Senate Jobs Bill Should Require Businesses To Increase Domestic Production And Boost Exports

Carnot Sylvestre, MS

For decades, US politicians have bought into the idea that the best way to create jobs is to grant tax cuts to businesses. This approach obviously does not work since unemployment has been on the rise in spite of various subsidies and tax cuts US companies have received in recent years.

The $15 billion jobs bill that was approved by the Senate on February 24th 2010 contains, among other things, a $13 billion program aiming to give companies Social Security tax breaks on new employees and a $1000 tax credit if those employees remain on their payroll for at least a year. The bill will surely help millions of Americans retain or acquire jobs but it does not go far enough in terms of requiring companies benefiting from the program to create and maintain long-term jobs right here in the United States.

The current business model of US companies generally aims to achieve maximum returns on investments in the shortest term. This model calls for companies to strategically locate manufacturing and distribution points near regional markets in order to take advantage of economies of scale. Therefore, American companies have found it more profitable to abandon US-based plants and to outsource production or set up manufacturing facilities in foreign countries like China, India, Malaysia, Vietnam, etc. where labor is much cheaper.

No one can blame US companies for desiring to increase profitability and returns to shareholders, but they must be held accountable when they lobby Washington and readily accept tax cuts as incentives to create jobs here and fail or do not make an effort to deliver. Sustainable and meaningful job creation will never be achieved and the trade deficit will never be eliminated as long as US companies keep exporting manufacturing, engineering, research and development and even technical and customer service abroad.

While the importance of strategic outsourcing cannot be ignored, American companies must endeavor to increase production here in the US not only to satisfy domestic needs but also to increase exports. This is what will create jobs here in the United States of America and significantly reduce unemployment in the long term.

Before the Jobs Bill goes into effect, lawmakers should make sure it also includes provisions requiring that tax cuts be granted to businesses based on the number of sustainable jobs they create on US soil. Further, the bill should also give preferential tax treatment to companies as incentives to increase export of US made goods and equipment to foreign markets. These key measures will go a long way in keeping unemployment low and reducing the trade deficit.