Obama's jobs council twisted reality

NEW YORK: The President's Council on Jobs and Competitiveness report promotes a distorted reality. It includes some good ideas, especially on deregulation.

But it ignores the role of domestic savings, its ideas on infrastructure investments would be unproductive, and its support of increased immigration would worsen unemployment. You can tell GE's Jeff Immelt chaired the panel.

The report is full of measures that appeal to large corporations. But it fails to convince in the context of the fact that new and small businesses are the most effective agents of job creation.

According to the Fed's 2010 Survey of Consumer Finances, over 70 percent of US businesses with fewer than 500 employees were started primarily with personal savings or assets. Current negative real interest rates, now maintained over several years, are highly savings-destructive.

The council, composed mostly of executives of multinationals who enjoy the artificially low interest rates, omitted this vital factor in its discussion of entrepreneurship.

The Council recommends programs of infrastructure and green energy investments. But US infrastructure investment is expensive, compared to other countries and past norms.

This is therefore an inefficient use of job-creating capital. As this investment would smother other projects, employment losses might exceed the gains.

It also recommends that more people especially entrepreneurs and those with US science degrees should be attracted into the country from overseas.

While entrepreneurs who bring capital into the country should certainly be welcomed, swelling the ranks of scientists would depress wages in scientific fields.

This might lead domestic students toward fields such as law and medicine. Such displacement would do little to alleviate unemployment overall.

The Council recommends streamlined regulatory review and accelerated project approvals. Good. But it fails to address the recent regulatory aggression of the Environmental Protection Agency and other federal agencies, which is increasing regulatory burdens.

The focus on job creation is welcome, and some of the ideas have merit.

But a broader approach, including both deregulation and fiscal and monetary reform, without direct state investment or increased immigration, would better achieve the council's job creation objective.

The President's Council on Jobs and Competitiveness report, released on Oct. 10, contained five groups of recommendations. First, it would like to see accelerated investment in infrastructure and energy. Second, it favours a drive to ignite entrepreneurship and accelerate the creation of small businesses.

Third, it reckons a national investment initiative is needed to boost inward investment in the United States. Fourthly, it recommends a streamlining of regulation. Lastly it wants America to take steps to ensure it has the talent in place to fill existing jobs.

The Council was chaired by Jeff Immelt, chairman and CEO of GE, and included industrialists, bankers, lawyers, union representatives and academics.

Copyright Reuters, 2011