So the President and most every other politicians and political wonk seems to be willing to use a phrase we consider stupid-from-the-jump.
“Jobs bill.”
We think that anyone who supports “jobs” legislation, needs to have an economics lesson. The way we see it, governments cannot create private sector jobs – period. All they can do is create the conditions that will run a billiards style bank shot, aiming for the legislation to ultimately result in new positions opening up.
Create the conditions. What conditions? Conditions that make business owners and managers say, “Gosh darn it! There’s demand for what I’m selling and I have no way to meet all that demand with my current staff. I’d better find one or more people to help us meet this demand, or I am leaving money on the table.”
If a business can make enough profit off of the next hiree to make the burden of that employee worthwhile, most employers will go and hire him or her. But can anyone – ANYONE – give us a business reason why it should hire someone if it won’t result in greater profits for that company? If one of us owns a business, and we’re going to lose money because hiring someone costs us more than we’ll make in sales, we’d be idiots to make the hire – unless there’s some other factor that doesn’t relate to immediate profits. (For example, we might hire someone who is so good at what he or she does, that we don’t want the competition to snap him or her up. So we might not have an immediate need, but we might want to take a small cut in profits to prevent our competitor from beating us in the marketplace – especially in the short term.) Ultimately, though, it still comes down to profits, and if we’re losing more than we’re taking in, we can’t just print money to pay our bills. So the business either has to lean up or go out of business altogether.
This seems so abysmally obvious, that we consider it political malfeasance to discuss “jobs” bills. What needs to be discussed are “business conditions bills.” Governments CAN set up conditions that make it worthwhile for a business to consider expansion. Reducing taxes on businesses would be one way. It’s no substitute for increased demand, but it at least gives businesses some breathing room. Incentives to hire rather than to move out of country with offshore hiring is another good idea. But this, too, is just a stopgap since other countries will likely compete as well. At some point, someone is going to have to cry uncle and lose the competition.
So what can the Federal government do?
#1 – It can recognize that businesses are the source for all private sector jobs. This recognition should come with the further acknowledgment that business owners do not exist in order to provide jobs. They exist to make the owners profits (that they can personally use in their private lives for any legal purpose they want) and that most business owners recognize that profits come from meeting customers’ demand. All feel-good efforts go contrary to these simple facts and are doomed to fail.
#2 – It can recognize that there are certain PUBLIC SECTOR activities that are in the legitimate province of the Federal government, create large programs to fulfill the objectives, and hire citizens to do the work. These citizens will earn money from all taxpayers as compensation for the very real and worthwhile services that they provide to the American people (building an interstate freeway system, for example, or a network of hydro-electric dams, or space missions, etc.). The people in these government programs will then have money to spend. This will increase demand, thus increasing the need for private sector positions to meet the increased demand.
#3 – In parallel with #2, the Federal government can contract out parts of the public projects to private contractors. These private contractors (businesses) will have to hire people who are paid with taxpayer dollars. But they will go out into the private sector and buy goods and services, thereby increasing demand and generating the need for more private hires. Note: anyone who works on a government job, whether a government worker or a someone working for a government contractor is being paid by We the Taxpayers. It may be worthwhile and good, but it needs to be recognized and accounted for as what it is.
#4 – The government can provide incentives and partnerships for innovation. How does Apple generate demand for its products? It comes out with new, innovative products that people want. The better they do this, the greater the demand for their products and services. The greater the demand, the greater the need to hire more people (jobs). If the government will just get out of the way and say something like, “Create a new product that results in you needing to open up for new hires, and make these jobs USA jobs, you, the entrepreneur will get a good size tax cut. More money stays with the company; easier to make a profit; incentives to innovate; success means more hires, and so on – a positive cycle.
We at O-t-c are not economists, but we believe that these minimalist steps can do a great deal toward healing our economy. We’d like to see people begin discussing things in terms of business conditions – and stop all the blather about “jobs.” Talking about jobs is like talking about the sound not coming out of your speakers. You want to create sound. But you can’t get the sound unless you supply a signal. Business is the signal. Jobs are the sound.
- Off-the-cliff.com