Are We Setting Ourselves Up For A Jobless Recovery?

Are We Setting Ourselves Up For A Jobless Recovery?
By Tom Pauken


The Texas unemployment rate jumped from 6.7 percent in April to 7.1 percent
in May. While the percentage of Texans out of work is much lower than the
9.4 percent national figure, continued unemployment claims for individuals
out of work for more than a week are 175 percent higher than
they were in our state a year ago.
The national jobless rate is the highest since July 1983, and this current
economic environment has a more worrisome feel to it than the recession back
then. What is troubling is the sense that there is no place to hide when it
comes to loss of jobs in the private sector. The job losses are across the
board, with the manufacturing sector being one of the hardest hit in terms
of layoffs and plant closings. Moreover, debt levels are much higher today
than they were back in the early 1980s.
A major reason why this national recession appears worse -- and more
persistent-than previous recessions is the higher debt levels in the U.S.
During the "go-go" years of what turned out to be a bubble economy,
consumers, businesses, and most governmental entities (the Texas state
government being a notable exception) went on spending sprees as though
there were no tomorrow - and no day of reckoning.

The credit excesses, beginning in the 1990s and continuing throughout this
decade have resulted in a "mountain load of debt." John Riley of Cornerstone
Investments has cited figures about overall debt to GDP (gross domestic
product) which should concern all of us. In 1981, when President Reagan
assumed office, debt to GDP - that is, consumer debt, corporate debt, and
government was 91 percent. In 1930, at the time of the Great Depression, it
was 300 percent. At the end of 2008, it was nearly 400 percent. That is way
too much debt to get this economy moving again. Moreover, rather than
reducing government debt, the Obama Administration is piling on more
government debt with a stimulus package designed to get the American
consumer to spend our way out of this serious national economic recession.
Our federal budget deficit is expected to be nearly $2 trillion this year.
The Bush Administration tried to engineer a similar short term fix in early
2008 with a $168 billion package of tax rebates to individuals (including
money to those who had never paid taxes in the first place).
Are we setting ourselves up for a jobless recovery?
The Bush Plan didn't work; and, I submit, the Obama stimulus plan won't work
either to get our economy out of the ditch - and growing again. Consumers
aren't going to spend if they are worried - as they are today - about
whether they will have a job tomorrow, or about the very survival of their
businesses. Instead, Americans are saving again - putting money away for
their own "rainy day" fund. Personal savings were at 4.5 percent in April
and jumped to 5.7 percent in May.

Meanwhile, however, government spending at the national level is totally out
of control. With these massive budget deficits (and huge trade deficits as
well), don't we run the risk of opening the door to runaway inflation,
similar to what happened to Germany in the Weimer Republic after World War
I?
Government cannot create jobs - only the private sector can. While the
government may seem to create jobs when it hires people or buys things, it
destroys at least as many jobs as it creates when it does so. That is why
you need a vibrant private sector to pay for and support the public sector.
The number one economic issue facing us today is - how do we encourage job
creation in the private sector - particularly, small businesses where most
new jobs originate - and put America back to work?
The federal government does not have to spend trillions of dollars it
doesn't have in a vain attempt to stimulate the economy. Instead, we need to
reform our job-killing, business tax system which rewards debt while
penalizing companies that save and invest in order to create jobs in the
United States. Under a proposal by Austin businessman David Hartman, we
would replace our onerous business tax system with an 8-percent
border-adjusted consumption tax. That would level the playing field with our
foreign competitors for U.S. businesses operating here at home. We need to
quit exporting prosperity abroad, rebuild our manufacturing base,
lessen our dependence on foreign energy, and bring good paying jobs home to
America again. The Hartman Plan would do just that.
The time for action - along with a new direction in economic policy - is
now. Let's put America back to work.

Tom Pauken is Chairman of the Texas Workforce Commission

Media Contact: Ann Hatchitt Phone:
512-463-8556

The Texas Workforce Commission is a state agency dedicated to helping Texas
employers, workers and communities prosper economically. For details on TWC
and the programs it offers in unison with its network of local workforce
development boards call (512) 463-8556 or visit www.texasworkforce.org.