What the government needs to do is not all that difficult to figure out. As a beginning: Stop spending so much money. Don’t raise taxes. Repeal the health care bill, and declare a moratorium on new regulations that impose greater burdens and uncertainty on the economy.

To be sure, America faces long term challenges in areas like education. But right now, the problem is the federal government. Once the private sector becomes convinced that the government will actually stop attacking the free market, the private sector will once again begin hiring.

When Ronald Reagan was campaigning for President, he said the following. “A recession is when your neighbor loses his job. A depression is when you lose your job. And a recovery is when Jimmy Carter loses his job.” And so it proved.

You can sense the frustration in his voice.

By Sen. Jim Talent, Honorary Chairman

Published on December 4, 2009 in Springfield News Leader

Today, the President is hosting a “jobs summit” to find solutions to the current unemployment rate, which is more than 10% and is rising.  A lot of Americans are hurting badly and the President is right to focus on jobs.

Many of the President’s political opponents will say this meeting is political.  They are partly right.  He can read polls and knows Americans’ top concern is the economy.  The meeting shows the President is “feeling their pain.”  But good politics isn’t automatically bad policy.  Our representatives should care about our concerns, and we shouldn’t fault them for doing what’s right because it is popular.  I’m giving the President the benefit of the doubt that he really wants to know how to bolster the economy.  In that spirit, I want to offer some advice.

Roughly 98% of American jobs are in the small business sector.  Big businesses tend to make money by finding ways to reduce costs; small businesses do that too, but tend to be more “entrepreneurial.” These entrepreneurs are often more willing to take risks to grow.  Growing firms usually hire more employees.  But it is important to understand that no business, big or small, grows for the specific purpose of hiring employees; they grow to be successful, and the free market defines success at least partly in terms of profit, because if they don’t make a profit eventually, they die.

Ask Kmart if you don’t believe me.  Remember them?

Unlike the government, businesses don’t have a choice in this matter. The government can, and does, fail without having to make changes or hard decisions.  Entrepreneurs don’t have that luxury.

I chaired the Small Business Committee in the House of Representatives from 1997 until 2001.  I’ve spoken with thousands of entrepreneurs, and learned from them.

Most entrepreneurs view the government as, at best, a burden, and at worst an enemy.  The government is constantly demanding they spend time and money doing things that have no direct connection to the success of the business.  Many of those burdens are mandated regulations they must comply with: environmental, safety, quality, consumer, personnel, trade, building. The list goes on.

These mandates come from every level of government at the same time.  They constantly change, and are often very difficult to understand.  So the entrepreneurs not only have to spend money to satisfy the government; they have to spend money figuring out what the government wants, and if they are wrong they pay the penalty.

I’m not saying these mandates are necessarily bad, but they usually make it more difficult for the business to succeed.

Here is an example.  Say you run a restaurant chain of 100 stores and are hoping to make 100,000 dollars per restaurant.  Perhaps you were planning to open 10 new stores with that profit.  But if a new law – like the new health care legislation — costs $25,000 per store, you have just lost 25% of your profit.  If that happens, will you be more or less likely to build the new stores?  If you don’t build the stores, then you are not hiring new restaurant managers, or giving business to construction firms, or buying more product from your suppliers.

This doesn’t even take into account the tax burden.  Businesses that make a profit pay income taxes.  If you believe they don’t, disabuse yourself of that notion.  The income taxes usually come from both the federal and state governments, but many local governments levy income taxes as well.  Entrepreneurs have to pay a host of other taxes as well – sales, use, franchise.  And they must spend hundreds of billions of dollars per years to figure out what they owe because the tax laws are so complicated.  Even failing businesses pay taxes – like the payroll tax.  Every business that hires a new employee has to pay 15% of that employee’s wage or salary to the federal government in taxes, regardless of whether the business is making a profit.

Does that make it more or less likely they will hire new employees? Remember that firms don’t grow for the purpose of hiring people; they grow, in part, because they think expansion will turn a profit.  The more taxes they have to pay, the less profit they get by growing, and the more certain they must be that expansion is a really good investment before they will decide to make it.

In an atmosphere of increasing government mandates, and increasing taxes, entrepreneurs become more cautious. They don’t make marginal investments and they won’t grow their business.

It’s easy for public officials to ignore this, or show contempt for the business community.  But I’ve been in public life for a long time, and I can tell you this from personal experience:  There are very few politicians who will cast a vote or make a decision if they think it will cost them their career.  They shouldn’t expect entrepreneurs to be any different.

So here is some simple advice for the President.  If he wants to create jobs, he shouldn’t spend more money on a new “stimulus.”  Government borrowing is part of the problem, not the solution.  Instead, the President should announce that, until the economy is growing, at say 3-4% per year, and unemployment has dropped below 6%, he will not approve new taxes, or any new mandates.

I’d like him to actually reduce taxes and regulations, but given his philosophy that is probably too much to ask.  He could at least make clear he is not going to make the burden on business bigger until the economy is back on its feet.

That would be a significant shot in the arm for the economy.  It would allow entrepreneurs to plan for the future with some degree of certainty.

We can get by with a government that doesn’t grow.  We can’t get by with an economy that doesn’t grow.  If the President will just realize that, then unemployed Americans will have some hope, for the first time in a long time.

To read other articles written by Sen. Jim Talent visit:

www.freedomsolutions.org

www.heritagefoundation.org

In my experience, voters can respect political officials who disagree with them, if there is an honest dialogue and if the public at least understands and trusts the reason for whatever action it does not like.  That dialogue has not occurred, and voters are now beginning to assert their  authority.  The public – and particularly independent voters — will tolerate disagreement, but  will not tolerate arrogance thinly masked by deception.  Whether the White House chooses to admit it or not, it is in the middle of a political and governance crisis that was not only foreseeable but inevitable – and was in every respect self inflicted.

All of this would be interesting if it were just an academic exercise.   But it’s not.  It’s hurting people, and of course people who were most vulnerable in the first place are in the greatest danger now.

Moving forward, it will be necessary to reverse these policies but also to discredit them.  The objective must be to restore the bipartisan consensus – which the President has disrupted – that prosperity is essential to everyone’s agenda, that prosperity depends on healthy free markets, and that the government must therefore respect the private economy.