Where do jobs come from?

Rep. Joseph R. Pitts Congressman, Pennsylvania 16th District
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Last week, the Bureau of Labor Statistics reported that unemployment remained at a high 9.6 percent in the month of September. Private sector job growth was positive, but lower than expected. If the current rate of job growth held steady, it would take 20 years for the United States to make up for all of the jobs lost in the recession.

Government has proven to be a poor stimulator of job growth. Good jobs, jobs that become careers and that create lasting wealth, come from the private sector. The private sector — motivated by profit — innovates and creates, finding new ways to employ American workers.

Unlike the government, businesses cannot print money. They have to take risks in order to reap rewards, and risk-taking requires both courage and confidence. Establishing a new business or expanding an existing business is not an easy decision. In fact, many businesses fail after only a few years.

Because there is so much risk, entrepreneurs and business executives construct detailed plans that try to take into account all of the factors that go into establishing or growing a company. How much capital will be needed? What will labor cost? Where should the facilities be located? Will the market support the product or service?

The government is a factor in many of these decisions. Government regulations affect the availability of venture capital. Laws affect wages and benefits. Taxes determine how much revenue the government will take in.

With detailed planning, the risk of starting a new venture can be reduced. Less risk means it is more likely that a company or entrepreneur will move forward. It means they will attract more investors and have lower interest rates on borrowed money.

In the United States today, many businesses are anticipating a tougher business climate. They are saving resources rather than spending them, leading them to hold record levels of cash. Investors are increasing their holdings of commodities like food, fuel, and precious metals. They are more interested in holding on to what they have, and less interested in risking their money on a job-creating business that might fail.

I believe that part of the reason is that uncertainty over tax rates and regulations is making it harder to plan and grow. Uncertainty makes it harder to plan and increases the risks associated with growth. Business planners are uncertain about how big their tax bill will be next year. The House of Representatives is constitutionally responsible for writing federal revenue bills, but we adjourned for the election without considering legislation that would extend any of the current tax rates.

Many businesses are grappling with the changes in the new healthcare law. Because of changes concerning retiree healthcare, AT&T had to book an additional $1 billion in costs in just the first quarter of this year. These kinds of changes affect how many new employees an employer can hire.

Some recent government regulations or assistance programs only apply to businesses of a certain size, making it more difficult for businesses to scale up. Some regulations classify small businesses as no larger than 25 employees. When an employer decides to grow, they have to consider the many government penalties that could change the way they do business.

When I first came to the House, I served on the Small Business Committee and I wholeheartedly support programs aimed at helping small businesses get off the ground. But I think that the present leadership in Congress and the White House are going too far and reducing the incentive for successful businesses to grow.

One of Mao Zedong’s most infamous and disastrous economic programs was his push for increased steel production. Workers were ordered to make steel in small backyard furnaces. In reality, quality steel cannot be made on such a small scale. China ended up with tons of useless, low-quality steel. Government interference was counterproductive.

We want businesses of all sizes to have confidence and grow. This means giving both large and small businesses the confidence to invest, make a profit and hire new employees. Congress can’t create the jobs, but we can make it less risky for the real job creators in the private sector.

Rep. Joe Pitts represents Pennsylvania’s 16th Congressional District.