Can We Create Jobs?

We will hear a lot of talk about jobs, debt, and policy during the presidential campaign.

The Occupy Movement helped bring the issues to the front burner. Now we’re talking about tax rates and “Job Creators”.

So, who actually creates jobs?

The answer is simple: People, businesses and institutions that spend money create jobs. Notice I said spend money, not have money. Investment, in and of itself, does not create jobs.

The facts, taken from the Bureau of Economic Analysis, are these:

• Roughly 70 percent of the economy is consumer spending

• Another 10 percent is investment, the majority of that by business in equipment and software

• Roughly 20 percent of the economy is government spending – 8 percent federal, 12 percent state and local

• Government spending is funded by taxation and borrowing

• 10 percent of government revenue is paid out as interest on the debt

To me, the implications are clear. If consumers spend less, jobs will be eliminated and unemployment will rise. If government spends less, jobs will also be eliminated and unemployment will rise, but to a lesser degree.

If government doesn’t pay down debt, interest payments will continue to eat up revenues that could otherwise be invested in infrastructure that helps business, thus creating or retaining jobs - but that is not a significant part of the economy yet.

Giving people more money to spend doesn’t necessarily create jobs. When taxes were reduced 10 years ago, people had more money to spend but the unemployment rate rose and fewer new businesses opened each year.

Two years ago, the government pumped almost a trillion dollars into the financial institutions and unemployment spiked while the decline in the formation of new businesses increased. That’s one of the points the Occupy Movement is trying to make: we’re not focusing on the 99 percent.

According to the Small Business Administration statistics, 65 percent of net new jobs are created by small businesses. It’s the 99 percenters who typically start small businesses. That’s where the focus should be. That’s the discussion we should be having.

Most small businesses don’t need, or really want, investment capital. Investment capital just transfers profit from the business owner to the investor. Small businesses need flexible financing, streamlined regulations and community support.

That’s where government can help. But even when government helps, a small business can’t succeed without customers and the support of its neighbors. That’s where you and I can help.

The current challenges are very much like those that people have faced from time to time throughout human history.

We will get through this. It will take time but, if we commit to creativity and cooperation, it will undoubtedly take less time.