February 22, 2011

Businesses Don't Create Jobs

The folks at the Michigan Chamber of Commerce are a little like Rudy "9-11" Guiliani. Most of their policy statements consist of "Noun, Verb, Job-Providers". Their argument for shifting business costs to the rest of us consists, basically, of the concept that businesses exist to create jobs.

Hooey. Double Hooey.

Businesses exist to make the largest profits possible for their owners. If that means hiring people, they hire. If that means laying people off, they lay them off. If that means shifting production to another country, they outsource.

Businesses, by and large, have no social conscience. They aren't supposed to have a conscience (even though the activist Supreme Court says companies are really people). They are created to generate profits for their owners. Period.

Government doesn't create jobs either, but at least it is supposed to have a conscience. In a democratic society, government has a responsibility to all of us. Unlike a business, it isn't designed to operate as a profit-generating machine. Its job is to help all of its people live a more profitable life.

What creates jobs are customers. All the tax breaks to business in the world won't create a single job without increased demand for services or products. (In fact, many tax breaks reward companies for eliminating jobs: tax credits for investment into robots is just one of many examples.)

The mantra of the corporate representatives in government is that freeing up more capital for business through lower taxes, regulation etc. will allow them to create jobs. Then why do we have a combination of a booming stock market, record corporate profits, record executive bonuses, trillions in liquid corporate assets sitting in the bank ... and sky-high unemployment?

The auto industry has recovered because people started buying cars. To do that, it's PEOPLE who need more money. If PEOPLE are buying, companies will find the money to meet the demand. Only at that point companies will 1) add more employees, and 2) start buying from suppliers.

Government policy, therefore, needs to maximize the money available to those who drive economic growth: consumers of services and products.

So what does Rick Snyder do? He calls for an end to taxation for most businesses, but pays for it by taking money out of the pockets of their potential customers. Compounding the mistake, he focuses his tax increases on those most likely to spend money quickly: lower- and middle-income families. His budget takes money away from seniors, college students, government employees and the working poor. Is it going to help sales at the Mom-and-Pop convenience store when many of their customers have less money to spend?

This strategy may give businesses better return on their current sales by reducing costs, but it won't create jobs.

Making things even worse: to finance higher profits for the economic elite, they mortgage the future. Economist Paul Krugman calls it "Eating the Future".

1 comment:

  1. Curmudgy-
    You are all over the board on this one my friend. Neither businesses nor government have consciences...People do. Large businesses and large governments both have to have a hierarchy to survive...think bee hive, there is no direct line to the queen, the hive needs her to survive.
    Your booming stock market...how much has it gone up since 2001? Look it up.
    Your booming car industry? My tax dollars bailed them out after they did not pay many small businesses (people who now cant afford their houses) with your governments approval and blessing.
    Now you want to give people other peoples money so they can buy a car owned by the government(GM check out percentage of outstanding stock certificates) so the can buy a house from the government (fanny and fredie mae)?