From the New York Times. By ROBERT H. FRANK
Published: June 25, 2011

The federal budget deficit is a distraction.

It’s important, yes, and must be addressed. But by a wide margin, it’s not the nation’s most pressing economic problem. That would be the widespread and persistent joblessness that has plagued the labor market since the Great Recession began in 2008.

Almost 14 million people — 9.1 percent of the labor force — were officially counted as unemployed last month. But that’s just the tip of the iceberg. There were almost 9 million part-time workers who wanted, but couldn’t find, full-time jobs; 28 million in jobs they would have quit under normal conditions; and an additional 2.2 million who wanted work but couldn’t find any and dropped out of the labor force.

If the economy could generate jobs at the median wage for even half of these people, national income would grow by more than 10 times the total interest cost of the 2011 deficit (which was less than $40 billion). So anyone who says that reducing the deficit is more urgent than reducing unemployment is saying, in effect, that we should burn hundreds of billions of dollars worth of goods and services in a national bonfire.

We ought to be tackling both problems at once. But in today’s fractious political climate, many promising dual-purpose remedies — like infrastructure investments that would generate large and rapid returns — are called unthinkable, in the false belief that they would impoverish our grandchildren. Yet there are other ways to attack unemployment that could garner bipartisan support.

Perhaps the most promising is a payroll tax holiday. The payroll tax was originally meant to pay for Social Security, and in recent years, employees and employers have each contributed 6.2 percent of total salary — with no additional levies on salaries beyond $106,800. Congress should both declare an immediate payroll tax holiday for employees and exempt employers from making contributions for newly hired workers — and keep both provisions in effect until the end of next year.

The first step would increase take-home pay, thus stimulating spending and employment. And the employer exemption from taxes on new hires would make it substantially less expensive to hire additional workers.

Last December, Congress approved cutting the employee’s contribution to the payroll tax to 4.2 percent of salary for the 2011 calendar year, a move that attests to the political viability of my proposal. President Obama has proposed extending the employee reduction through 2012, but in the face of dreary recent labor market data, stronger steps are needed.

Larry Seidman, an economist at the University of Delaware, has estimated that if employee payroll tax payments were suspended from next month through 2012, the unemployment rate by the end of that period would be one percentage point lower than it would have been otherwise. Private-sector employment would thus expand by about 2.4 million workers by the end of next year.

Even greater employment growth would result from the employer exemption on new hires. Companies aren’t very likely to hire additional workers unless they can generate at least enough new income to cover their salaries, including all relevant taxes. The exemption would reduce the cost of hiring new workers by 6.2 percent — and even by conservative estimates, we can expect it to result in more than five million new hires.

Although payroll tax revenue has traditionally been designated to pay for Social Security benefits, Congress should make clear that these steps will have no effect on current or future retirement checks. The Treasury would have to issue new bonds to cover those payments in the short term. But the payroll tax holiday and cap need not compromise the long-term goal of deficit reduction.

Because these two measures would increase employment by more than seven million by the end of 2012, income tax revenue would rise accordingly. And higher employment would sharply increase both the employee and employer portions of the payroll tax, compared with what they otherwise would have been when the tax holiday ended.

Taking such steps to expand employment would improve the long-run deficit picture in other ways. Periods of high unemployment are periods of high social stress. Increasing employment would reduce divorce rates and result in better nutrition and parental care for children. It would also give many recent graduates a quicker start to their careers. These effects would yield permanent increases in lifetime earnings, with corresponding effects on tax revenue.

Higher demand would also accelerate business investment. Many companies aren’t investing today because they already have enough capacity to produce more than people want to buy. Greater investment would bolster productivity and wages, which would also lead to permanently higher future tax revenue.

Enacting a payroll tax holiday, however, shouldn’t end discussion of more forceful and effective proposals to stimulate employment. We need to keep posing hard questions to deficit hawks who argue that we shouldn’t be hiring unemployed workers to maintain our crumbling roads and bridges, even though postponing such projects will make them much more expensive in the future. These projects don’t impoverish our grandchildren. They enrich them.

The important point is that bringing down federal deficits is a long-run problem that cannot and should not be solved by gutting entitlement programs like Social Security and Medicare. Deficit reduction will require creative thinking about additional revenue sources and judicious decisions about future spending. But our immediate concern must be getting people back to work.

Robert H. Frank is an economics professor at the Johnson Graduate School of Management at Cornell University.
A version of this article appeared in print on June 26, 2011, on page BU4 of the New York edition with the headline: The Payroll Tax Needs a Vacation.

We realize we are very early on this one, but we predict huge gains from their higher than average franchise fees. Just think, they are going to have people pay them money to open retail outlets across the country that promote their products! It’s free on-the-street advertising to the 10th degree.

Read this article. Some of the vignettes show how powerful a marketing idea this is. Existing dry cleaners reporting a 50% decline in business once a Tide Cleaners opens nearby, etc. Tide Dry Cleaners Franchises in the New York Times.

What a great growth channel for a company that pays a 3 1/2% dividend already. I’m in.

SSW, HUN, BAC, C, MGM, AAPL, RIMM, GE

Start with Seaspan:

This is 7 days old…

http://www.fool.com/investing/general/2009/07/07/4-star-stocks-poised-to-pop-seaspan.aspx

I bought a little of this stock when it had a big dividend. Then, they slashed the dividend to 6.6%, and the stock price tanked. Then, it kept going down. I’ve been buying it all the way down. It’s as close to a cant-lose situation as you will find. Their business will double over 5 years because they have lots of new ships they’ve ordered that are coming online, most of which are under contract. The stock was up 2% today, and is up another 4 1/2 % in after hours.

Also, check out HUN. Pays a nice dividend and the company recently received $1 billion in cash from lawsuit settlements, plus another half billion in favorable financing. It’s a chemical company, which should benefit from an economic recovery.

My other bullish picks are BAC, C, MGM, GE, RIMM and AAPL. All of those are poised to benefit from the economic recovery.

Just my humble opinion.

When oil went to $150 per barrell last year, everyone’s expenses went up. Even businesses had to pay more to ship things or operate offices.  Now, we’re seeing the effects.

I saw an article that said we lost more jobs in January than in any other month since 1974.  Hmmm… is there anything that happened in 1973 that might be similar to 2008?

Anyway, here are Volcker’s comments:
Article with comments from Paul Volcker

They all suck, right?  Unless you want a pickup truck or a giant SUV.

Why bail them out?

I read an article the other day talking about how there was much applause for the government’s bailout of Chrysler a couple decades ago.  What they didn’t know then is that if they hadn’t bailed out Chrysler then, Ford and GM would be much stronger today and wouldn’t need bailouts.

I saw someone on Twitter today complaining that GM spent $1 Billion of its bailout money shoring up a factory in Brazil.  Ha!  Ever been to Brazil??  Brazilians actually BUY GM CARS!  That’s exactly where they should be investing.

Don’t get me wrong, I’m totally in favor of “investing” in the US car manufacturers.  I watched Roger & Me.  However, I am worried that Japan and Korea and Europe are going to get pissed because helping our auto industry is seen as protectionist.

I’m not an Obama fan.  Don’t really like him.  Voted against him.  However, I wish him well, because he has the hardest job of any human since Jesus.

Honestly, I’m not that upset with him today (although I thought the Bush-bashing earlier this week was in bad taste).  However, Geithner, Summers, and Congress are the targets of my ire.

For the love of Pete, I would rather have a Congress made up of 100% Democrats, if they would govern based on principles rather than politics.

Here’s a lightning rod issue for me: The Republicans in the Senate forced the Dems to add a tax credit for new home buyers to the stimulus package.  The Dems in the House cut it in half today, causing the stocks of home builders to drop 8% today.  Seriously? What is the possible explanation of WHY YOU DIDNT DOUBLE IT!  The core of the problem is that the value of houses is collapsing.  The more incentive you give to new home buyers, the more you increase housing prices.  That’s positively the best way you can stop the coming depression.

But wait, there’s more.  Wanna create 4 million jobs?  Why not just hire 4 million people at $50,000 per year for 3 years.  $600 Billion.  Our payroll now includes 4 million people.  Make up a list of things we need to do to increase the economic expansion: produce steel, build cars, market cars, etc.  There are a million jobs they can do that will help society.

Or, how about this…  Go to the banks and offer to buy any mortgage or derivative or other instrument they want to sell.  We buy mortgages for pennies on the dollar.  The bank can now loan out money because the uncertainty is gone.  We go to the homeowner and re-finance their mortgage over 35 years, thereby reducing their monthly payment.  Are you 3 months behind? We’ll add all your past-due payments on to the end of your loan.  Now, the government makes a huge profit.  Or, and here’s a radical idea… the government buys mortgages and then does its own ARMs!  We buy your 6.5% mortgage.  We’ll refinance it at 3% interest for 3 years, then, your interest rate goes to 8%.  If you default in 3 years when your payment goes up, we foreclose and sell your house in (presumably) a better real estate market.

The bottom line is that Congress needs to stop thinking about “gifts” and start thinking about “investments.”  They can solve the country’s financial problems and make money in the process.