Obama's Job Bomb

So: in this post I'm going to connect two recent posts: the review of Rick Perry's handout to contributors TEF money-for-jobs program, and Obama's killing the return to the moon and American spaceflight in the new budget.

The link for them is the $100 billion in Obama's proposed 2011 budget designated as his "jobs program." One link is obvious, but the other not so much so- but be patient, I'll get there.

So, we established in the Rick Perry piece that handing free money to employers and trusting that they'll create the jobs they promise just plain doesn't work. So, what's Barack Obama's approach?

Hand free money to employers and trust that they'll create jobs.

Leaving aside the simple fact that it doesn't work and has never worked, Richard Posner of the Atlantic spots the main flaw at once:

The Keynesian theory of stimulus is that if private demand for goods and services falls substantially below the economy's productive capacity, government can replace the shortfall in demand by increasing its own demand. It can buy roads and airports and military equipment with borrowed money...

The job-stimulus plan is not aimed at increasing demand, and therefore is unlikely to increase employment. For think: if a company is producing 1,000 widgets a year with a work force of 30, and it adds a 31st employee and thereby earns a $5,000 tax credit, the company's total costs will have risen by the wages and benefits that he pays the new employee minus the $5,000. But his sales will not have risen. Participating in the job-subsidy program will actually reduce his profits (revenue minus cost).

So... $30 billion... which won't increase the demand for jobs one iota, and which will almost certainly go into the pockets of corporations whose lawyers and accountants are best at gaming the system. This is one hundred percent wasted money.

And as Derek Thompson reports, we tried this before- under Gerald Ford:

After the 1973-5 recession the New Jobs Tax Credit gave firms a tax break if they increased total employment by at least two percent. The policy was too complex for many firms to apply, and later studies struggled to agree that the tax credit boosted jobs by a significant number. A Department of Labor report ultimately concluded that it was impossible to observe what hiring would have been done without the credit.

Really, I knew Obama was imitating Ford by effectively pardoning his predecessor for all their many and egregious sins... but isn't this carrying imitation too far?

But the aspect of all this that truly intrigues me is this: in order to fully fund Projects Constellation, Orion and Ares for return to the moon by 2020, NASA requested a mere $3 billion per year above current budget for the next ten years.

That adds up to... oh... $30 billion.

And that money, I might remind you, WOULD create a demand for jobs- people building the rockets and spacecraft, people designing the systems involved, people overseeing the launches and spaceflights and tests, and all the knock-ons that would involve.

(Oh, wait- Obama is adding $6 billion, spaced out over five years, to NASA's budget, mostly to extend the space station's life to 2020 and to encourage private spaceflight to take over from NASA. So actually, fully funding NASA would be CHEAPER than Obama's $5000/head new-hire tax credit... and would almost certainly create and protect more actual jobs.)

Lincoln and Douglas are Still Dead

I didn't watch the Republican gubernatorial debate the other night- didn't really feel a need to. I haven't decided for certain yet which primary I'm going to vote in- vote for the best Democrat or the worst Republican- but I already knew how I felt about all three of the people seeking to be the chief executive of Texas.

That said, the Houston Chronicle's account of the debate is a bit interesting.

Gov. Rick Perry spent most of the evening defending his promotion of the Trans-Texas Corridor, toll roads and the spending of $380 million to attract businesses to move to Texas. Perry said he would not have done anything differently during his nine years in office.

I hope the Democrats have THAT little clip in hand for their fall ads. "If you hated the last nine years of Republican rule, how about four more?" Or better yet, "If this man has his way, someday all Texas roads will be toll roads- including the street on which you live."

U.S. Sen. Kay Bailey Hutchison again tried to square her “94 percent pro-life” voting record with her support for the Supreme Court decision legalizing abortion. She also took the brunt of anti-Washington rhetoric.

Dead campaign walking. In this environment, nothing other than "the right to life begins at conception and ends at birth" is going to satisfy the radical right organization that the Texas Republican Party has become.

Hutchison restated her promise to quit the Senate no matter whether she wins or loses the governor's race.

So what's keeping you?

Please don't say manana if you don't mean it...

Activist Debra Medina had to distance herself from statements she made last year that if efforts to promote states' rights fail, the nation may need a “bloody war” of secession. Medina said she is against secession. She said she wants the state to be able to nullify federal laws...

So, you don't support secession, you just support the thing that led to secession a hundred fifty years ago.

Debra, dear, don't be ashamed of your pro-secession views. Rick Perry shares them, remember?

But very few concrete ideas were offered by the candidates on how to resolve a possible $17 billion shortfall in the state's budget over the next two years or how to pay for an expected $300 billion in highway construction needed over the next 20 years.

And this is the fundamental point of the debate. The Republican Party has forgotten how to even HAVE ideas. They've lost their brains and have nothing left but their campaign reflexes- fight, and fight dirty.

It's ironic that almost the only idea of any solidity came from the teabagger outsider, Medina:

She offered one of the more direct proposals of the evening: replace the property tax with increased sales taxes — even if that means the sales tax rate would have to go to 14 percent.

I actually ran with this as my main platform plank when I sought a seat in the legislature as a Libertarian, back in 2006. I still think it's not a bad idea, provided you make most necessities of life tax-free and provide some mechanism to ease the pain on the poor.

But it's not really a Republican idea, and never has been, because it requires that one tax be raised to offset the abolition of another. No mainstream Republican has the honesty to admit the need to do this; instead, it's "cut taxes" forever, and to hell with balancing the budget or maintaining minimum services for the worst off among us.

It's sad that a pro-secession, lunatic-fringe teabagger candidate appears to be the most honest and most sensible of the Republican options. It's also not a little bit frightening. Right now the empty suits like Perry and Hutchinson are the only things standing in the way of an open (and possibly armed) revolt by the people who Debra Medina represents. If they don't come up with better policies- or, more to the point, better candidates- then the old Republicans will sink...

... and something new, and much more savage and ruthless, will rise in its place.

Handing Corporations Free Money Doesn't Work? Imagine That!

Texans for Public Justice reports that Rick Perry's "Texas Enterprise Fund" is not holding corporations receiving job grants accountable for failing to meet pledges of jobs created.

Brace yourself for a LOT of quoting:

Run out of the Governor’s Office, TEF has been a centerpiece of Perry’s administration, with the governor often convening media events to unveil TEF awards... As a brutal economic downturn coincides with Perry’s reelection campaign, the governor has not publicly addressed his job program’s mounting woes. Instead, his office has quietly redefined success. When the 2008 recession struck, the Governor’s Office increasingly amended TEF deals to ease the contractual requirements of what a recipient must do to hold onto its public funds... While the governor, House speaker and lieutenant governor all approve TEF grants, the Governor’s Office said it acts alone when amending the deals.

TEF contracts typically permit the state to terminate an agreement—and recover public funds—when a TEF recipient falls woefully short of its initial job target. The Governor’s Office has enforced the death penalty on just two TEF recipients—though many more companies have qualified for it under the terms of their contracts.

Most TEF agreements contain “clawback” provisions that allow the state to impose financial penalties on recipients who fail to meet job commitments... As of October 2009, however, it had imposed $647,100 in penalties on 11 other TEF projects studied here. These penalties recovered just 1 percent of the $61.4 million that TEF has disbursed to these penalized grant recipients.

Even as the U.S. economy tanked in October 2008, Perry convened a meeting on Texas’ economy where he boasted that:

* The state added 252,000 jobs in 12 months; and
* Texas’ 5 percent unemployment rate remained below its level during the high-tech bubble burst five years earlier.

...Texas’ employment growth rate turned negative starting in February of 2009, according to Texas Workforce Commission data... Texas’ unemployment rate has since surpassed its peak during the dot.com-bomb, hitting 8 percent in November 2009... As the recession took hold, the Governor's Office had to massage data to keep projecting an image of economic vibrancy. A media release it issued in January 2009 claims, "Approximately 70 percent of the jobs created in the U.S. from November 2007-2008 were in Texas." To cook these numbers the Austin American-Statesman revealed, the Texas Workforce Commission ignored all the jobs created by the 36 states that had negative job growth in that period. In fact, if you throw out just 13 more incovenient states, Texas accounted for 100 percent of all new U.S. jobs.

Governor Perry claimed in February 2009 that TEF has created 54,000 jobs since the program’s creation in 2003. Yet more than one-third of the jobs that Perry was counting were job pledges that had yet to materialize. While TEF touts job creation, it awarded $51 million to three recipients to maintain pre-existing jobs. Nor are all TEF-subsidized jobs reserved for Texans. TEF’s $7 million contract with Tyson Foods expresses the “goal (but not requirement)” that 90 percent of the hourly workers at Tyson’s Sherman plant be “Texas residents.” Portugal-based Martifer Energy Systems reported in May that 11 of the 21 workers that it lined up for its TEF-subsidized plant in San Angelo were awaiting U.S. work visas.

. . .

Twelve of the 45 projects reviewed failed to meet their contractual employment commitments, with TEF terminating two failed deals outright. More recipients would have defaulted if TEF had not amended eight contracts to ease their terms of compliance. Nine more TEF recipients are struggling with their job pledges... A $50 million TEF contract suggests that Texas Instruments will create 1,000 new jobs, for example, but imposes no deadlines or penalties for this amorphous target.

. . .

Texas’ Unemployment Compensation Trust Fund is running out of money to pay benefits to all the state’s laid-off workers, including those laid off by companies subsidized by the Texas Enterprise Fund. The irony here is that the state unemployment fund has transferred $161.5 million to Governor Perry’s job fund since the legislature authorized such funding in 2005. The Texas Workforce Commission recently announced that the unemployment-insurance taxes... will almost triple in 2010 to cover shortfalls.

. . .

TEF promised in November 2004 to give (Cabela) from $400,000 to $600,000 to sink $120 million into two superstores in Buda and Fort Worth. The TEF agreement... says that the two new stores will spur “new hotels, entertainment parks, restaurants and complimentary retail stores... expected to total over $250 million and create an additional 2,000 Texas jobs.” Instead, the two stores have yet to provide the 400 relatively low-paying jobs for which they have been contractually responsible since 2005. TEF first forced Cabela’s to repay some of its incentives in 2006, the first such repayment in the program’s history... Cabela’s reported in 2008 that the hyped stores had 241 full-time jobs—159 jobs short of its pledge. To date, the state has recovered $177,288 from Cabela’s. This amounts to 44 percent of the TEF funds disbursed to the company... Due to the economic crisis, the report says, a hotel and two apartment projects slated to be built near the stores have been put on hold.

. . .

Ten months after California hit Hilmar Cheese Co. with a record environmental fine (see “California’s Big Cheese”), TEF awarded the same company $7.5 million in late 2005 to invest $190 million to build a new cheese factory in the Panhandle town of Dalhart. Hilmar officials said they were attracted to Texas by its “common-sense approach to regulation.”

. . .

EF awarded $50 million in July 2005 to ... Lexicon Pharmaceuticals to establish the non-profit Texas Institute for Genomic Medicine... Soon after the Governor’s Office unveiled this deal, the Houston Chronicle reported that three families that controlled 17 percent of Lexicon’s stock had contributed more than $325,000 to Governor Perry. The Institute pledged to create 5,000 jobs by 2015 and maintain them through 2027 ((Texas A&M University) was responsible for 3,384 jobs and Lexicon for 1,616). A&M’s jobs need not be direct hires. It can count any new job for which the Institute is “significantly responsible” through its efforts to attract or create biotechnology and drug-related positions in Texas.

In practice, A&M directed the Texas Workforce Commission to count any new Texas jobs in industries encompassed by the “Governor’s Biotech Cluster.” Data provided by the Workforce Commission indicate that the A&M’s job claims covered two dozen diverse industries from soybean processing to diagnostic imaging centers.” ... A&M ... almost certainly is taking credit for many of the same jobs that the University of Texas’ TEF-subsidized Center for Advanced Biomedical Imaging also claims to have generated.

. . .

TEF awarded $15 million in mid 2005 To Washington Mutual Bank (WaMu) to invest $50 million in a new operations center in San Antonio. The deal calls for the creation of 4,200 new jobs by 2011, including 2,250 at the new facility... During the following year, WaMu cut almost 10,000 jobs... federal regulators seized the $300 billion WaMu in September 2008. Even as this ship was going down, WaMu’s political committee contributed $2,500 to Governor Perry’s campaign in March 2008. Federal regulators immediately sold WaMu to JPMorgan Chase... within six months of this acquisition, JPMorgan announced the elimination of 12,000 more WaMu jobs nationwide...

...WaMu missed its first job target in 2005, when it reported creating 356 jobs instead of the requisite 600. The Governor’s Office wrote WaMu in March 2006, seeking to recover $207,400 for the company’s shortfall of 244 jobs... the Governor’s Office appears to have informally granted WaMu a three-month extension to make up this job shortfall. By 2008 WaMu’s contractual TEF target increased to 2,400 new Texas jobs. The bank reported that it created 2,208 of them—192 jobs short of its target. To derive this number, WaMu reported that it aggregated together its part-time employees’ hours to calculate an unspecified number of full-time-equivalent jobs... WaMu’s TEF agreement specifically applies to “full-time employment positions in Texas.”

And so on, so on, so on, and so forth so on.

So, what have we learned? First and foremost, that the Texas Enterprise Fund is giving free taxpayer money to people who donated to Rick Perry's re-election campaign.

Second, that Rick Perry is deliberately protecting better than half of these companies from being forced to pay back the grants when they fail.

Third, that in most cases the Texas Enterprise Fund payments are being made to corporations which would have done what they would have WITHOUT the payments.

And finally, that a major portion of the current bankruptcy of Texas's unemployment fund can be laid at the feet of looting that money for the Texas Enterprise Fund.

And all of this, mind you, is entirely unaccountable to the people of Texas- the Fund is, for all practical purposes, run solely by the office of the governor. To quote the Dallas Morning News:

"The governor's office has been very deliberate in obscuring the actual jobs that have been created," said Rep. Jim Dunnam of Waco, the House Democratic leader. "It's definitely not lived up to the propaganda."

. . .

Dunnam said the state needs an "independent audit" of the Texas Enterprise Fund, possibly by state Auditor John Keel.

"We need someone with fiscal responsibility to tell us what has worked and what hasn't," Dunnam said.

Keel, who became state auditor in late 2004, didn't return a message seeking comment. An aide said the office has not audited the Texas Enterprise Fund and doing so would "depend on legislative interest."

Bear in mind, though, that Rick Perry is not unique by any means. He's just an example of the fundamental Republican belief that if you cut funding for the poor and helpless and give it to the rich and powerful, then everything will be made better.

And it is made better- for the rich and powerful. For the poor, for the "little people" who pay taxes in Texas, and for the over 8% of Texans now unemployed and with no effective safety net in the state... not so much.

Wind Power: Good News, Bad News

The good news: with current petroleum prices, wind power is currently competitive with other methods of electric generation even without tax subsidies.

The bad news: Congress will almost certainly renew those subsidies next year- despite the fact that wind power companies no longer need them to be competitive.

Here's the Houston Chronicle's article on the subject.

Note the following numbers in the article:

COAL FIRED ELECTRICITY: 4.2 cents per kilowatt-hour
WIND POWER (subsidized): 4.6 cents per kilowatt-hour
WIND POWER (without subsidy): 6.0 cents per kilowatt-hour
NATURAL GAS FIRED ELECTRICITY: 6.8 cents per kilowatt-hour

The article also goes on to note infrastructure costs are fairly high for wind power. Viable wind generation sites are limited to remote areas- deserts, plains, or offshore sites- all of which require long-distance transmission wires to be installed. Furthermore, the high cost of wind turbine construction has caused a bottleneck for expansion of wind generation projects, making them more expensive. These, plus the call to make electric generation affordable for all, are the justifications cited for the tax credit.

HOWEVER.

If an industry is so successful that it has maxed out its ability to expand... why does that industry need tax dollars to survive?

As for transmission line costs... the same argument should apply to rural electrification projects, including the one I live on. Yes, I indirectly receive a government subsidy- because electric service to my area would never have been profitable without a massive initial government outlay. Even now my electricity comes not from a commercial provider, but from the regional co-op that owns the electric lines. In many, if not most, places the electric wires are run on publicly acquired rights of way, but the wires themselves are privately owned. This has led to monopolies in the past and mind-boggling regulations today.

There's a very simple solution to this. We have government owned roads to rural areas so that people who live and work there can get goods to and from the market- enriching all. We have government operated sea ports and airports for the same reasons. Let's extend this public service to transmission infrastructure- in short, publicly owned electric wires. Charge the electric companies a tax per kilowatt hour for maintenance- say, a nickel per- and let anyone with generation capacity into the market. This simplifies the current absurd regulations that try (and fail in many cases) to make the current private infrastructure open to competition- while opening that competition wider than ever.

The anarchists in the Libertarian Party, of course, would never go for this. In fact, there are some who with a straight face call for all public roadways to be auctioned off to the highest bidder- immediately. I don't know about you, but I'd rather not pay a $5 toll just to leave my driveway... and I don't like the "toll" electric companies charge for the use of their wires. This is a case where monopolies will exist UNLESS government acts... and I'd like to abolish all natural monopolies in such a manner.

But in the meantime, let's stop giving taxpayer money to companies owned by Goldman Sachs, hm? Subsidies are only justifiable as a temporary assistance to growing industries which, without them, could not get started. Wind power has its feet under it now- in fact, it's growing by leaps and bounds. It's time to get Goldman Sachs and other investors in wind power off the Welfare rolls... for a start.