Frieda Wallison: Job creators are on strike
July 17, 2010
At the recent Aspen Institute Ideas Festival, several commentators of various political stripes bemoaned the current state of the U.S. economy and the failure of the economy to generate jobs. Despite over a trillion dollars of government spending since 2008, the economy remains beleaguered, and yet many Democrats are calling for even more government spending.
Sadly, since the president signed the $862 billion “stimulus” bill, more than 3 million Americans have lost their jobs and credit remains tight, particularly for startups and small business. Large corporations and banks are hoarding cash. The unemployment rate is 9.5 percent, and the administration projects that it will be over 9.8 percent at year’s end, compared to their projections of 7 percent when the stimulus bill passed. If the number of underemployed people (those working part time, but wanting full time employment) were counted, the unemployment rate is estimated at over 16 percent. Administration claims that the legislation “created or saved” 3.6 million jobs does not square with the experience of most Americans.
Those of us who live in the Roaring Fork Valley know this first hand. Many of our friends and neighbors have lost their jobs. Local businesses have shuttered their doors. Credit to consumers and business is tight. For many people these are grim times. Even Democratic Colorado Gov. Ritter acknowledged last week that the administration “may have oversold the job creation part of [the stimulus legislation] … this administration and the congress to have not delivered [jobs] more quickly has become the problem.”
The fact is that government programs cannot create jobs in the numbers needed to sustain the economy. However, depending on its policies, government can either help or hurt the economy. By creating an hospitable environment – through favorable regulatory, tax, spending, trade and other policies – government can encourage the private sector to invest and take risks, leading to economic expansion and jobs. Alternatively, government policy can lead to so much uncertainty and increased costs that it stifles the private sector. We are currently witnessing a general strike of private sector job creators in reaction to a government determined to bring every major sector of the economy under its control, while spending money it doesn’t have.
When Republicans talk about limited government and free enterprise, we do not mean that government has no role to play. In a complex society like ours, government has an important role. Too often, however, government actions inhibit initiative and create uncertainties that affect individual decisions to make an investment or undertake risk, both of which are necessary to economic growth for the betterment of all.
In many instances, government spending creates winners and losers by moving resources from one sector of the economy to another. This disadvantages some in society through no fault of their own. Government policies often have unintended consequences, no matter how well intentioned. Who in the business community, whether large corporations or small entrepreneurs, is willing to hire new employees given the uncertainties produced by recent controversial government “reforms,” an explosion of new regulation, and impending tax increases?
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The health care legislation is a prime example of how government “reforms” can have a negative impact on the economy. Without addressing runaway costs in the health care system in any meaningful way, the administration succeeded in demonizing health insurers, and the legislation focuses on that industry. If MassCare, the model on which the federal legislation was based, is any predictor, health care costs will continue to rise at an even faster pace under the new legislation and the quality of care for all Americans will suffer. At the same time, the law creates enormous uncertainties about the cost to employers of adding new jobs and is an important factor in the reluctance of the private sector to increase hiring.
The financial “reform” legislation is another example of the unintended consequences of government action. On the erroneous assumption that lack of regulation of one of the most heavily regulated sectors of our economy – the banking sector – caused the financial crisis, this law will further limit the flow of needed credit to business and individuals and limit job creation, while still enabling large institutions to be bailed out by the taxpayers.
In contrast to these big government approaches, Republicans support measures that will increase incentives for the private sector to hire and invest such as reducing payroll taxes, maintaining or decreasing current tax rates, reducing the corporate tax rate, rolling back specific regulations that have increased the cost of doing business in the United States, and liberalizing trade policies. These measures would put more money into workers’ pockets to spend, improve American business’ competitiveness, and create jobs.
The Republican belief in limited government is not a call to the chaos that results from every person for himself or herself. Instead, it’s a call for non-coercive government at all levels that nurtures free enterprise, rather than sapping it of its vitality and job-creating potential. It’s a call for equal opportunity based on an individual’s willingness to work, invest and take risks, not on the government’s choice of winners and losers. Only when individuals and business are convinced that the fruits of their labors will not be curtailed by government action will the economy return to sustained growth and greater opportunity for all to achieve prosperity.
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