How to create jobs

Gary Johnson Libertarian Presidential Candidate
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All of us tend to speak in terms of the American economy either creating or costing jobs. To an extent, speaking in those terms gets it backward — or at best neglects the reality that job creation or loss forms a vicious circle with that thing we call the economy. From the local tax revenues that pay for schools and basic services to the real estate market and every other significant element of the private economy, the driving force in the American economy is people working in productive jobs and getting paid for it.

Unfortunately, this reality has been used to justify some really bad federal policy in the past several years. The greatest example, of course, is the drunken spending by the Feds to “stimulate” the economy and produce jobs. What that stimulus has produced is a government that is bankrupt, deficits we cannot sustain, an economy that is quickly being consumed by government and its debt — and precious few jobs.

It is long past time to reverse course and pursue policies that will, in fact, encourage the private economy to put more people to work in real jobs with real futures. As I travel the country and talk with entrepreneurs, established businesses, and yes, credible economists, it becomes clear that there are a number of very specific steps we can take to put more Americans to work — and none of them involve using federal spending to “stimulate” anything.

First, we must balance the federal budget NOW. The federal debt and continuing deficit spending are clearly unsustainable, due largely to entitlements the politicians refuse to reform. That reality stands squarely in the way of investment capital that could and would fuel growth and produce jobs. At the end of the day, excessive spending requires added taxation. Added taxation shifts dollars from productive to unproductive activities, and jobs are lost.

On the other hand, the same is true of most of Europe, which, combined with the inherent investment risks in developing countries, creates an opportunity for the U.S. to get its house in order and once again become the world’s safe haven for investment. Bringing entitlements under control and dramatically reducing wasteful spending — from earmarks to subsidies to agencies we simply don’t need — will produce more jobs than any so-called stimulus program we could ever imagine.

To further shift resources from unproductive taxation to productive activities, we need to reform the tax code. A tax system, like ours today, that is rife with loopholes, deductions and exemptions requires higher tax rates on everyone to generate necessary revenues. Getting rid of those loopholes and deductions will broaden the tax base, lower rates, eliminate distortions in the marketplace and allow dollars to move to job-creating investments.

Likewise, potentially millions of jobs will be created by eliminating the corporate income tax. The corporate tax is a classic example of double-taxation, and serves no economic purpose. It is no mystery that businesses can and will gravitate toward countries with lower taxes. Increasingly, the U.S. corporate tax burden exceeds that of many other developed nations. The inevitable result is business, jobs, and tax revenues from income moving overseas. Eliminating the corporate tax will increase investment within the U.S. and boost employment. Any near-term impact on the deficit will be slight and short-lived as greater corporate activity and employment produces greater tax revenues.

Talk with almost any employer or potential employer, and it is clear that government rules and regulations are huge disincentives to hiring. Job-killing regulation must be reduced. Obviously, some regulation is necessary; however, much, if not most, of what government piles on businesses today has little common-sense justification or real benefit. Also, excessive regulation perversely harms the entrepreneurs and small businesses who lack the resources and market presence to absorb the cost of those regulations. It is those same entrepreneurs and small businesses who create the bulk of new jobs in the U.S. We need to get the government off their backs.

Each time Congress revisits the federal minimum wage, an energetic debate ensues over whether a higher minimum wage results in fewer jobs. In reality, the minimum wage is a clumsy mechanism for redistributing income: It raises the wages for some, while causing others to have no income at all. Also, a uniform federal minimum wage distorts regional job markets and needs, and ignores differences in living costs. I propose that we allow the states to establish minimum wage laws and rates, without an overriding federal mandate.

Most states already have minimum wage laws on the books. Some are higher than the federal rate, some are lower, some are the same — and a handful of states have none. Allowing these varying approaches to function without federal interference will reduce distortions in the job market — and encourage the creation of more jobs.

In the same vein of eliminating wage distortions that kill jobs, we must repeal Davis-Bacon. Requiring federal construction projects to pay “prevailing wages” raises costs and unavoidably reduces the number of people who are employed to work on those projects. Repealing that requirement will better align jobs with wages and put more people to work.

Finally, as painful as it may be politically, Congress must stop extending unemployment insurance benefits. The compassion argument for extending unemployment benefits can be compelling, but that near-term compassion must be weighed against the larger and longer-term issue of a government-sponsored incentive for people to remain unemployed.

In sum, we have seen what happens when government tries to create jobs, manage wages and determine winners and losers through taxation and regulation. I would suggest that the real answer lies in getting government out of the jobs business — and letting American innovation, productivity and enterprise create the opportunities they can and will create if the Feds will just get out of the way.

Gary Johnson, a Republican and two-term Governor of New Mexico from 1994-2002, has been a consistent and outspoken advocate for efficient government and lowering taxes. As Governor of New Mexico, Johnson was known for his common-sense business approach to governing. He eliminated New Mexico’s budget deficit and cut the rate of growth in state government by 50%.