Cato Daily Dispatch for October 8, 2004
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96,000 New Jobs in SeptemberEconomy May Play Role in Friday's Debate
Pension Agency Head Calls for Change
96,000 New Jobs in September
"U.S. businesses added 96,000 jobs to payrolls in September, the government reported on Friday, a weaker-than-expected total that was expected to sharpen a presidential debate later in the day over the economy's direction," Reuters reports.
In "How to Create More Jobs," Cato Adjunct Scholar Richard W. Rahn writes: "One reason for the slow employment growth has been the rapid growth in government spending. Some people think government spending creates jobs (the old Keynesian myth) but, in fact, government spending reduces more jobs in the private sector than it can create in the government sector.
"The reason is private sector jobs tend to be more productive than government jobs, and there is a considerable cost (i.e., dead weight loss) when government extracts monies from the private sector by taxing or borrowing to pay for the government jobs. Therefore, countries with large government sectors, like France and Germany, tend to have much higher unemployment rates than countries with smaller government sectors. Slowing the growth in government spending would speed job growth."
Economy May Play Role in Friday's Debate
"A lackluster unemployment report, troubling terrorism developments and fresh questions about President Bush's rationale for invading Iraq frame the second face-to-face encounter Friday night between Bush and John Kerry," according to the Associated Press. "Although voters cite Iraq as a major concern, the economy consistently ranks at the top."
Bush and Kerry "share a lot of common ground on economic policy," according to Cato Director of Tax Policy Studies Chris Edwards in "The Economic Policies of Bush and Kerry." "Nonetheless, there are key differences between Bush and Kerry," he writes. "Bush cut income taxes in 2001 and 2003. Kerry opposed those cuts, but he now says that he supports middle-income tax cuts. Kerry would increase taxes on those earning over $200,000. But that would damage job creation because many high-income folks are small business entrepreneurs."
Dan Griswold, director of Cato's Center for Trade Policy Studies, compared the economic platforms of Bush and Kerry in a speech at Cato in May.
Pension Agency Head Calls for Change
"The government's pension insurance agency yesterday called on Congress to strengthen its hand in seeking to attach assets of bankrupt companies to protect those companies' pension plan participants, and also suggested that it be given more flexibility in negotiating deals with troubled pensions to keep them operating," the Washington Post reports.
"Bradley D. Belt, executive director of the Pension Benefit Guaranty Corp. (PBGC), told the Senate Commerce Committee that his agency has the power to place liens on a non-bankrupt company's assets if the company misses a required pension-fund contribution. But if the company is in bankruptcy, he said, 'there is no penalty' for missing such a payment."
In "How to Reduce the Cost of Federal Pension Insurance," Richard A. Ippolito, former chief economist at the PBGC, warns that the agency is poised for a taxpayer bailout similar to the 1980s savings and loan crisis. He recommends transforming the PBGC into a private insurance program that sets premiums according to the amount of risk plan sponsors add to the program.
"Once taxpayers were removed as ultimate guarantors of the insurance, the plans themselves (and most notably the better funded plans) would have an incentive to align premiums with exposure, and plan sponsors would have to face up to the problems that their own underfunding creates," Ippolito writes.
Wyatt Dubois, editor, wdubois@cato.org
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