The 2009 $850 billion stimulus bill, at best was partially successful in the short term, by saving and adding public jobs. However, with money running out at states that received the stimulus, many of these public jobs are being lost. Why?
There was little if any new wealth creation with these jobs; wealth creation would have added to state and local treasury revenues to keep these jobs. What jobs then can create wealth and thus new revenues for state and local governments?
Private Sector ‘long term’ economic impact
The answer is – private economy jobs that the free markets will demand and support. Examples include:
• New business and social media technologies that speed up communication, making all of us more productive
• New hardware acceleration technologies that speed up processing of data for near real time business intelligence ranging from financial trading to marketing to law enforcement to natural resource exploration to weather and tornado predictions.
• Nanotechnologies that are in process of creating intelligent robotics that will update sensors in real time to alter procedures for complex surgeries.
The private sector has persistently come through with technologies that create long term jobs that in turn, via multiplier effects, create other long term jobs.
New software start-up creates superior Complex Event Processing (CEP) technology that allows Company X to determine what proportion of products to develop to maximize global competiveness. CEP company adds more CEP licenses and more employees after Company X grows and adds more employees.
Start-ups and small companies (under 500 employees) have traditionally been the driving forces creating approximately 70% of all new jobs that last for many years in the US.
What public policy can support a pro entrepreneurial environment to support long term job creation?
One policy is the Fair Tax, now in Congress as HR 25. Although it addresses federal taxes, its main features can be implemented by states. At the federal level, the Fair Tax eliminates all personal and corporate income and payroll taxes and replaces that with a revenue-neutral tax of 23 percent for all “new” products. It is progressive, provides “prebates” to lower-income earners. It eliminates the IRS, which alone will boost our GDP by about $450 billion. That money in the private sector will further generate economic growth.
The 0% federal corporate tax rate will position the US overnight as an entrepreneurial friendly haven. Similarly, eliminate state personal and corporate taxes and replace that with a revenue neutral consumption tax. Then watch foreign and domestic investors flock to NJ. 0% taxes for corporations? Corporations pass on all taxes to consumers.
Imagine the improvement in our trade deficit if we exempt taxes on domestically produced products but tax imports. Right now foreign producers pay no US income or payroll taxes and no foreign Value Added Tax when selling in the US. Furthermore, many foreign countries rebate their companies when they export. Right now, US producers must pay US income and payroll taxes on items sold in the US as well as Value Added Taxes in many foreign countries. The US is at a severe global competitive disadvantage.
Improve investment opportunities and state treasury revenues will increase. Let us stun the US and the world with a ‘new’ New Jersey that is business friendly after decades of investor warfare.
For more details about the Fair Tax (www.fairtax.org) and world economic challenges confronting us (with proposed solutions) please visit http://www.returntoexcellence.net/ and http://Economics501.wordpress.com.