Government should stimulate, not thwart, private sector job growth

July 12, 2011

On July 8th, the government reported that the country added only 18,000 new jobs in June, further confirming that businesses are not hiring. Commentators and many government officials act mystified by these disappointing results, but as someone who works with and invests in small companies, it is not hard for me to understand what is going on. Our government policies discourage private sector job growth.

Instead of reducing the costs and red tape incurred by businesses to hire new domestic employees, we have added a major new cost by mandating that businesses provide health care benefits or face federal penalties. Instead of opening new markets for American businesses, we have left trade agreements unsigned for years. Instead of encouraging companies to risk their capital to grow their businesses, we implement regulations like Sarbanes-Oxley and Dodd-Frank which reduce access to capital. Instead of maintaining business confidence in our economic future, we run unsustainable government deficits and operate with temporary tax breaks that do not encourage long term commitment to new permanent jobs.

We berate Wall Street for paying high salaries and force these firms to pay more compensation in the form of stock and deferred compensation. As a result, cash profits sit on the balance sheets of these firms and these employees have less cash to spend on furniture, cars, homes and the like which reduces jobs for factory and construction workers. In 2008, we berated companies for spending lavishly on travel, which caused even more hotel workers in towns like Las Vegas to lose their jobs. Now we are focused on closing tax loopholes for private jet owners as if we do not understand that those most hurt by reduced jet use would be the factory workers that build the jets, the pilots that fly the jets, the attendants who fuel the jets and so on.

It is possible that these policies are promoting more equal pay, encouraging less risky behavior in the financial sector, getting free loaders out of the health care system, and preventing near term foreign competition, but at what cost? Will any of this matter if the economy cannot create private sector jobs? Even if we soak the rich, we cannot afford to pay for the entitlements that many Americans want if only 58 percent of all eligible Americans are working and nearly one-sixth of all employed workers are civil servants in tax-payer funded jobs. Of course we need regulation, equal opportunity and a social safety net, but if our policies continue to focus on fairness at the expense of private sector job growth then we will have neither.

Phil Clough

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