Bachmann's jobs plan: Could it work?by Catharine Richert, Minnesota Public Radio
St. Paul, Minn. — On the eve of the latest GOP presidential debate, Rep. Michele Bachmann released an 11-point plan that she claims will create jobs and put the nation's economy back on track.
While the plan promises to eliminate "job killing" regulations, repeal "Obamacare," cut taxes and promote free trade, it doesn't offer much in the way of new ideas, and it is sparse on details; her spokeswoman did not answer an inquiry about how many jobs Bachmann expects her plan to create.
Whether or not the plan would be effective is an open question. At the very least, it does provide some insight into how the Minnesota congresswoman might handle the economy if she were to be elected president.
In her plan, Bachmann says that the new health care law is the "number one hindrance" to job creation. But PoliGraph previously investigated this claim and found that most businesses aren't hiring because consumer demand is lagging.
Here's how a variety of experts assessed some of her plan's other elements:
"Repeal Job Killing Regulations"
There's little dispute that government regulation can increase a company's costs. Advocates for smaller government argue that money used to comply with federal rules is siphoned from funds that would otherwise be used to hire workers.
But the link between regulations and job creation is fuzzy, said Peter Cappelli, a professor at the Wharton School of Management. A lot would depend on which regulations Bachmann wants to cut.
For example, regulations having to do with worker safety are directly connected to labor costs. Such rules can be expensive at the start, but they bear no additional cost once compliance mechanisms are in place, Cappelli said.
In fact, some regulations create jobs.
"Dodd-Frank is one of them," Cappelli said, singling out a sweeping financial industry regulation law that Bachmann says she would repeal as president. The 2010 legislation has created a market for accountants.
"You might say that it's still not a good thing for the economy because it causes a headache for the firms and maybe in the long-run it's not doing anything especially productive," Cappelli said. "But it's hard to say that it's killing jobs because, in the short-run, it's actually creating work."
The same can be said for environmental regulation: It costs money for businesses to meet environmental standards, but such rules also create jobs in compliance.
And it appears regulation is not the top reason companies are shedding workers, according to U.S. Labor Department data. In the last four years, less than 1 percent of all layoff events have been attributed to government regulation.
In fact, most economists point to flagging consumer demand as the top reason businesses aren't hiring.
Bachmann says she'll eliminate some personal taxes, such as the estate tax, and reduce the number of tax brackets. But she also wants to eliminate some fees that affect businesses, such as one in the new health care law that would charge some firms that don't provide health insurance to its employees, and "make the corporate tax code simpler and fairer."
Bachmann's argument is theoretical: The less money a company has to pay in taxes, the more money it has on hand to expand, the more likely it is to grow and hire more workers.
That's the long-term argument low-tax advocates frequently make, said Joseph Rosenberg, a research associate with the Tax Policy Institute.
"As the economy recovers, all else equal, lower tax rates should increase the return to working and investing," he said. "But it's not like you cut taxes and the economy takes off and a bunch of new jobs are created."
That's because the economy is far more complicated than that, said Chris William Sanchirico, a professor at the University of Pennsylvania Law School and co-director of the Center for Tax Law and Policy.
When the government cuts taxes and collects less revenue, one of two things can happen: It spends less, which can drive up unemployment, or it continues to spend and goes to the capital markets to entice investment by selling bonds. But firms on the receiving end of the tax breaks are competing for the same capital, which could drive up interest rates, making capital more expensive, and ultimately counteracting the benefits of the tax cuts, Sanchirico said.
Sanchirico's conclusion: "If you just look at the tax bill of the business and you don't consider the revenue side or the borrowing side for the government, then maybe it makes sense that lowering taxes will cause businesses to expand."
"Legalize American Energy Production and America's Natural Resources"
Bachmann says that expanding domestic energy production could create 1.4 million jobs. She doesn't say precisely which resources she would exploit; only noting that her plan would involve reviving logging and metals industries and bringing federal lands into production.
It's difficult to say precisely how many jobs this part of Bachmann's plan might actually deliver; a lot would depend on whether the sources she is considering are both technologically and economically viable, and she offers no details in that regard.
But at least one analysis conducted by energy consulting firm Wood MacKenzie, and touted by the Republican-controlled House Natural Resources Committee, supports her claim. It says that speeding up the permitting process and opening a range of resources, including drilling in Alaska's currently off-limits Arctic National Wildlife Refuge and areas off the Pacific and Atlantic coasts, would 1.4 million jobs could be added to the workforce by 2030.
A separate study by the economic analysis firm ICH Global Insight looked only at speedier oil and gas exploration permit approval for areas in the Gulf of Mexico. That policy might create 230,000 jobs throughout the country by 2012.
Bachmann includes a familiar idea in her proposal: tax breaks for corporations that bring overseas earnings homes, otherwise known as "repatriation," as a way to boost job growth.
But a recent report by the Senate Permanent Subcommittee on Investigations on "repatriation" isn't encouraging. It found that a similar effort back in 2004 led to job losses, not gains. Specifically, 15 companies that brought back the highest amount of money reduced their workforce by 20,931 jobs. Meanwhile, xecutive compensation at the top five firms grew by 27 percent between 2004 and 2005 and by 30 percent between 2005 and 2006.
Among all 840 businesses that took advantage of the program, there is no evidence that repatriation encouraged job growth in the United States, according to the report.
The conservative Heritage Foundation explains the effects of the tax break this way: "The current proposal would cut taxes, which is generally a good thing, but if another repatriation tax holiday were enacted, one should expect a similar result as last time: specifically, a surge in repatriations and little appreciable increase in domestic investment or job creation."
Whether Bachmann's jobs plan helps her flagging poll results remains to be seen. In the meantime, another barometer of her viability as a presidential candidate will become more clear on Oct. 15, when she releases her fundraising figures for the third quarter.
More: Read Bachmann's plan here.