Okay, Let’s Talk About Jobs


Well, as I mentioned in my last post Bank of America is planning to lay-off thirty thousand employees over the next couple of years. This news was announced with stunning irony, on the same day that President Obama sent his recently announced “American Jobs Act” to Congress. So, the talk in politics is all about jobs. What can Congress, or the President really do to create jobs in this country? The answer is. . . not much.

All the talk is about the record of job creation a person has. Rick Perry is touting the economic success “he’s had” in Texas. Mitt Romney is taking shots at him about it, and all the Republicans are blaming President Obama for the economy. John Boehner gave a speech today in Detroit basically outlining the fact that congressional Republicans aren’t going to work with the President. Unless, of course, he does whatever they want. Their ideas are the same tired ideas they’ve had for years, but I will deal with that later.

There is an idea that is more broad and it needs addressed. The American public has a huge misconception about the role of government in the economy. We talk about a President’s record of creating job, but the truth is that president’s don’t create jobs. Unless, they require the government to hire more people. George W. Bush, for example, created the job of Secretary of Homeland Security. President’s can only provide incentives, like tax credits and tax cuts, for employers to hire more people, but that won’t work.

Take a look at it this way. I’m CEO of the Worldwide Widget Corporation, J. Pierpont Finch. We sell two million widgets a year that are produced in two factories employing 100 people. The accountants come to me and say if we build a new factory and hire 50 more people, we’ll get a tax credit. What would you do? If your smart you’d go to the sales team and ask, “If we build a new factory how many more widgets can we sell?” If they say there is no more demand for widgets, you would be crazy to spend the money on a factory and employees that you don’t need. You would be throwing money away. Yes, the government is going to reimburse you for some of it but then your stuck with a factory that is a drain on your profit.

Now, if the sales team comes to you and says, “If we build a factory and hire some people we can sell one million more widgets and our profit will grow 50%.” What would you do? You’d build the factory, and I bet you would do it even if you weren’t getting a tax credit. You’d build it because it is good for Worldwide Widgets.

The President and Congress have no actual role in that decision. Only one thing does, and that is demand. The economy isn’t a physical thing. It is the compilation of all of the uncountable transactions that take place between people and business every day. The mood of the masses drives the economy. President Bush issued rebate checks to American taxpayers. If you filed a tax return you got a $600 check if you were a single person and a $1200 check if you filed jointly. That could stimulate the economy, but only if people spend that money. If the public puts it in their savings for another day, it doesn’t do anything until that other day.

That means that people are the economy. We make it succeed or fail, grow or retract. Capitalism is built on people spending money. That’s why consumer confidence is so important. If we believe the economy is going well and we can afford to spend money, then things will be okay. Christina Stein wrote an interesting article about this at the Kansas Free Press.

I’ve said before that the best way to stimulate the economy would be to eliminate taxes on the poorest people. Poor people are unique in that they are the only group of people who spend every dollar they have. The middle-class, and the wealthy don’t do that. They can afford to have a savings or a retirement account. If you give poor people more of their paycheck, a lot of money will immediately be returned into the economy.

The real truth about the economy is that it hinges on the behavior of people. Presidents don’t control that. Congress doesn’t control that. If you vote on the state of things now, you are voting for the wrong reasons. We need to be voting for the person who is thinking about the future. We need to look at a candidates vision, intellect, and drive. We need to take our eyes off of today and think about tomorrow, and pick the right person to lead us there.

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2 responses to “Okay, Let’s Talk About Jobs

  1. I enjoyed reading your post. Not many people are aware that government cannot create jobs, it can only give tax credit and tax cuts hoping this would promote job growth. Our economy relies on people having confidence and spending money. 3/4 of our economy depends on consumer spending. Again great post.

    • Thanks for the comment. You’re right. It’s all about borrowing and spending money. Most people just don’t know that. Of course, there is also a lot of bad information out there, and people who spread it.

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