First, let’s be clear.  Government normally creates jobs that create nothing.  Real jobs are ones that add value and pay taxes from that added value.  Most jobs created by government fail that test.  So, the thought of Government creating jobs is one that must be understood as not actually creating jobs, but doing things that will encourage the creation of jobs in the private sector.  Without the private sector jobs that add the value that is taxed, there are no funds for the government jobs.

Government can be good at coordinating, organizing, regulating, and setting standards.  So what can Government do to help create jobs?

There is an old Bumper sticker that I have on my wall that holds one of the keys to answer that question.  It says, “Make Welfare as hard to get as Building Permits.”  Though a bit simplistic (like most bumper stickers) it points out the fact that businesses must endure a long list of barriers before they can go to work or before they can create jobs.  Many, if not most, of those barriers are Government-created.

Do you remember the teacher keeping the entire class after school because one person in the class failed to follow instructions?  Typically this was done by the teacher for two reasons.  He or she wanted the peer pressure of all those who complied to force the offender to fall into line.  He or she was also probably lazy.  The same result could be accomplished by the teacher spending an appropriate amount of time with the offender but that would not be easy.  It was easy just to make everyone do the same thing and the end result was that the offender usually bowed to the peer pressure.  The other 25 members of the class wasted a half hour or more but the teacher saved a few hours of working with the offender.

Much of the dreaded paperwork that government requires of businesses is just like that.  To control a small problem or to keep a very small group of scofflaws in line, government creates a program that punishes and wastes the time of all the others.  Need examples?  Just try to permit a small wine tasting room on your farm/vineyard.  Having done it, I have a list of requirements with which I was required to comply that wasted my time and my money, but, did nothing to improve the community anywhere close to time and cost involved.  Why should I pay for a traffic study (going price – about $1,500) for the 4 days a year that my tasting room will add about 25- 35 cars on our road?  Does the lady down the block who has a garage sale every weekend have to do that?   She generates far more traffic than we ever will. Does everyone who builds a home on a piece of raw land on our road have to do a traffic study?  A new home and the family who lives in it will certainly generate far more traffic in a year than our winery ever could.  Why should I be required to have my septic tank pumped (going price $300-400) and then have a county inspection (over $1000 for the inspector to come out an look at the system and issue a report)?  If my septic system is not up to the additional burden of 4 days of wine tasting a year, who is hurt by that?  Only me.  More wasted time and money.  No benefit to the community.

Suggestion Number 1 – Government at all levels should make an assessment of the number of people effected by each requirement with which a business must comply.  They should look at the revenue and see if the number of people required to draw up the requirement plus those to administer and enforce it are paid for by the fees collected.  They should look to see the size of the problem the requirement was made to resolve.  They should see how many are effected by the ‘problem’.   If the problem is one person playing his stereo too loud late at night, does that warrant a law that bans the playing of stereos after 10 p.m. for the entire community?  I think we could cut the paperwork barriers to new or increased business activity significantly.  That would encourage more business and more job creation.

It is often said that a successful journey starts with a well thought out plan or itinerary.  Imagine planning a trip for six months from now.  You get airline tickets, rental car reservations, book hotels, and line up special tours or events.  Each of these items in your plan is tied to the next.  If your plane is late, the car rental office may be closed.  If you can’t get the rental car, you can’t get to your hotel without more money for a cab, etc., etc.  But, you know most of these things and know they are not normal and you can handle such problems.  You are encouraged by your plan that you will have a successful trip so you invest in the tickets, car, and rooms.

Now how would you feel about your trip if the airlines often changed fares or schedules or destinations after you booked your trip?  What about if the car rental companies were known to offer a 5 passenger car for $50 a day and then often only had 2 passenger cars that they rented at $100 per day?  What if you booked and paid ($150 per night) for the Hilton and when you arrived they said the hotel was full and put you up in the Wally World Hotel down the street that had a sign saying rooms available by the hour, day, or week?   Would you go ahead and book your trip and make the investment even though you were uncertain any of your plans would work?  Not likely.

Business is much like that.  Business plans are made based on known and predicted conditions.  The more stable the conditions, the more likely a plan is to succeed and therefore, the more likely a business will find investors.  That bodes well for investments and job growth.  On the other hand, when things are not stable, investment drops dramatically.  Do you know if we will have inflation or deflation over the next five years?  Me either.  But, if I were planning a business or an investment, I would need to know or at least have a strong belief.  My guess is that Mr. Obama will be convinced by his advisors that we have to keep the bubble inflated at least until the election in November of 2012.  To me that means we will have another round of “quantitative easing.”  In other words, I would bet we will print more money and have more inflation.  But, I am not in the mood to make any investments with the amazing uncertainty that exists right now.  Will Congress and the President get serious about balancing our budget?  Until they do, I think investment will be depressed and job creation minimal.  Today the only stable things that seem to continue to get investment dollars are business plans tied to government growth/spending, medical care, and the aging population.  We seem confident that these things will continue to grow.

Suggestion Number 2 – Get serious about cutting Government Spending at all levels.  If the Federal Government had a strong leader who ordered all agencies under his control to cut budgets by 15% immediately, I think investments would swell.  If the Federal Government would stop changing the rules for employers (taxes, fees, requirements to provide health care or pay a fine, etc?), I think investments in business would increase.  If our governments committed to plans that would balance budgets, largely through cutting spending, I think investments would swell as would the job rolls.

Most business plans are highly complex and detailed.  People who seek investment or a loan to expand or start a business must lay out an argument for the business and how it will succeed.  First, it must define what success will mean.  Will it be a certain positive cash flow or a certain increase in profit margin to allow the payoff of the required loan?  Will it plan for a certain return on investment for the investors?  Once this definition of success is known, the business planner must show that the risks involved are within reason for the anticipated return.

They say that the marketplace will tell you the value of any asset.  I think that barring government intervention, that is basically true.  If for example, you look at corporate bonds, you will see that bonds that pay 5% today command a higher price than ones that pay 1% if you assume that both are of equal risk.  If Borders Books had a 20% bond offering today, I don’t think many people would buy it considering the state of affairs at Borders.  Or if they would, it would be at a huge discount.  Government bonds, like T-Bills are offered at 3% and people will buy them.  Currently, Banks will pay you less than 1% (passbook savings) to borrow your money.   The Feds are paying above market interest so they can attract enough investors to cover the ever increasing deficits.  As long as banks can borrow money for 1% and the Fed will pay them 3%, guaranteed, they need only ‘invest’ in T-Bills.  Why would they every lend money to a risky business when they have a guaranteed 2% margin when they buy T-Bills with their money.

Suggestion Number 3 –  The Federal Government needs to balance its budget and stop printing money.  If it would do this, they would not need to pay a premium to sell T-Bills, and banks would not have the guaranteed margin they now have when they buy T-Bills instead of lending the money.   Banks would again have to earn money the hard way, by studying business plans, evaluating risks and rewards, and then making business loans.  This would allow new businesses and business expansions, both of which would create jobs.  Banks ‘investing’ in T-Bills creates no new jobs.

Spending more money than in any previous time, borrowing more money than any time (other than World War II), and creating administrative and regulatory barriers to free enterprise will never help create a job.  Doing the opposite will.  Playing politics and saying that we threaten senior citizens and the poor if we don’t continue to increase spending will not create more jobs.  Leading the nation to reduce government involvement in our daily lives will help spur on more investment and more jobs.  I would love to have someone tell me anything that Congress and the Current Administration are doing that will help increase investment in U.S. business enterprises which will create jobs given the opportunity.

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