Let Companies, not Government Create Jobs

Maybe it’s because I am a techie or perhaps because I have seen how the post office, tax code and department of motor vehicles works – but I am fairly certain that an investment by Intel – in this case $2 billion for new US companies will generate 100x more lasting jobs per dollar than the US government via stimulus and/or jobs bills. It is worth pointing out that there are other firms investing as well bringing the total investment amount to $3.5B.

The reason VC firms are investing now is they feel more secure about the future and sense the opportunity to make money. This is what drives capitalism — the opportunity to make money.

History has shown the US economy is vibrant and ever-evolving. It has increased the standard of living in this country and others like no other force could. Our financial system is second to none and yes, we have had our share of problems these past years but the values which have made this country prosperous will continue to move us forward.

In contrast, if you listen to politicians explain how they spend money they don’t have to hopefully create jobs, it is enough to make you nauseous. $780 billion has already been allocated to stimulus over the past year and at best we have seen some stabilization in the jobs market as a result. We now need to create 18 million jobs and do it quickly.

History has shown the best way to encourage job creation is to increase the opportunity to make money. The easiest way to do this is to allow companies to share in a greater portion of the fruits of their own labor or reduce drag. This is otherwise known as tax breaks for small business owners and other companies. We have spent trillions of dollars on stimulus, bank and insurance aid and in the process, millions of jobs have been destroyed. 

You would think this is not possible but it is happening before our eyes. Perhaps this is the reason why — a recent Bloomberg survey of investors showed 77% of them  think Obama is anti-business.

Lets look at the headlines from this week alone (today is Tuesday by the way)… Consumer confidence hit a low, housing prices are sinking and unemployment is increasing.

What are the problems with Obama which scare business owners and investors?

Healthcare: Companies are afraid their costs will go up when and if a government bill is passed. They are likely right as a wide variety of taxes have been discussed as ways to pay for the various bills which have been proposed.

Spending in general: Businesspeople are smart enough to know they make money and are on the hook for the government’s continuous cycle of debt. Moreover there is fear of inflation/collapsing dollar which will cause more problems for businesses – even if it doesn’t happen – businesses have to be prepared for it.

Tax increases: The ten-year tax cuts expire this year meaning small business owners are now in a higher bracket and yes this means less money to invest in growing a business/hiring.

Demonizing the successful: The president continues to demonize people who make money and this puts fear in business owners and makes them think twice before hiring – better yet, they lay some people off to be safe. Fat cat bankers as he calls them hire lots of people to cut grass, shovel snow and they also own cars and pay lots of state taxes which help pay the salaries of policemen, firemen and school teachers. I always thought the US was a place where success was encouraged. BTW, I share the frustration the president feels on bankers getting outsized bonues after getting bailed out — the problem is when you are the president and you go on TV and complain about it, Americans lose jobs.

President Obama on fat cat bankers

Not realizing the International Threat to Jobs: How often does the government acknowledge US jobs are moving rapidly to China, India and the Philippines because technology puts every worker a mouse click away? They don’t mention it because they are either too out of touch to understand the problem or if they acknowledge the problem exists they would have to do something about it. Sadly, the only thing that can be done is to reduce the cost of doing business in the US so American workers would be able to effectively compete. This means fewer taxes, smaller government and less political power – and what recent politician wants less power?

Cap and Trade: President Obama has said energy prices will necessarily skyrocket under his plan – the response from businesses, layoff more people.

President Obama on how he will make energy prices skyrocket

Reinforcing the cycle of dependence: The American people are hurting but the way to help them is to find ways to get them working and/or starting companies. Before we pay another dime of entitlements to anyone we should require them to become educated and pass regular drug and alcohol screenings. With the advent of Internet technology it is easy and virtually free for the government to hold courses via webinar or distance learning from existing schools. If you want to continue getting government assistance you should be required to increase your chances of being hired by becoming skilled in a number of disciplines. And yes, you should be required to pass tests to ensure you are really learning.

And why not promise a X-year tax break to anyone who starts a new company this year and employs at least 50 workers over the next Y months? How can the US people lose out on such a system?

The president’s tight relationship with unions/card check: President Obama is on record saying he is trying to make the agenda of the unions a reality. If unionization spreads, it increases corporate costs meaning there is less money and employees need to be laid off. Moreover, why invest by hiring in the US when you can do so in China/India where the threat of dealing with unions is much less/nonexistent?

President Obama explains how he will make the agenda of the union reality – basically expand unions greatly in the US

If unions are so important to Obama, I suggest he tries to get the Chinese and Indian governments to implement them so the cost of workers in those countries increases – this could bring jobs back to the US. But increasing union power in the US and subsequently wages/benefits per US worker will instantly move more jobs to countries with no unions which means less US jobs. Or it will do what it did to many airlines, GM and Chrysler — just bankrupt the companies outright.

I truly believe the US is the most innovative country in the world. We are the place where Microsoft, Google, Cisco, Apple, IBM, Xerox, Boeing, GM, and Kodak came from. We have exported innovation the world over and we can continue to do so.

But I caution my readers and politicians – our new competition is developing nations and they will do anything it takes us to help the US become a third world power so they can prosper. They will take our jobs. And from the outside the Indians and Chinese are doing just about everything right – they seem to have a consistent strategy to take more and more industries from the US and relocate them to their shores.

Nothing is slowing them down and gridlock and lack of vision in Washington makes their job even easier.

In order to compete with China, we can’t continue to spend like drunken sailors, grow government and increase taxes, red tape and regulation. That is a prescription for losing even more jobs. Other countries will do whatever it takes to get our jobs and I get the feeling Washington doesn’t realize the real competition is not the other political party, it is other countries.

In the last 20 years we have witnessed technological innovation change the world and many of the jobs associated with this technology have been created in the US. I trust Intel and other tech companies many times more than I do the federal government when it comes to job creation.

Now that Intel has taken the lead with this fund, I think the politicians should cease all work on job creation themselves and find ways to encourage Intel and other tech companies to create ever more jobs.

I am convinced this is the best path to sustainable growth and permanent job creation which will be paid for by selling products and services – unlike government jobs which are paid for by taxes or loans from foreign governments.

If this article is of interest be sure to check out this video of Thomas Friedman — “The global economic playing field is being leveled and you Americans you’re not ready!”


As I was getting ready to post this entry I learned that Juniper too has launched a $50 million dollar VC fund called Junos Innovation Fund. These new funds are a very positive sign for the US economy and tech markets in general.

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