CNN, October 9, 2009, Friday

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CNN

SHOW: LOU DOBBS TONIGHT 7:00 PM EST

October 9, 2009, Friday

HEADLINE: President Obama's Nobel Peace Prize; America in Decline; Health Funding Fight; Credit Card Rip-Off

BYLINE: Lou Dobbs, Ed Henry, Ines Ferre, Lisa Sylvester, Casey Wian, Bill Tucker, Miguel Perez, Errol Louis, Robert Zimmerman

GUESTS: John Bishop, Bill Dunkelberg, Keith Richburg, Warren Zuckerman, Brian Hawthorne

HIGHLIGHT:
There is total and complete shock over President Obama winning the Nobel Peace Prize. Is it the end of the American empire? Some of the cost of the health care plan will be passed along to individual states. California Governor Schwarzenegger is facing contempt of court for failure to comply with an order to release inmates from overcrowded prisons. Banks are raising interest rates on America's struggling middle class.

BODY:

Well there are some other issues that aren't changing as well. We're going to be taking up one of those right now. The unemployment rate in this country now stands at 9.8 percent. That is the highest in 26 years. The federal stimulus program so far has failed to reverse that trend but then only 20 percent of the money has been disbursed.

Many economists are now calling for a tax credit for companies to create new jobs. Others call the tax credit simply corporate welfare. And that is the subject of our "Face Off" debate tonight because with 30 million Americans unem-ployed and underemployed this seems like the time to focus on jobs, "JOBS NOW!"

Joining me John Bishop -- he's associate professor of Human Resource Studies at Cornell University -- great to have you with us -- and Bill Dunkelberg, chief economist for the National Federation of Independent Business -- good to have you with us.
UNIDENTIFIED MALE: Thank you, sir.

DOBBS: Mr. Bishop, let me ask you first why a tax credit for job creation when the president just asked for $787 billion, gave less than one percent to small business, which creates most of the jobs in this country.

PROF JOHN BISHOP, CORNELL UNIVERSITY: We have a huge need for more jobs and when they were mak-ing those plans, they did not -- the projections were for much better circumstances than we face now. The political situation has changed in the ability to get a very large increase in jobs, it would require another trillion dollars to really make a -- get us back to full employment and a much cheaper alternative exists, and that's what we're proposing.

DOBBS: How does a tax credit proposal you're working on differ from the 77 new jobs tax credit?

BISHOP: Well, first, maybe we should explain what the 77...

DOBBS: Very quickly.

BISHOP: ...credit was. It was $,2100 for hiring and expanding your employment by a measure of $2,100 per worker who worked a lot, and that would then, that then produced -- it ended up costing about three-tenths of one per-cent of all, of the wage bill.

DOBBS: And your plan?

BISHOP: Our plan is more expensive on the face of it, but we're tackling and shooting to increase jobs by three million, rather than the 500,000 to one million...

DOBBS: Total price tag three million jobs?

BISHOP: It's about -- in terms of lost government earnings and taxes, about $6,000 to $8,000 per job created, the jobs that pay $50,000.

DOBBS: So $250 billion?

BISHOP: The net cost after the money -- when the program is operating...

DOBBS: All right, we got the idea. It's expensive.
(CROSSTALK)

BISHOP: And then taxes are paid and so that helps reduce the cost.

DOBBS: Let's get over -- let me ask you this, why do you oppose such an idea? We need jobs in this country.

BILL DUNKELBERG, CONSUMER ADVISORY COUNCIL: We do. You know, but in general I think that gov-ernment job creation is an oxymoron. That doesn't really happen that way. If a small firm is going to hire somebody, they hire because they think this new person will generate more sales than the cost of hiring them.
Right now, 32 percent of the firms out there in the NFIB survey say that sales, weak sales is their No. 1 problem, only four percent say credit's a problem. So, basically you got a Cash for Clunkers program coming along here which says, you know, we'll pay you now to quickly hire somebody, but mostly we're going to, not going to hire people unless we think we can pay for them with extra sales and that's not the prospects right now.
Forty percent think their real sales will decline over the next six months, so even though you give me $5,000 for a $30,000 job, I'm not going to pay $30,000 to get a $5,000 credit if this person isn't going to generate the sales that I need to pay for it. So, that's not going to work.

DOBBS: What do you think -- John.

BISHOP: We, well the -- you can put the person to work getting more sales. You can put the person to work -- it presents you with the opportunity to offer lower prices when you export. You can compete with importers more effec-tively. This is a credit for hiring and employing Americans.

(CROSSTALK) DOBBS: ...because this doesn't consider the impact of two things, principally the fact that our economy is now import-driven, and our capital is being diverted, frankly, to, it's borrowed capital, it's being diverted to buy imported products at a time when we got the most significant import penetration in this economy in history. How do we create a sustained job creation engine in this country?

BISHOP: We need to grow manufacturing, and we've lost...

DOBBS: By how much?

BISHOP: We need -- we've lost maybe 10 million jobs in manufacturing over the last 30 years. You know, when the highest level of manufacturing employment was in our history, was shortly after the end of the new jobs tax credit in 1978 and '79, so it helped expand manufacturing then, it helped expand construction then, and the program we proposed is better, because it avoids some of the flaws that that program has, and can have a huge effect.

DOBBS: This president has shown no appetite whatsoever, nor has the Democratic Congress shown any appetite whatsoever for driving jobs through small business.

BISHOP: I think we're going to persuade -- you know, I think you'll see a change. If you perceive that, I think the perception is wrong.

DOBBS: I don't perceive it. Here are the facts. They put in less than one percent of a stimulus package, and less than one percent of that went to small business in this country, and the rest, you could argue, was something quite dif-ferent. I mean that's not a perception problem. That's an empirical problem.

DUNKELBERG: And all the headlines you see is that Obama is meeting with the heads of these huge companies that don't really employ that many peoples in the United States. I mean General Motors, these big companies, don't em-ploy a lot of people. It's the small businesses and we haven't had...

DOBBS: If not a tax credit for jobs what? Because we need to create jobs and businesses and doing it right now.

DUNKELBERG: Well, I would suggest that we go back to the early thoughts we had, give tax cuts to consumers who can then go spend. If we get a customer coming in the front door, then I have to hire somebody and order some inventory.

DOBBS: That's a wonderful idea except for one thing, there is no manufacturing policy in this country.

DUNKELBERG: True.

DOBBS: I think all three would agree we've got to double or triple our manufacturing capacity in this country. We've got to become an exporting nation, at least if not to be, and I'm not talking about in a mercantilist sense, we have got to move to a level of parity with our trading partners or this becomes nothing more than a backdoor exercise in which taxpayer capital will be flowing out the back.

DUNKELBERG: That's right.

BISHOP: If you increase -- if you subsidize or encourage people to consume more, half of the
goods that they buy are going to be made abroad. That's -- Cash for Clunkers...

DOBBS: Precisely my point.

BISHOP: Exactly same result. So, those kinds of approach will not work to create jobs for Americans.

DOBBS: But if we throw money at jobs, the way you're suggesting, how do we sustain? We don't have manufac-turing policy. We don't have a trade policy.

BISHOP: It's up to the entrepreneurs to solve this problem, not the government. The government gets out of the way.

DOBBS: Thanks for not saying invisible hand. We appreciate that. John, thank you so much. Bill, thank you.

DUNKELBERG: Thank you.

LOAD-DATE: October 11, 2009