Businesses are the job creators, not the Federal government

by Gary Coe

I would like to address the three points made in the Sunday Oregonian editorial by Eric Schuck, professor of Economics at Linfield College.

Dr. Schuck’s first claim is that businesses are not job creators, and that the jobs are just a “cost of production”. He then goes on to claim that creating jobs is the Federal government’s task. Two of my businesses have been severely damaged by the recession. In many ways it might make the most economic sense to close them. However those jobs provide for 25 families. I have a responsibility to cut the costs and somehow stay afloat during this longer than usual recession, and keep those valuable people employed. Neither business pays me one cent currently. However because of Measure 67, my annual fee to the Secretary of State has doubled.

It is not the Federal government’s task to create jobs. What state government and the Federal government need to do is to get out of the way. The continually growing piles of regulation are, in fact, strangling business. In the Feb 2012 legislative session, there were 7 jobs bills introduced by the House Republicans, designed to create 50,000 jobs over the next 5 years. Only one of those bills passed. I am certain some of those bills will resurface in the 2013 session, and we must make sure that we have the right mix of Senators and Representatives to get those bills passed.

Dr. Schuck goes on to claim that when state revenues fall, states “have no choice but to slash employment”, referring to public sector jobs. But in fact total state employees on our payroll is up, partially from using Federal stimulus money, and partially new programs such as the Education Investment Board and the new Oregon Education Czar. Dr. Schuck believes the answer is to “raise taxes on a local level”. I believe that would result in less buying power for working families, further damaging the economy.

Finally, Dr. Schuck’s third claim is that since the federal government is only paying 1.5% on their (actually our) debt, and that inflation is running 2%, that “the real interest rate is less than zero”. Dr. Schuck may know more about water resource management than economics, because when you are paying out interest expense every month, that is cash that a government does not have to provide services, like paying for education.

Gary Coe, candidate for State Senate District 14

Post to Twitter Post to Facebook Post to LinkedIn Post to Reddit

Posted by at 05:00 | Posted in Economy, Government Regulation | 34 Comments |Email This Post Email This Post |Print This Post Print This Post
  • MrGreenJeans

    And, luckily, the private sector is doing just fine. Great, in fact.

    • Rupert in Springfield

       Yep, the private sector doing just fine was one of those comments that makes clear BO is no genius. He’s not stupid, but to parrot Hank Reids exact same comment, about the private sector doing just fine, from a few months ago was amazingly inept. 

  • Rupert in Springfield

    I wish we could get over this faux pondering over whether or not business creates jobs. Really it seems to be an attempt by some to obfuscate a simple question with phoney intellectualism by trying to reduce the obvious, to the obscure, through false chicken and egg comparisons.

    The answer is simple. If you have a product or service you think people will buy, you create jobs. You do so before there are any consumers, so the answer of which comes first is rather simple.

    If I think carpet cleaning is needed in the area, I can start real simple. Get a van, a carpet steamer and a store front and wait for someone to call. I have just created one job, my own, before anyone has called. If people call my job will continue, if they don’t it will not, but regardless, for the time I was doing the job I did create it.

    If I get more calls I hire more people in the anticipation of increased work. Again I have created jobs. No one walked in and guaranteed those jobs would lead to the increase in my business, and no one guaranteed me the business income to pay those workers. I created those jobs. Again, if I can drum up business on an ongoing basis, those jobs I created will continue.

    It’s a pretty simple answer to a basic question, if you want more jobs, you need to have people skilled in seeing a service or need to be fulfilled to produce them. I cannot think of a society that has flourished when job creators were denigrated. I can think of plenty that have died from that exact sentiment.

    • Ardbeg

      “I have just created one job, my own, before anyone has called”

      Really? If no one calls your pay is zero, not much of a job.

      • David Appell

        The worth of a job isn’t only the money one receives for doing it. (This is an obvious fault of our national system of accounting.)

      • Rupert in Springfield

        >Really? If no one calls your pay is zero, not much of a job.

        Irrelevant, as it relates to the duration of the job, not whether I created the job in the first place. If they call, the job will have some duration, if they don’t, then it wont. Regardless, the job was created by me, not the phone call. Whether or not the job is sustained is determined by my own innovation in meeting what I perceive as customer demand.

        • Ardbeg

          So if I put a sign in my yard that says “Gutter cleaning services” and my phone number that I just created a job?  I don’t think so Rupert. The person who calls and hires me creates the job.

    • David from Mill City

       

      Rupert

      Only three things create jobs, consumer demand, perception
      that consumer demand exists and philanthropic activities. While the actual position
      may be created within an organization (public or private)  it was created in response to one of the three
      causes I listed.  More over lasting jobs
      are the result of real consumer demand or serious philanthropic interests.

      As to your example, the job was created in response to a
      perception that a market for the service (i.e. consumer demand) existed. It
      would continue to exist only if that perception turned out to be correct. That
      is assuming that it was not created for some philanthropic reason such as
      creating a summer job for your son or daughter

      While the availability of money and government regulations
      may have an impact. That impact is in the amount of demand, real or perceived,
      that needs to exist for a given endeavor to go forward.

      At the root of our current economic situation is a lack of
      consumer demand caused by too many people either being underpaid, out of work
      or fearing that they soon will be out of work.  Since in a consumer based economy such as
      ours, consumers and workers are the same people. Whenever a consumer based
      economy gets its self into the position ours is in now, it is both difficult
      and risky for the private to create enough consumer demand/jobs quickly enough
      to facilitate a rapid economic recovery. The only organization in a position to
      do so is the Federal Government.

  • Ardbeg

    I’ve never been a “job creator.” I can start a business based on a great
    idea, and initially hire dozens or hundreds of people. But if no one
    can afford to buy what I have to sell, my business will soon fail and
    all those jobs will evaporate.
    That’s why I can say with confidence that rich people don’t create
    jobs, nor do businesses, large or small. What does lead to more
    employment is the feedback loop between customers and businesses. And
    only consumers can set in motion a virtuous cycle that allows companies
    to survive and thrive and business owners to hire. An ordinary
    middle-class consumer is far more of a job creator than I ever have been
    or ever will be.-“Nick Hanauer”

    • Rupert in Springfield

       A classic logical fallacy.

      Start with the basic precept – I can start a business but if nobody can afford to buy what I have to sell it will fail and jobs will evaporate.

      The obvious thing this statement ignores is that the jobs were in fact created. They may not have lasted long, but clearly the person starting the business created the jobs. Thus the statement admits at the outset that business is the job creator, it is just their duration that is in question.

      The second thing that is ignored here is how in the world does this fictional business, that makes a product no one at all can afford prove anything other than a bad business model?

      Did Hanauer really mean no one in the world could afford this product? If so, then its an example of a bad business plan and nothing more.

      What if Hanauer meant reagionally, rather than no one in the world? If this is the case then case clearly Hanauer didn’t considered his proposition very closely.

      Plenty of companies in third world countries make products no one regionally can afford, yet they thrive and maintain jobs by exporting these products.

      So in this case, the business failing because no on regionally can afford the product, is an example of possibly a poor business plan, and definitely a poor export plan.

      Hanauer’s statement isn’t dishonest, it just is extremely poorly considered. A moments pause and most can see the logical fallacy.

      • Ardbeg

        Wow, you over analyze a lot. My point (that I used Hanauer’s quote to illustrate) is there is a flip side to the whole “job creator” mantra from the right.  It take a person or a group of people pooling their resources to start up a business and yes; technically, they are the job creators.  But, consumers determine who will have a job next month.  It’s a 2 sided coin. Should we try to make it easier on small business start-ups during a recession? Should we also be concerned about a consumer base with less and less discretional dollars to spend?

        • Rupert in Springfield

           >Wow, you over analyze a lot.

          Not really, its a pretty simple analysis that reveals a logical fallacy.

          >My point (that I used Hanauer’s quote to illustrate) is there is a flip side to the whole “job creator” mantra from the right.

          It’s a weak point, because Hanauers quote doesn’t stand up to even cursory logical scrutiny.  

          >It take a person or a group of people pooling their resources to start
          up a business and yes; technically, they are the job creators.

          Good, so business is the job creator and my analysis was not in vain.

          >It’s a 2 sided coin. Should we try to make it easier on small business
          start-ups during a recession? Should we also be concerned about a
          consumer base with less and less discretional dollars to spend?

          The two are not mutually exclusive, therefore not a two sided coin. Really its the left framing the argument this way. Its a false dichotomy.

          • Ardbeg

            “reveals a logical fallacy”,”mutually exclusive”,”false dichotomy”.  Give me a minute while I look up them fancy words.

            “It’s a weak point, because Hanauers quote doesn’t stand up to even cursory logical scrutiny.” (how did I forget ‘cursory logical scrutiny’! double darn!)

            The only ‘weak’ point is you not understanding basic economics.

      • David from Mill City

         

        If one assumes that the business in your example was
        intended to succeed, it was created in response to a real or perceived consumer
        demand. If the consumer demand was there the business succeeds if not it fails.
        If on the other hand it was not intended to succeed then it is some sort of
        strange philanthropic exercise.

        • valley person

           Rupert is thinking like a physicist here, dealing with those sob atomic particles that come into existence for a micro of a micro nano second and then disappear.

  • David Appell

    Businesses are the job creators, not the Federal government.

    Ask any Congressperson who has a military base or defense contractor in their district, and I bet they will disagree.

    • Steve Buckstein

      For the federal government to create military or defense contractor jobs, no matter how important these may be, the private sector must either be taxed (potentially losing jobs there) or money must be borrowed from the private sector or even from a foreign government. That borrowing must eventually be repaid with taxes on the private sector later. Either way, there is no assurance that federal defense spending is a net creator of jobs.

      That doesn’t mean that government should not tax or borrow for to make defense expenditures; that’s one of the few constitutionally legitimate functions of the federal government. But Congressmen should be careful claiming that they’re creating jobs in the process.

      • David from Mill City

         

        Steve

        Your argument is only valid during periods of full
        employment. Currently we have a surplus of workers so a creating government
        jobs, directly or indirectly does not reduce the private work force. Further
        since the government is getting its money from banks who are getting it from
        the Fed through no interest loans, the Fed basically printing it and since the
        banks and large corporations are sitting on large amounts of cash the
        government jobs are also not depleting the available amount of capital.

        So at this time the Government is capable of creating jobs.

        • Rupert in Springfield

           >Currently we have a surplus of workers so a creating government
          jobs, directly or indirectly does not reduce the private work force.

          Im not sure anyone argued that it did.

          What was argued was that it potentially reduced private jobs through increased taxation to support the government jobs.

          Two very different things.

          >the Fed basically printing it and since the
          banks and large corporations are sitting on large amounts of cash the
          government jobs are also not depleting the available amount of capital.

          So then BO is lying when he wants to raise taxes on the wealthy to pay for some of these jobs he is lying?

          When the teachers unions lobbied for measure 67 to pay for government workers they were lying?

          >So at this time the Government is capable of creating jobs.

          If you believe the money government uses to pay those workers comes from magic, then yes, yes it is.

          If you believe that magic source of money will last for the life of those jobs then yes, you are correct.

          • David from Mill City

             

            I should have been more specific, by Government I meant the
            Federal Government as it is in control of our sovereign currency, the dollar.  

            As to the President’s desire to have those with extremely
            high incomes pay more in income taxes, no I do not think he is lying. But
            whether or not he is lying is not relevant. The reality is we can have much
            higher tax rates and a prosperous economy, just look at the 1940s and 50s.

            Now as the State of Oregon does not have a sovereign
            currency of its own and is mandated to balance its budget bi-annually, it needs
            to have the income to meet its expenses. So the Measure 67 supporters were
            correct that the revenue raised by the measure was needed to retain state and
            local government employees.

            The source of the money I am speaking of is not magic; it is
            the Federal Reserve Bank and its ability to create money.  

            And of course the money will last for the duration of the
            jobs, first because when the money ends so would the job but more important
            once the economy recovers the need for the job would end and thus the need to
            fund it would also end.

  • David Appell

    Gary Coe wrote:
    But in fact total state employees on our payroll is up

    False, according to data from the Federal Reserve:
    https://research.stlouisfed.org/fred2/series/ORGOVT?cid=27319

    • David Appell

      PS: These numbers are employees at all levels of government, not just the state level. 

      But this is a better measure than just the number of employees employed by the state, because responsibilities shift as organization, priorities and fundings shift.  

      • Rupert in Springfield

        At least you caught your mistake. Would be a little more graceful to simply admit you were wrong and call it good though.

        • David Appell

          Clearly, since responsibilities shift between the three major levels of government, the simple number of state employees is inadequate as a measure of the size of government. So, if all you care about is the total number of government employees (and not the health of society), then you need to look more broadly. 

    • Rupert in Springfield

      False – The data from the St. Louis Fed has zero relevance to state employees since it is not a chart of state employment.

      Basic research screw up, par for the course. Oh well.

  • David Appell

    Gary Coe wrote:
    But in fact total state employees on our payroll is up

    The decline in state employees is even more apparent on a per-resident basis. 

    The number of state employees has dropped from one per 12.2 state residents in 1999 to one per 13.1 state residents in 2011:

    https://research.stlouisfed.org/fred2/graph/?g=7Xy

    Roughly half that decrease came in just the last four years.

    • Rupert in Springfield

      Twice a basic research screw up. Those charts are not state employment David.

      For someone trying to be a science writer to make this basic a research mistake twice in a row is pretty bad.

    • David Appell

      This post from the Oregon Office of Economic Analysis, though a year old, provides a better picture of OR state government employment.

      https://oregoneconomicanalysis.wordpress.com/2011/07/20/more-on-public-sector-employment

      It shows that the increase in Oregon state jobs has happened in the education sector — which is a good thing, from what I hear of education in this state, whether from federal stimulus money or state money.  

      Administrative jobs peaked and are decreasing — even more so as a percentage of state population.

      Estimating numbers from the third chart, and using population numbers found elsewhere, I find that the number of state employees per 1,000 residents has remained virtually unchanged compared to a decade ago: about 20-21 per 1,000 in July 2011, and in Jan 2002. 

  • Bob Clark

    The main weakness of the Linnfield economics professor argument about ain’t it great government borrowing costs are so low is the presumption current government officials are actually capable of investing in public projects with positive returns.  I think the answer is mostly no.  Instead, stimulus monies find their way mostly into padding benefits of existing public employee union and government workers.  And these extra benefits and  compensation partly go to union dues for helping current government officials get re-elected.  But largely, the benefits of padded salaries go towards savings and not the Keynesian multiplier effect.

    So, if current government officials are very inept at finding positive returning public investment projects, the Linnfield economics professor would have us believe its o.k. to continue escalating money supply (with the federal reserve doing so by buying most of the new treasury notes and bond issueances), and there is no risk of this turning rather quickly into even higher rates of inflation.  One should be at least somewhat guarded about recommending a blatant policy of simply having the government print ever more rapidly new monies.  Granted such policy is helping ease near-term otherwise serious economic pain, but to go down this path further as the professor argues is to invite even more disaster (at least intuition would suggest such possibility).

    • David from Mill City

       

      Bob

      If past history is a guide the Federal Government generally
      makes good choices with long lasting impact. Many of the projects completed
      under the WPA and CCC are still being used and enjoyed. The Interstate Highway
      System is still being used. The current fleet of civilian aircraft utilizes
      advancements derived from Federally sponsored space and military research.  

      As to your implication that government employees are overpaid
      because of the existence of public employee unions, you have it backward
      private sector workers are underpaid at least partly because they are not
      represented by a strong union.  

  • valley person

    No one person or entity “creates” jobs. Not the private sector, nor the public sector. “Jobs,” which I’ll define as stuff people do for money, are created, sustained, eliminated, and sometimes re-created elsewhere, within a continuous supply and demand loop that INCLUDES a whole bunch of stuff government does, like provision of personal and property security and education and training to just name the most obvious.

    An engineer who invents a new device or ap who was educated in a public school was in some ways “created” by the public sector. And her own invention may be purchased and used by both the private and public sectors, resulting in hiring or redundancy in those areas.

    What matters is economic activity, and this is dependent (at any given time) on so many variables that for one to claim he or she “created” jobs is utter nonsense. At best someone hired someone else to provide a good or service. The “job” only exists because of the effective demand of the good or service. And that demand only exists because enough people have jobs to create demand. Loop de loop.  

  • Oregon Engineer

    For all of you out there on both sides of the fence. try this for a different perspective on job creation.  most of the comments were half right but miss directed.

    https://mises.org/daily/4890

    This may not behave as a link but a paste into your browser will work.

    there are some of you that will total dismiss this as crackpot economics.

    • valley person

       Its not a “different” perspective. Its exactly the perspective that Ron Paul and pretty much the whole Republican party has. Its a mistaken notion that if we only return to pre-Great Depression economic theory we can recover.

      It reminds of the saying: “We have come to the edge of a precipice, and it is now time to take a bold step forward.”

  • Pingback: scam()

Stay Tuned...

Stay up to date with the latest political news and commentary from Oregon Catalyst through daily email updates:

Prefer another subscription option? Subscribe to our RSS Feed, become a fan on Facebook, or follow us on Twitter.

Twitter Facebook

No Thanks (close this box)