Job Creation Bills Will Kill Them

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WASHINGTON--Congressional Democratic leaders assert that several major pieces of pending legislation will create jobs. In fact, the bills are more likely to increase unemployment, already close to 10% and probably heading up. Tomorrow's Labor Department report on employment in September may tell us more.

The "Big Three," touchstones of a Democratic agenda rooted in the belief that more government equals progress, are the "cap and trade" bill to reduce greenhouse gases, the House and Senate health-care reform bills, and the Employee Free Choice Act. All would, if enacted, cost the country jobs.

Democrats should have no trouble passing these bills. They have 60 votes in the Senate, a large majority in the House, and a president who is poised to sign.
That the bills face opposition within Democratic ranks shows that inside the majority there is doubt-and controversy-about the leadership's happy jobs rhetoric.

Take the House-passed American Clean Energy and Security Act, launched yesterday in the Senate by Barbara Boxer and John Kerry as the Clean Energy Jobs and American Power Act. House Speaker Nancy Pelosi said the bill was about "jobs, jobs, jobs, and jobs," and Chairman Edward Markey of the House Energy and Environment Subcommittee declared that the bill would "create jobs by the millions, save money by the billions, and unleash energy investment by the trillions."

The bill would raise energy prices, impose strict new efficiency standards on automobiles and appliances, and require greenhouse gas emissions in 2050 to be no more than 17% of 2005 emissions (20% of 2005 levels by 2020 in the Senate version). Those wildly ambitious goals and the bill's radically new standards for energy production and use would be enormously costly to business and consumers.

Cars, homes, household goods, and energy would become more expensive and people would buy less, leading to layoffs, a weaker economy, and the next recession.

The notion that the bill would create jobs comes from its requirements for increases in the share of electricity from "energy efficient savings" and renewable sources-wind, solar, geothermal, biomass-from 3% now to 20% in 2025. But this mandated employment would be far more costly than the jobs displaced from the oil, coal, and natural gas industries.

The bill even acknowledges the likelihood of job losses in a lengthy section on how to compensate workers who lose their jobs. Entitled "Climate Change Worker Adjustment Assistance," it sets out a petition process for workers from energy-producing industries, or those industries dependent on energy, or energy-intensive industries, or consumer goods manufacturers. That list doesn't leave much unmentioned.

Workers whose petitions are granted can receive training, job search stipends, relocation allowances, and cash benefits. If the bill is all about jobs, why is all this necessary?

The House and Senate health-care bills face similar problems. Although President Obama this summer was calling health-care reform a prerequisite for economic recovery, the bills would be expensive, and would have to be paid for by increased taxes. Taxes discourage work and investment, thereby reducing employment.

For instance, the House bill relies on income tax surcharges on the most productive workers, bringing the top tax rate to 45%, as well as an 8% payroll tax on employers who do not offer the right kind of health insurance to their employees. Moreover, anyone who does not sign up for health insurance would face an additional 2.5% income tax.

The Senate bill would tax high-end, expensive health care plans; they would face an excise tax of 35% on premiums above $8,000 for singles and $21,000 for families. The bill's new regulatory requirements would drive up insurance premiums, according to the Congressional Budget Office, so that the penalty tax will bring in an additional 15% in revenue every year. As with the House bill, those who do not purchase health insurance face an additional tax, as well as fines for nonpayment of the tax.

The third bill, the Employee Free Choice Act, would allow workers to choose to be represented by unions by checking a card circulated and retained by the union rather than by voting in a secret-ballot election, as required for almost 75 years by the 1935 National Labor Relations Act.

A second provision would require the Federal Mediation and Conciliation Service to appoint arbitration panels to write contracts between newly-unionized workers and firms, if their negotiators fail to agree on an initial collective bargaining contract within 120 days. The arbitrators' contracts would, by law, hold for two years.

Increasing union power would hurt employment. States where workers cannot be compelled to join unions as a condition of having a job-known as "right to work" states-have created jobs at twice the rate of other states over the past decade. Americans are migrating from the unionized northern states to the primarily non-union South, with the result that the North is losing population and political power.

Fewer than 8% of private-sector workers belong to unions, and large unionized manufacturing industries are going offshore in search of less-expensive labor. Unionized auto companies are shrinking and losing market share to non-union firms because of difference in labor costs.

The country's economic recovery, weak or strong, will be defined by job creation. Without paychecks families can't spend. Without families to spend money, businesses cannot sell products, hire workers, and invest. The pending "Big Three" bills could start a vicious circle, one that Congress must avoid.

Diana Furchtgott-Roth, former chief economist at the U.S. Department of Labor, is senior fellow and director of Economics21 at the Manhattan Institute. Follow her on Twitter: @FurchtgottRoth.   

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