Bob Herbert writes in The New York Times that that what America needs to recover from the recession are more jobs. On that point, he’s absolutely right. The problem is that the jobs he would choose to create won’t do anything to help the economy. Like a good Times columnist, his preferred solution is more government intervention:
What Americans need is new employment on a massive scale, and one of the most effective ways to get that started is to invest extraordinary amounts in the nation’s infrastructure, to rebuild America in a way that creates a world-class platform for a sustainable 21st-century economy.
President Obama’s stimulus package is just a first step in the government’s effort to stabilizing the hemorrhaging economy. It contains infrastructure spending, but nothing comparable to the vast amounts it will take to make the desperately needed improvements.
Funds spent on those improvements, which will have to be made sooner or later, are also cracker-jack investments in putting people to work. The idea that the government is spending trillions on wars, bank bailouts, tax cuts, and so on, while still neglecting its infrastructure needs — and at a time when Americans are desperate for jobs — is mind-boggling.
Here’s the problem with that line of argument. What we need is not a bunch of make work jobs. Exactly what would Mr. Herbert’s plan look like? Should we take an unemployed financial analyst from Manhattan, hand him a shovel and have him dig a ditch or fix potholes on I-95? Is that really an effective use of his skills? Of course it isn’t&madash;it’s a waste of human capital.
We do need to fix infrastructure, but don’t kid yourself that doing so will make a bit of difference in job growth. Unless we want to start building roadways to the moon, there’s just no reason for millions of people to pick up shovels for all those “shovel ready” projects. What stimulus infrastructure spending produces is very limited and not terrifically effective.
Here’s where the standard argument about government jobs comes in: “but you’ve built a road!” they exclaim. Great, you have a road. Does that mean anyone will use that road? Sure, that road would be nice for all the trucks that aren’t going anywhere to take all the goods that aren’t being produced, but here in the real world just building a road produces a strip of concrete that may or may not get used. “If you build it, they will come” is a line from a movie, it’s not a theory of economics.
So, what do we really need? We really do need jobs, and we really do need infrastructure fixes. But those are two different problem with two different solutions.
If we want to get out of this mess, we need to tear down walls rather than build them up. The first bill that President Obama signed into law was an act that dramatically expanded liability for employers. You want to create jobs? Try not hobbling the people who create them.
Instead, Congress continues to punish American small businesses at every turn with higher taxes, more regulation, and expanded liability. If you’re a small business owner, now is the last time that you’re thinking about expanding your business. Yet now is also the time when we most need new job creation. Congress and the President continue to put policies in place that harm job creation, then they wonder why the economy is swirling the tubes. Then their solution to the problem is to punish the creators more with even more regulation while lavishing more and more money on the irresponsible.
If job creation is the goal, then Congress should start making it easier for small businesses to start and become big businesses. There are a number of ways to do this. For one, President Obama could sign an Executive Order today that nullifies regulations that harm small businesses—it wouldn’t solve all the problems caused by over-regulation, but it would certainly help. He could then push Congress to pass regulation that would shield small businesses from the biggest liability-increasing laws like the Lily Ledbetter Act. If you’re going to punish business for their excesses, at least punish the people with the deep pockets rather than tilting the playing field more and more against the little guy.
The next step is an across-the-board cut to the corporate tax rate to 25%. The U.S. has the highest corporate tax rates in the developed world—even Sweden has a lower corporate tax rate. Alternately, small businesses (with 25 or fewer employees) should not pay corporate taxes at all. While small businesses can elect to become Subchapter S corporations that make their income exempt from federal taxes, that rule puts more hurdles in their way. Why bother making small businesses jump through the hoops of a Subchapter S election rather than simply getting rid of all the headaches? Small businesses should not be punished with either double taxation or having to elect to go Subchapter S—the process should be as simple as possible.
Forget bailing out the Big Three auto companies. They’re dinosaurs. It’s like giving a bailout to the horse-drawn carriage industry in 1920. Somewhere in a garage an American inventor is coming up with the next revolution in transportation, free of the restraints of conventional thinking. I’d rather throw a few hundred grand to a hundred garage labs than a few billion to the dinosaurs. If just one of those innovators pans out, a new industry is born. HP, Apple, Microsoft, and even Google started not as the product of giant government R&D programs, but in garages and college campuses. You want the most bang for your stimulus dollar? Then give it to the little guys with the big ideas, not the big guys who are too constrained by their own bureaucratic inertia to revolutionize American industry.
We’re not going to fix America’s problem by repairing bridges and digging ditches. Most of our infrastructure problem should be solved by just shifting our priorities. Yes, it’s nice to have millions for the arts. But we also have to fix bridges, and we have to start making rational choices about how we spend our money. If we want to repair American infrastructure, we should do that, but it should be done in as apolitical a way as possible. That means saying that we are not going to spend millions on bike path or “community centers” that only help a small number of people. Instead, we’re going to fix the big problems like failing airports, falling bridges, and chemical plants that might as well have a “BOMB ME” sign painted on them. That means insulating these decisions from Congress, who have every incentive to put the needs of their campaign contributors above the public good.
If we want to fix the economy, we can’t follow Herbert’s single-minded focus on government as the solution to every problem. The reason why things are so bad is that our private-sector is failing. Neglecting the real engine of growth—private-sector, small-business jobs—is only going to make this recession turn into a full-blown depression.
This is the 21st Century. We can’t play with the handbook of the 1930s. If we want a 21st Century economy, we have to look beyond the top-down centralized approach and start looking at the economy in the same way we look at the Internet. Instead of a “central server” in Washington, we need a “cloud” economy that spurs innovation. Centralized networks are slow, inefficient, insecure, and costly. Distributed networks are fast, resilient, efficient, and effective. Our economy is the same way. If we’re to build a better future for ourselves and our children, we have to concentrate not on centralizing economic power, but putting it back into the hands of the people who create jobs that last.