rules imposed under the Dodd-Frank financial regulation bill made it impossible or them to finance their business operations.

We are on record as advocating repeal of the prohibition against the manufacture, sale and consumption of narcotics.  Legalizing and taxing the use of narcotics which had long been legal would bring in substantial revenues and we would save up to 50 billions per year, the cost of multiple agencies trying to enforce an unenforceable law internationally because of our failure to enforce the law domestically. Thousands of Americans and foreigners have been killed trying to eradicate the production and traffic of narcotics. Our prisons are filled. Little known is the fact that we are losing the Afghan war because we imposed our unenforceable narcotics law on the Afghans. Poppies were the chief agricultural product of Afghanistan. Opium was exported to Asia; it was no problem for us. The invasion of Afghanistan and the destruction of the Taliban army was so easy because the Taliban, for religious reasons, had banned the production of poppies in 2001. The rural Afghans viewed us as liberators from their Taliban oppressors and for a couple of years they continued to view us as liberators. Washington caved in to a U.N. request that production of poppies be outlawed in Afghanistan, which we did, going so far as having our soldiers destroy poppies in the field. The Taliban reversed policy at the suggestion of drug traffickers and eliminated their ban against growing poppies. Drug traffickers financed their rearming. From liberators we became foreign oppressors in the eyes of the farmers and the Taliban became their liberators from foreign yoke.

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  • [An] extensive argument for balanced trade, and a program to achieve balanced trade is presented in Trading Away Our Future, by Raymond Richman, Howard Richman and Jesse Richman. “A minimum standard for ensuring that trade does benefit all is that trade should be relatively in balance.” [Balanced Trade entry]

    Journal of Economic Literature:

  • [Trading Away Our Future] Examines the costs and benefits of U.S. trade and tax policies. Discusses why trade deficits matter; root of the trade deficit; the “ostrich” and “eagles” attitudes; how to balance trade; taxation of capital gains; the real estate tax; the corporate income tax; solving the low savings problem; how to protect one’s assets; and a program for a strong America....

    Atlantic Economic Journal:

  • In Trading Away Our Future   Richman ... advocates the immediate adoption of a set of public policy proposal designed to reduce the trade deficit and increase domestic savings.... the set of public policy proposals is a wake-up call... [February 17, 2009 review by T.H. Cate]