Wednesday, July 13, 2011

Playing Job Roulette

How much should a job cost?

When jobs are purchased by the governors of states that over-regulate the so called free market, which becomes less free the more regulations are piled on regulations, using their tax structures to transfer money from tax payers and small businesses to larger more government savvy corporations too big to fail, the cost of a job can be very dear.

President Barack Obama’s stimulus package, a scheme to gather taxes from the voiceless masses and pass them along to favored businesses and union groups, has simulated only the appetite of those in the federal government who consider it their business to soften the sharp edges of problems they themselves have have had a hand in creating.

The inability of the Obama stimulus package to reduce the jobless rate in the United States is the surest indicator that the president’s plan has failed. When number crunchers toted up the amount of stimulus spent per job produced, they arrived at a figure of $278,000. In most places outside the Beltway loony bin, that figure would have suggested an abysmal failure. But Washington moves away from its failures at a snail’s pace.

According to the the White House Council of Economic Advisors’ seventh quarterly report on the impact of the “stimulus,” just under 2.4 million jobs, both private and public, were created at a cost to date of $666 billion, which represents a charge to taxpayers of $278,000 per job created.

Tax Lawyer’s blog puts the cost benefit ratio in perspective: “In other words, the government could simply have cut a $100,000 check to everyone whose employment was allegedly made possible by the ‘stimulus,’ and taxpayers would have come out $427 billion ahead.”

This is not the shape of success. A malingering jobless rate tilting towards 10 percent, two years into an administration that considered 8 percent to be intolerable, cannot be considered a vindication of a stimulus plan that was supposed to return the economy to normalcy.

Here in Connecticut, Governor Dannel Malloy recently announced he had arranged a “performance-based” economic development package worth between “$47 million and $71 million to grow and retain jobs at CIGNA Corp. as the health insurer declared Connecticut its corporate home,” according to a report in CTMirror.

The state, in other words, is going to confer a tax and loan benefit on an insurance company that has promised to move 200 jobs from Philadelphia to Connecticut to comply with a job incentive program that showers benefits on companies that produce a minimum of 200 new jobs in Connecticut. CIGNA came in just under the wire.

"’Our corporate headquarters, effective today, is Bloomfield, Conn.,’ said David Cordani, the chief executive officer of CIGNA, a Fortune 500 company with 30,000 global employees and $21.3 billion in annual revenues.”

CIGNA’s history in Philadelphia dates to 1792. The city of brotherly love is not sweating the loss of 200 jobs, provided it retains 1,100 CIGNA jobs at Liberty Plaza in Center City. CIGNA, it should be noted, is a well established company with a rather large footprint in Connecticut as well.

Mr. Cordani plans to “create at least 200 jobs in the next two years, retain its 3,883 jobs in the state and make a minimum of $100 million in investments in its technology and real-estate infrastructure in return for a package of tax credits, a loan and job-training grants” worth, on the low end of the scale, $47 million.

At $235,000 per new job in tax benefits and loans, the transaction appears to be a good deal for CIGNA, though Commissioner of Economic Development Cathrine Smith, a former top executive of ING, another insurance giant, believes that the deal will in the long run be “revenue positive” for beleaguered Connecticut.

Big Business – Pfizer is a case in point – tends to use such tax breaks and loans as opportunities to perfect their business operations. When the tax breaks and loans run out, they may reconsider their options and occasionally move jobs to more cost effective states. Philadelphia need not morn its loss forever. Times and circumstances change, and large mobile companies, like the mercurial Mercury of mythology, have wings on their ankles.
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