Speaking of fiddling, let’s fiddle with some numbers.
While perusing the wonderful internet spawned by the prodigious efforts of former Vice President Al Gore (by the way, has anyone seem him lately?) I ran across an interesting report by Ernst and Young, the accountants, which tracks capital investment and the number of jobs produced. They focus on capital intensive industries (manufacturing, energy production and the like) and came up with some fascinating numbers.
Are you ready to extrapolate?
In 2011 the capital invested per announced job was $ 403,000.00 Considering that the industries that were analyzed were capital intensive, the investment per job would be very high compared to, let’s say, someone who decides to open an insurance agency, a nail salon or home painting business. But for the sake of argument let’s assume that it takes an investment of $ 403,000.00 to create a job.
Now I ask myself, how large is the federal deficit? To make this easy let’s say it is $ 1,500,000,000,000.00 ($ 1.5 trillion) per year. That might be a tad high, but with numbers that large what is a few billion here and there?
Suppose we live in a world where the annual budget deficit might actually be reduced by one-third, so that $ 500,000,000,000.00 ($ 500 billion) stays in the private economy. Do you see where I am going with this? The $500 billion provides sufficient capital to create 1,240,695 jobs assuming it takes $ 403,000 of capital per job. Since that is a one year calculation, imagine that happening every year. Those 1,240,695 jobs per year equal 103,391 jobs per month. Have you seen the employment numbers lately? Now add 103,391 per month to those numbers and we might actually get some improvement in the unemployment rate. That is what we could be achieving even with the large capital cost per job of $ 403,000.00
Let’s continue. Assume that those jobs result in net taxable income of $ 50,000 per job per year. That is just over $ 62 billion a year in taxable income and at a 15% federal tax rate over $ 9 billion in income tax revenue to the federal government. Factor in other items such as state and local taxes paid, social security taxes paid, reduced unemployment insurance expenses, reduced food stamps, etc. and cutting the federal deficit by reducing spending sounds like a good idea for the economy, maybe even better than subsidizing failing businesses like GM and Solyndra . Who would’ve thunk it.
Obama fiddles, the economy burns and opportunities for economic growth are squandered. Maybe the US needs to join the Euro so Germany will bail us out before we hold hands with Greece and go over the fiscal cliff. Or we could just cut spending and solve our own problems.