Friday, December 4, 2009

Thoughts on Job Creation

The White House held a jobs summit earlier this week to discuss ideas to lower unemployment in the U.S. Several ideas were presented and discussed during the meeting - some that made sense and others that, in my opinion, will do little more than add to the deficit.

The big problem with the bulk of the proposals is how to pay for them. The deficit is out of control and literally growing every minute. And most agree that we can't afford to continue to pump money into programs that don't provide immediate results (as we have enough of those already).

Another issue with the current situation is that, until the jobless rate drops, the government needs to continue to fund unemployment and health care benefits for those who have been out of work for an extended period of time.

It's unfortunate that this problem was not addressed two years ago when the recession began. As the financial system crumbled, it was obvious that a recession was coming that it had the potential of being very long and severe. On the macro level, the increased unemployment rate reduced the amount of taxes collected on the state and national level, as well as resulting in a decrease in consumer spending - leading to further layoffs (and even lower tax collections). The death spiral that resulted has continued and worsened to the point where we now cannot afford to do much of anything to get things moving again. Although I agree that it is necessary, unemployment benefits do nothing to increase spending or economic activity.

Over a year ago, I wrote that we needed to focus on job creation and that any stimulus money should go to those companies that do not layoff workers. Unfortunately, we not only gave money to companies that implemented layoffs, it appeared that is was a prerequisite to receiving assistance. Rewarding companies that keep people working could have encouraged businesses to look for alternate ways to cut costs. This could have kept more people working - and spending - thereby reducing the effects of the slowdown.

There are a number of well-known companies that did not layoff workers during the recession. These organizations implemented a variety of actions to keep people working; including unpaid holidays, reduced workdays, focused improvement activity, and dividend cuts. Our economy would have been much better served by providing stimulus money to these companies rather than throwing it into programs that, at best, created temporary employment for a small sector of the workforce.

I would love to see congress and the administration implement an economic, rather than a political, approach to job creation. We will get through this crisis much more quickly if we work for what's best for the country than continuing to focus on what's best for the political parties or individual congressional districts.

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