Double Vision

October 1, 2004

On the issue of job creation, President Bush and John Kerry are like two men sitting on a park bench, arguing about whether it’s sunny or cloudy. Underlying their policy differences is a fundamental disagreement about what is happening in the U.S. employment market. Bush portrays the economy, stagnant for much of his administration, as gaining strength and creating increasing numbers of new jobs. He credits the tax cuts that he championed in 2001 and 2003 for this rosy prognosis, arguing that they stimulated the economy out of a downturn. Kerry, in contrast, sees an economy weakened by spiraling federal deficits and a costly, poorly planned war, and he predicts that Bush will be the first president since Herbert Hoover to end his first term with a net loss of jobs. Kerry warns that the nation’s long-term economic security is threatened by multinational companies’ exporting of jobs to nations with lower labor costs.

    The candidates offer similarly contrasting jobs policies. Bush’s "Plan for Creating Opportunity for American Workers," available at, proposes few initiatives, with the exception of a $250 million program to create "opportunity zones" in areas with declining employment. Instead, Bush touts other parts of his agenda--making his tax cuts permanent, opening wilderness areas in Alaska to oil drilling, reducing government regulation of business and placing restrictions on lawsuits--intended to boost the overall economy. Kerry’s "Plan to Create Good-Paying Jobs at Home," posted at, offers more direct focus on job creation, including a two-year payroll tax break for employers that create new jobs and taxing of corporate profits earned by shifting jobs overseas.

    The candidates agree on some points. Both would promote exports and enforce existing trade agreements to ensure fair access to foreign markets. And both propose retraining and education initiatives, though they differ on the details.

    Bush supporters claim that his tax cuts are finally stimulating employment, and that continuing them is vital. "We don’t want uncertainty about what tax policy is going to be down the road," says David Keating, executive director of the Club for Growth, a conservative advocacy group. "That kills job creation by discouraging investment."

    But critics of Bush’s job-creation record say a new approach is needed. "The main difference between the two candidates is that Senator Kerry acknowledges we have a job-creation problem," says Christian Weller, a senior economist with the Center for American Progress, a progressive think tank. "President Bush doesn’t."

    Here are comparisons of the candidates’ positions on four job-related issues:

    Tax policy to promote job creation. Bush has seen negative job growth during his administration, but he continues to tout his tax cuts as an employment stimulus, and proposes making them permanent. He promises to work to simplify the federal tax code, though he has yet to specify what changes he would make.

    Kerry also advocates tax cuts, but his more specifically target the creation and preservation of jobs. In manufacturing and service industries facing competitive pressure to send jobs overseas, Kerry would give employers a two-year tax break from payroll for each new American worker they hire. A company that hired a $40,000-a-year worker, for example, would save $3,060. Kerry would give small businesses a 25 percent tax credit for providing health coverage for workers. In addition, he would cut corporate taxes from the present 35 percent to 33.25 percent.

    Education and skills training. In "Better Training for Better Jobs," a document on the White House Web site, Bush proposes doubling the present number of workers receiving federally funded training, from 206,000 to 400,000. But he wouldn’t allocate any new funds to accomplish that ambitious goal, according to "Making Federal Job Training Work Better for America’s Workers," a document on the White House Web site. Instead, Bush would merge four existing training programs and use their $4 billion in funding to create a single program of Innovation Training Accounts. According to the jobs-policy plan on Bush’s campaign Web site, he would invest a modest $250 million a year in Community-Based Job Training Grants. Bush also proposes creating Personal Reemployment Accounts, which would give unemployed people up to $3,000 to spend on training and services such as child care or transportation. Bush would allow state governors more leeway in distributing federal job-training funds, a move he claims would result in more efficiency and save the government $300 million.

"You’ve got to show workers that you care about the problem and are trying to do something. Otherwise, they’ll stay away from the types of jobs they see as vulnerable to being sent overseas, and you end up with a skills shortage that leads to even more offshoring."

    Kerry’s job-creation plan offers fewer training initiatives. He would expand the Trade Adjustment Assistance program, created by Congress in 2002 to help manufacturing workers hurt by free-trade agreements. The present program offers up to two years’ worth of retraining to displaced workers, plus another six months of remedial-education classes if they have deficits in reading, math or other skills. Kerry would extend coverage to service-industry workers as well. Instead of vocational skills, Kerry focuses more on higher education. He would offer college students a $1,000 yearly tax credit, which he touts as "a crucial step toward training the workforce of the future to secure and create the higher-paying jobs of tomorrow."

    Partnerships with employers. Bush proposes $250 million in tax breaks and other incentives to create jobs in economically troubled areas designated as "opportunity zones." Several existing federal programs--Empowerment Zones, Enterprise Communities and Renewal Communities--already focus on chronically depressed areas. Bush’s initiative would also include areas that lost manufacturing and retail jobs over the past decade, according to a document on the White House Web site. Bush calls for creating 40 opportunity zones, 28 in urban locales and 12 in rural areas. (The document mentions Erie, Pennsylvania, and Cuyahoga County, Ohio--both in swing states--as potential recipients.) Small businesses in Opportunity Zones would qualify for an extra $100,000 in expensing for new equipment, and companies of all sizes would get accelerated depreciation on new or rehabbed buildings. Bush would give tax breaks to companies for hiring zone residents, but he would do so by consolidating existing Work Opportunity and Welfare to Work tax credits, rather than by increasing funding. Even Keating, a Bush supporter, is skeptical. "It’s more likely to shift jobs around than it is to create new ones," he says.

    Kerry proposes larger-scale assistance to private-sector employers. He proposes creating a Manufacturing Business Investment Corporation, modeled on the existing Small Business Investment Corp. program, which has $5.5 billion invested in private-equity funds that finance small businesses, according to the federal Small Business Administration. Kerry’s new program would make similar venture-capital investments, intended to help medium-sized manufacturing firms hire more workers. Kerry also wants to preserve the federal Manufacturing Extension Partnership, a program the Bush administration plans to eliminate, which provides small and medium-sized manufacturers with technical expertise. According to the MEP’s Web site, the program assisted more than 5,000 companies in 2003, and helped them create or retain 35,000 jobs. Kerry would increase MEP’s funding to double its pre-Bush funding level of $104.8 million. Kerry would also preserve the Advanced Technology Program, which in 2004 provided $133 million to universities and private companies for research, according to the program’s Web site. Kerry would reorganize the program to focus on job creation by promoting technology start-ups around major research institutions.

    Offshoring. The debate over offshoring provides one of the clearest contrasts between Bush and Kerry. Bush’s Council of Economic Advisers, in their February 2004 report to Congress, described the sending of jobs overseas as a form of trade, and noted that "when a good or service is produced at lower cost in another country, it makes sense to import it rather than to produce it domestically. This allows the United States to devote its resources to more productive purposes." Bush has said little, other than a February 12 speech in which he expressed sympathy for people who have seen their jobs shifted to other countries. A June 14 policy memo on his Web site quotes news articles and economists to make the case that the export of jobs is not a serious economic problem.

    Kerry, in contrast, sees offshore job transfer as a threat to U.S. prosperity, and proposes changing the federal tax code to eliminate loopholes that encourage manufacturers to export jobs. "A company with $10 million in profits in Michigan will pay taxes at the standard corporate tax rate; but if that company moves to Malaysia and makes that same $10 million in profits, they can avoid paying U.S. taxes--perhaps forever--as long as they keep the money overseas," he said in a March 26 speech. For all his rhetoric about "Benedict Arnold CEOs," Kerry is careful to penalize only multinationals that produce products overseas for export, not those making products in China for Chinese consumers. He would offer a one-time tax holiday to companies that take offshore profits and invest the money back in the United States to create jobs. Kerry’s goal is to discourage offshore job transfer, but he wouldn’t try to eliminate the transfer of jobs, in part, perhaps, because offshore manufacturers’ taxes would help finance other job-creation proposals. Weller thinks Kerry’s offshoring measures send a powerful psychological message to the nation’s workforce. "You’ve got to show workers that you care about the problem and are trying to do something. Otherwise, they’ll stay away from the types of jobs they see as vulnerable to being sent overseas, and you end up with a skills shortage that leads to even more offshoring."

Splitting hairs
    As with most political debates, the best solutions are likely to be somewhere in the middle. Bush, for example, is correct when he notes that new-job creation, stagnant for much of his tenure, has picked up. From August 2003 to August 2004, the economy created 1.7 million jobs, according to the Bureau of Labor Statistics. However, the monthly rate of 144,000 falls short of the 210,000 that the administration predicted for 2004. Indeed, it’s barely above the 110,000 new jobs per month needed to keep pace with population growth.

    Conversely, Kerry is correct in noting that Bush’s policies have not produced the job growth that the administration predicted, and that Americans remain worried about job prospects. According to an August 24 Gallup poll, 63 percent of Americans say it’s a bad time to find a quality job--an improvement from the 80 percent who held that opinion a year ago, but still a bleak outlook. In the poll, a quarter of American workers say there have been layoffs at their workplace in the past six months. Twenty percent of Americans fear that their wages will be reduced or hours cut back. But Kerry may be overstating the danger of U.S. jobs shifting overseas--at least at present. According to the BLS, of the 182,000 non-seasonal workers who were laid off in the first quarter of 2004, for example, only 4,600 lost their jobs to foreign workers. More than three times as many workers lost jobs because their employer relocated to another part of the United States. (A 2003 Goldman Sachs study estimated a bigger rate of job loss--up to two to three times higher.) Forrester Research, a Cambridge, Massachusetts-based consulting firm, has predicted that 3.3 million jobs will be sent overseas by 2015, giving credence to Kerry’s position.

Workforce Management, October 2004, pp. 53-55 -- Subscribe Now!