It’s About Job Growth, Stupid!
Contributed by Lewis J. Walker, CFP®
“History repeats and it may even rhyme,” continues as an apt observation in today’s political back-and-forth. In the 1992 presidential election a relatively unknown Democratic Governor of Arkansas emerged victorious over President H.W. Bush and independent Ross Perot. While Perot drained votes from both candidates, much of Bill Clinton’s success was a laser-like focus on the plight of the middle class. Clinton aide James Carville hammered away at the theme, “the economy, stupid!” “It’s the economy, stupid!” is classic political sloganeering.
Political folklore gained hilarity in the 2008 Obama/Biden contest against McCain/Palin, when Joe Biden declared the #1 issue facing the middle class was, “As Barack says, a 3-letter word, J-O-B-S!” It’s still about the middle class and jobs!
Employment is up and pay rates are rising as we continue to recover from the 2008 slump. The problem is finding people with the right skills to match the jobs of today, and the higher-tech, higher-skilled jobs coming at us. This touches on immigration policy as the recovery from damaging hurricanes and homes lost to western wildfires spotlights a shortage of workers in the building trades. President Trump’s push for infrastructure upgrades also depends on skilled and qualified workers of many types.
Good things are occurring on the global front. A 9/9/17 Wall Street Journal (WSJ) report on the Panama Canal expansion is an example. A surge in traffic has followed the opening of new locks that allow gigantic ships to transit between the Pacific and Atlantic Oceans. Opened in 1914, the original locks could not handle the behemoth new ships of today, hence the need for expansion. The Panamax ships that can transit the old locks can carry up to 5,000 shipping containers per load. The newer and wider Neo-Panamax ships can accommodate up to 14,800 containers. Instead of the longer sail through the Suez Canal, ships to and from Asia can transit Panama and reach east coast U.S. ports, including Savannah. What does that mean for Georgia, for example?
It means a need for more trucks to move cargo. It means more jobs for truck drivers and port personnel. It means more traffic on I-75/I-85 /I-285 through already traffic-clogged Atlanta, which precipitates road building and more jobs. Already there’s a growing shortage of trained long-haul and heavy-duty truck drivers. That means higher pay and more training facilities to qualify drivers. And so it goes.
It’s about tax reform. Do you grow jobs and skill upgrades by overtaxing high earning job creators? No. Phil Gramm in a WSJ op-ed (9/9/17) noted that the top 10% of earners pay “71% of federal taxes on income, (the) highest in the developed world.” Tax data from 2014 showed that household adjusted gross income (AGI) of $133,445 was the threshold for the Top 10%. How many of you reading this, are saying, “Hey, that’s me!” Or “us!” The mantra, “tax the rich,” sandbags many who consider themselves to be middle class!
If you want to increase jobs, we must grow the economy. When you relieve investors, entrepreneurs, creators, small business owners, even large corporations, of excessive tax burdens and compliance costs, the economy expands, jobs are created, and the overall tax take grows. If Congress can refrain from spending every last increased tax dollar, we may even cut deficit spending! Google the “Laffer Curve.”
What about technology replacing jobs? A 2013 Boston Consulting Group report commissioned by Microsoft showed a strong correlation between technological advances in small- to midsized business and growth in revenues and jobs. Cloud services and business intelligence tools allow job creators to be more competitive and creative. Robots? Somebody has to design, produce, program, and repair the robots!
Similar forces apply globally. “All 45 countries tracked by the Organization for Economic Cooperation and Development are set to grow this year.” (WSJ, 9/9/2017). As the paper noted, this marching in unison “has been uncommon in the past 50 years.” Is your equity portfolio well balanced with diversification in small- to medium-sized U.S. companies and international and emerging market equities?
It’s jobs that will make America greater again. Despite all the chaos in our world, if you read between the lines and connect the dots, there’s much to cheer!
Lewis Walker is a financial planning and investment strategist at Capital Insight Group; 770-441-2603. Securities and advisory services offered through The Strategic Financial Alliance, Inc. (SFA). Lewis Walker is a registered representative and investment adviser representative of SFA which is otherwise unaffiliated with Capital Insight Group.