Aside from waist-deep snow levels, the other hot topic in Washington today is the formation of a jobs bill. Attempting to rebound from a rough two plus week stretch, President Obama has re-tooled his message and taken it on the road. The new message is all about a reinvigorated campaign to reduce spending in Washington and to stimulate job growth which for Mr. Obama, involves new spending. One can think about this new tactic on the part of Mr. Obama as a 'jobs stimulus' approach.
Essentially, the President and House and Senate Democrats are attempting to wrangle a political victory by calling for bi-partisan measures that would stimulate job growth. The President's proposal calls for $100 billion, spread between a $5,000 tax credit per new worker hired, a $30 billion lending fund, and $18.7 billion in government SBA lending assistance to help businesses refinance commercial real-estate loans. Modest other amounts are also proposed to increased the cap on SBA 'express' business loans from $350,000 to $1 million, among other things.
While this approach sounds relatively encouraging as it is after all, jobs focused, it is actually more like looking at Swiss cheese; it is hard to miss noticing all of the holes. The fundamental problem again lies in Mr. Obama's understanding of economics and policies which are stimulating versus policies which are not;. In other words, as in this case, Mr. Obama is proposing to offer very short-term, targeted approaches to job creation all while at the same time, he is seeking broad and permanent, non-stimulating policy changes such as tax hikes on small businesses (already at 35%, one of the highest in the industrialized world), new energy policy such as cap and trade and a universal health bill. As has consistently been the case with recent policy Washington style, what one hand gives, the other not only takes away but before it takes, it pummels the intended target to the ground.
Small business represents (or should) 60% to 70% of new jobs created in an economic recovery. To date, small business has been a non-contributor to new job growth not because temporary tax credits for new hires were unavailable but because the sector as a whole is concerned about bigger, more deleterious policy proposals coming from Washington; issues such as tax increases and health care reform and taxing lending institutions.
In order to create a sustainable, healthy climate for business to grow, the following six simple steps are all that are needed. Unfortunately, I doubt that any of these steps are forthcoming via Washington.
Cut taxes, reform via simplification, the tax code and if nothing else, leave the Bush tax cuts in-place. Small business will be dramatically, negatively impacted by Mr. Obama's pledge to evacuate the Bush tax cuts. Already, small businesses in the U.S. pay one of the highest tax rates (35%) in the world.
Enact meaningful tort and product liability reform. Small business and job creation is all about taking risk and being inventive. The legal system in the U.S. presently stifles such risk taking.
Shelve the present policy proposals on health care reform and cap and trade and do so publicly. If health care reform is still a priority and it should be, start from scratch.
Get deficit spending under control immediately and begin taking serious steps to cutting the deficit. Deficit spending of the magnitude presently occurring in Washington is harmful to the overall economy and thus, to job creation.
Eliminate the movement to tax banks and to overhaul the banking system. In as much as banks are partially to blame for the economic downturn, there are more than enough culprits to go around, including in Washington. Taxing and adding crippling regulation to the banking industry will only serve to further tighten the credit markets - a 'chill-pill' for increased lending.
- Begin to reduce the enormity of federal regulations which do nothing positive for the economy or for job creation. Politicians and bureaucrats haven't yet met a situation that they believe cannot be remedied through additional regulation. The list of ridiculous and Byzantine regulations are too numerous to delve into here but examples such as the FDA's ban on the sale of raw oysters harvested from the Gulf of Mexico during warm weather months and the EPA's dozens of reformulated gasoline blends that dot the country and have no link to cleaner air serve to illustrate my point.