Don’t bet on increased taxes and government spending for jobs growth

October 23, 2011
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“It is not enough to show that a situation is bad; it is also necessary to be reasonably certain that the problem has been properly described, fairly certain that the proposed remedy will improve it, and virtually certain that it will not make it worse.” — Robert Conquest

Tom Fehsenfeld’s editorial (“Don’t bet on business for the next burst of job growth,” Oct. 10), grasping at the straw of President Obama’s jobs bill as a start toward job creation, may be seen as a journey.

Fehsenfeld’s journey starts out in the morning going in the direction of job creation. He sees several useful clues along the way and makes observations about them. He stops for lunch, thinking about the things that he has seen, and concludes that jobs are created by “consumers willing to spend.” But he also concludes: “No one knows the answer of how to create millions of new American jobs.” Now, not knowing his direction, he gets back in his car, sees something called a jobs bill, and heads toward job destruction.

What were the useful clues? First, he observes that in order to keep his business afloat he has to be increasingly productive. His competitors do not stand still, so neither can he. Second, he observes that GDP increased by approximately $2 trillion from 2000 to 2010 while employment declined. What he didn’t observe was that during this period, government spending was the majority of the increase. Nor did he observe that nearly 80 percent of the increase in government spending was borrowed, which will be a drag on GDP in future years. Next, he observes: “Consumers willing to spend are the job creators” and not businesses.

Why is President Obama’s jobs bill not “a good short-term start” on job creation, but a likely start toward job destruction? President Obama’s jobs bill, in spite of its name, would do exactly the opposite of what is needed to create jobs.

Why? Wouldn’t the bill cut taxes by $200 billion and spend $275 billion on worthy projects? And wouldn’t it be paid for by $475 billion in new taxes, making it revenue neutral? Yes, but it wouldn’t be tax neutral, since taxes would only be decreased by $200 billion, so net taxes would be increased by $275 billion.

But wait, that is not all, as they say in the late-night infomercials. The tax cuts are temporary and the increases are permanent, so it is really a $475 billion tax increase, reducing the amount consumers have to spend and businesses have to invest to remain competitive. The jobs bill is no more an act of charity than throwing a drowning man a lead weight painted to look like a life preserver.

Steven Williams is a principal with Williams & Works Inc., a professional engineering firm headquartered in Grand Rapids.

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