Two side notes to Ford’s announcement of drastic cut backs illustrate how our economic thinking and economic policy is bankrupt.
The first is the failure of the American Job – NOT – Creation Act – some thing I’ve discussed before. As Allan Sloan points out – Ford Takes a Tax Holiday for ‘Jobs Creation’:
Right there, on page 2 of one of its news releases yesterday, Ford said that “repatriation of foreign earnings pursuant to the American Jobs Creation Act of 2004 resulted in a permanent tax savings of about $250 million.”
Hello? How can you simultaneously cut jobs and benefit from the American Jobs Creation Act? Welcome to the wonderful world of Washington nomenclature.
Ford, understandably, declined to expand on its news release. But my calculations indicate that Ford last year brought into the United States about $850 million of profit that it had earned overseas but did not have to share with the Internal Revenue Service.
Let me hasten to say that I’ve got no problem with Ford bringing this money home. Ford is battling for survival, and every $850 million helps. It would have been remiss not to have taken advantage of the idiotic legislation that Congress adopted and that President Bush signed despite objections from his Treasury Department and Council of Economic Advisers.
My problem is with the legislation, and especially with its misleading name. Companies don’t add jobs based on one-time chances to repatriate money from overseas.
Yet – that is exactly what our political leaders seem to think.
Nor do state tax breaks help. The Hazelwood plant is one of the plants scheduled to be shut, according to yesterday’s announcement. Hazelwood had been targeted in earlier cutbacks. But, workers tried to turn the situation around. State and local governments also put up $17 million in incentives, according to a story in today’s Washington Post – “Workers Lament a Plant’s Falling Star”. It worked for awhile, but …
just last month, with workers still motivated to save their jobs, the factory was named the highest-quality Ford plant in North America and the one with the best cost controls, according to union and management officials.
. . .
After winning the two Ford performance awards, employees joked darkly that the company forgot to send the third award, the one for best plant closing.
One wonders why Ford was giving out these awards. Quality is no longer a competitive advantage. It is a minimal standard to stay in the game. And efficient mass production is no longer the name of the game. It too is a basic criterion.
Ford – and the rest of the country – needs to re-think its economic strategy. Quickly.