Ah, job creators.
You know it is election season when the buzzwords fly like the mosquitoes in the Florida Everglades, and certainly the term job creators has been on the forefront of the discussion about the economy, taxes, and the business atmosphere in the U.S. If you look at the recent buzz, you might think that some people have something against job creators.
I don’t quite buy that anyone has it out for business owners. By any measure, a politician, especially one seeking re-election, logically wants as many people to succeed as possible, job creators included. And although that doesn’t mean business owners have it easy, it doesn’t mean politicizing it is going to help make things better.
Washington and its role in business
I definitely lean to the free market side of the economic scale, so I do think that the government should opt to take a hands off approach on business and make it as easy as possible for people to start businesses and hire people to work for them. Of course, there’s a secondary balance of protecting consumers, employees, and even other companies. So I won’t speak for everyone but I think most want some sort of balance of those two issues.
Then you have the question of taxes.
Businesses should pay taxes, but our tax system is both cumbersome and heavy handed on the business side. Even President Obama said so in his State of the Union address Tuesday. Although our tax rates are blazingly high compared to the rest of the First World, most companies don’t pay anything near that because they utilize any number of deductions and loopholes along with special tax privileges negotiated between legislatures and lobbyists to get their final tax number.
Between regulation and taxation, there’s a third area that’s often overlooked: encouraging business. How much should the government be involved in helping new businesses get off the ground, floating struggling endeavors, or providing protections for companies at the end of their life cycle? This is probably the biggest gray area, but I tend to think that most people believe that the government should try to encourage business growth, but I’d add that there needs to be some accountability involved as well.
Juggling the political atmosphere
Of course, what no one will tell you is that businesses have been successful and have failed under every possible political configuration imaginable. Businesses failed under Democratic and Republican presidents. Partisan Congresses have seen their share of ups and downs.
The fact remains that government still only plays a limited role in the success or failure of business. Sometimes, industries go down, businesses go down of their own devices, markets change, costs change, or the global competitive balance comes into play. Taxation, regulation, and encouragement from Washington is only a small part of why businesses come and go, or why businesses choose to hold on to money or invest it in machines and assets instead of people.
I also saw an interesting piece on CNN about companies that have never laid off employees. There are some fascinating stories there but it proves a point. If business success really lived or died on the actions of the government, there certainly would have been layoffs at these companies by now.
While politicization of an issue can be good (it creates exposure for a relevant issue), it can also lead to gridlock or, perhaps even worse, putting resources into the wrong pile.
Doing things effectively versus doing just to do
Politicization creates pressure to act. The folks in Washington often need that help but spending those resources in the wrong place is a real possibility and that can have worse consequences than not spending at all.
While the taxation issue is important for instance, even a major simplification of the tax code probably isn’t going to create too many jobs. Is it worth working on? Of course, but politicization of job creators might point to this as a victory in and of itself.
Broad, modest, and un-targeted tax cuts sounds nice, but is giving back companies a few bucks per FTE a week going to make a dent in substantial job growth? Not only does that seem unlikely, it also ignores the fact that much of the job creation comes from smaller businesses.
Call me a bit optimistic but in the best of all worlds, the government could be effective and spend money in more targeted ways by focusing on what it can do to help:
- When a governor or trade representative helps open up new markets and get favorable treaties for American produced goods, that’s a high impact activity that comes at a low mean cost. Opening up new markets means more outlets to sell which can lead to more hiring.
- If the government has easy-to-use programs that help supply financing to purchase capital goods and hire employees, even a marginal rate of success in a program like that helps move the needle more than doing nothing. There is risk there but even conservative financing could be a better option than what is privately available.
- If we focus secondary education dollars on programs that prepare people to do jobs that need to be done today and continues to emphasize the fact that continuing education will likely be a part of a lot of people’s careers, that’s a big step up from where we are today.
It’s not rocket science and these aren’t new ideas. The government works best for job creators not by politicizing and pushing through token measures designed to appease in the run up to the election, it works best when it does the things that businesses can’t do easily on their own.
And when you target key industries, you do it one better. If it is time to get serious about creating jobs, it is time to take it out of political speeches and start doing those things that the government can do best.