I have been reading all of the debate about job creation. I must admit that there are things that most Republicans miss in the debate. But they do get more than the Democrats do, who seem to be missing the entire scope of what it takes to create a job to begin with. For review, there are three things that are necessary for someone to get hired.
1. If I am to hire someone, the most important thing is to have the cash on hand to do so. If I can't pay someone, I don't hire someone unless I want a whole heap of trouble. I also don't borrow money to make payroll as that is a recipe for failure. This is where the debate on taxes come in. If Congress lowers my taxes, any of my taxes, then I have more funds to do other things, including hiring people.
In the US, we have one of the heaviest corporate tax rates in the world. It is an average aggregate tax rate of 39%. This means that Federal plus State plus City taxes for the average business is 39%. These taxes come in many forms. There are taxes on revenues, there are property taxes, there are tariffs, there are sales taxes and there are many other types of tax. That means that some businesses in some cities in the US pay more than 39% and some pay less. Yes, there are loopholes and incentives and many businesses pay less. But really, 39%? How many people can would you be able to hire if 2 out of every 5 dollars that you earn go to the government at every level in some form or another? This is not all the fault of the Federal government. Some cities and some states have to work to lower their taxes as well.
BTW, energy costs are also a problem and are stopping some businesses from hiring more people. Health care costs are also a burden. Lower costs, and businesses can hire more people.
2. Costs are just the first part of the problem. The second part is a lot more complicated to solve. But in order to hire someone, there needs to be work for them to do. I am not going to hire someone to manicure my lawn in the middle of winter. I am not going to hire a computer programmer when I can purchase all of the software I need off the shelf. You get the picture? This problem is a little more complicated to resolve. This is the part of the job creation equation that government probably can't resolve, or can they?
When the housing market crashed a few years ago, regulators went overboard with new regulations. Very few people can qualify for a mortgage any longer, and according to many experts, the pendulum has swung too far to the other direction. We had a situation where there was not enough regulation and it was too easy for people to qualify for homes they could not afford. Now, people who can afford the homes can not qualify for mortgages. It would be just like a highway, where the speed limit is 100 and a lot of people are crashing and dieing. So, do you lower the speed limit on that highway to 30? Of course not. But that is exactly what has happened in the financial industry. We need to roll back some, but not all of the new regulations that have passed since 2008.
In the long run, regulation reduces the demand for product through the economy as a whole. It takes customers out of the equation and people and businesses who would be customers can not longer qualify to do business with you. The new regulations have reduced the demand for credit because fewer people can qualify. As a result, interest rates have had to been reduced to record lows, but still, there are fewer people who can qualify for regular loans. The only firms that have benefited from this are the payday loan people, who are not as regulated as the traditional banks are.
3. Third, but not least important, there needs to be a qualified person to do the work. Back to my lawn. Would I hire someone to manicure my lawn who has never worked a lawn mower before? I prefer experience in mowing my lawn, but if I had not other choice but to hire inexperience, I would. But, I would have to expect that the quality of the work would be diminished and the time in which it would take to complete the task would increase at first. Still, it is better than letting my yard go to seed when I do not have the time to do the job myself. But as my lawn caretakers grow in their experience, the quality of the work would improve and the time it takes to do the job would decrease. This is called a learning curve. Most businesses can only afford so much learning curve. Therefore, there should be patience with the job creation/economic growth cycle. If you have too much learning curve, the quality and quantity of the work that a company can produce are greatly diminished. It is the reason why some businesses never get off the ground.
If there is no one qualified to do the work, you have to hire the best person you can find and be patient as that person learns his job.
What can government do about this? Be patient, be understanding and don't become the enemy of business. As a businessman, I can only do so much while me and the people who work for me are learning our jobs. Government, as they have taken Education as a Government duty, can do more to ensure that people are better prepared for the work force when they graduate from school. Once we all know our jobs, the economy will run more smoothly.
Conclusion
I believe that both Democrats and Republicans understand the first point, to a point. It seems to both parties want to mess with the tax code when what really needs to happen is that government needs to cut spending so that the tax burden can be lifted. If there are more people paying taxes, the tax burden is spread among more people. The Democrats really do not understand point 2. They want more regulation. You can not regulate all of the problems out of the system, unless the system is so overburdened with regulation that it can not function. Is that what you really want? And neither party seems to understand point 3. You can't expect people to hire just because they have cash. No education system in the world completely prepares people for every possible job. We can certainly do better in this regard here in the US, but everyone has a learning curve when they take on a new job. It takes patience to deal with it. A company can only deal with so much learning curve at once. Therefore, hiring is a gradual process. Therefore, no matter what happens, the economy will not heal overnight. It will naturally take years.
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