Dear Editor,
Many Guyanese here in the US and in Guyana are watching the upcoming US presidential race between Obama and Romney closely. There are many issues at play in this election but the biggest is the economy and more particularly, jobs. From 1948 to present, the US has averaged 5.8% unemployment. The unemployment rate when Obama came to office was 7.8%. It is presently 8.3%. In terms of job creation, Obama has failed, plain and simple. Understandably, Obama inherited a recession. Indeed, from the time the recession ended in June 2009 the unemployment rate has since fallen from 9.5% to 8.3%. By comparison, developed nations like Australia went from 5.7% to 5.2%, Canada from 8.6% to 7.3%, France went from 9.5 to 10.1%, Germany from 8% to 5.4%, Italy 7.9% to 10.8%, Japan from 5.4% to 4.3%, Korea 3.8% to 3.2%, the UK 7.9% to 8.1%. America has done better than some developed countries during that time. Obama has failed to contextualize his economic performance to the American public, which is swayed incessantly with a media circus.
Unfortunately, the American public is extremely change-oriented, does not generally examine root causes and does not care about the underlying history of problems. They want results, and failure to deliver results amounts to failure to the American public. Whether fairly or not, Obama will be judged by most Americans on the economy. That has been the main barometer of American political judgement for the past 30 years. That said, there are two issues that American voters must ask before they consider removing Obama.
Firstly, they must ask whether the state of the US economy and its job creation could really be improved upon by Obama, Romney or anyone for that matter. I don’t think it could. The fallout from the 2008 recession is not cyclical but structural and permanent. This has been coming since the Republican dominance started with Reaganomics and trickle-down economics in 1980. They have destroyed the unions to weaken the American worker. They have relentlessly pursued free trade which is fine if done fairly, but turned out to be openings to ship American jobs overseas. They enabled the rise of developing world giants China and India by sending tens of millions of manufacturing and service jobs to their cheap-labour shores. Corporations made record profits by destroying American jobs. Those record profits turned into record executive compensation which then further benefited from tax breaks for the richest.
Then there was capital flight as more and more American companies and Wall Street investors took more American capital overseas to make profits but never returned it to the USA. Wall Street gambled and broke the economy in 2008. China started making high-end products, further gutting American manufacturing. Import restrictions were removed so foreign goods could flood American markets filled with heavily indebted and overburdened American consumers. The dollar remained high crippling US manufacturing already crippled, while China manipulated its currency. The Republicans were so eager to fatten their pockets from cheap labour in China, they never demanded it float its currency before it could be accepted to the World Trade Organization. There is no regulation of the financial industry despite the tragedy it brought upon Americans. Capital flight continues. Big business can buy political favour in America. The US lags behind many countries of the developed world in key economic indicators like productivity, research and development and technological improvement. It lost momentum during the recovery because of a hostile and recalcitrant Congress, while countries like Germany implemented key aspects of the Obama recovery plan like the green economy to create home-grown jobs, energy independence and high-end manufacturing. These economic realities do not point to the potential and capacity for any significant change to the USA’s present economic predicament.
This brings me to the second question as to whether Mitt Romney’s policies will create an economic revival and the job creation he claims. Romney’s plans are vague. However, the thrust of his plan is to cut corporate taxes from 35% to 25%, keep tax cuts for the richest Americans, deregulate even further, reduce government spending and cut government programmes. Dealing with the obvious proposals first, reduction of the deficit, reducing government spending and cutting government programmes will not create jobs. It simply shrinks the size of government and offloads the burden onto citizens who get no tax breaks under Romney’s plan to pay for these services. It has been proven time and again that tax cuts to corporations do not necessarily translate to job creation and definitely not on the scale Romney is asserting (12 million jobs). The Bush tax cuts led to capital migration to lucrative foreign markets. Romney’s corporate tax cuts will only deepen America’s inequality. American corporations in the past decade have not been using tax breaks to create jobs in America. They have used them to create jobs overseas, pay ludicrous executive compensation packages and to ship capital offshore. While the official tax rate is 35%, the actual tax rate (effective tax rate) corporations in America pay is 12.1%, which is 34.57% of the full 35% federal corporate tax rate. If Romney’s 10% tax reduction is applied, corporations will be paying an 8.64% effective tax rate. Even at 12.1% Romney’s friends are shipping American capital abroad. They will not cease at an 8.64% effective tax rate.
On top of getting a big corporate tax break, the richest Americans will also benefit from permanent personal income tax cuts from Romney. What Romney is really planning on doing is to pay for the tax breaks to his corporate friends by cutting government programmes. That trade-off works if his corporate friends create jobs and invest their capital in America. We know from the experience since 2000 that corporate America has no intention of using profits in this fashion to create jobs at home. This is why Romney’s plan will worsen the divide in America. This will create a backlash and his deregulation push could march America into another recession, especially with Europe in recession and the developing BRIC behemoths slowing down. If this occurs with Romney at the helm, his government will protect corporations ahead of citizens. Obama may have flopped on job creation even with a hostile Congress at his throat, but sometimes it is better to take the devil you know than the devil you don’t. America cannot rebound without a return to equality where corporations and citizens pay their fair share and jobs are created in an environment of mutual cooperation and not unadulterated profiteering.
Yours faithfully,
M Maxwell
