In my home state of Connecticut, I am bombarded with ads from businesswoman Linda McMahon. She has already spent over $24 million of her huge fortune in an effort to capture Connecticut’s open Senate seat. McMahon’s rhetoric echoes fellow Republicans around the country who say: “Government doesn’t create jobs. Small business creates jobs. Cut job-killing government spending. And Cancel the stimulus.”
This article will examine some of these sound bytes.
When does small business creates jobs?
The Republicans are fond of saying that small business creates 70 percent of all jobs. They don’t tell you that small business is also responsible for 70 percent of all layoffs. That’s the nature of small business. They start up and go out of business all the time.
Business, small or large, hire more workers when they have more customers. If customers are cutting back, business cuts back. It’s that simple.
Don’t take my word for it. The National Federation of Independent Business asked its members, “What is your single most important problem?” The answer was not taxes, not unions, not labor, not government red tape. The biggest problem for small business is poor sales — not enough customers! And there are no customers because we are all broke, unemployed, drowning in mortgage and credit card debt.
When union’s workers are able to win higher wages, their income flows back into the local economy. Yes, unions are good for small, local business!
But the fastest way to create jobs in the private sector is to increase government spending.
Unemployment compensation, food stamps and other safety net programs are immediately spent at the local supermarket, gas station, and other businesses. A study by the Congressional Budget Office found this kind of government spending among the most effective in creating jobs!
Government spending on infrastructure, education, and medical care helps the businesses that supply these industries. And government workers’ paychecks are also spent supporting businesses in the local and national economy.
McMahon and Republicans are against government spending and against unions. So they are really against small business and small business job creation.
Is government spending evil?
McMahon’s TV ads say, “Cut job-killing government spending.” This makes no sense at all. Almost every dollar spent by the government creates jobs.
Seventeen percent — more than one of every six workers — is directly employed by the federal, state or local governments. And for every worker with a government paycheck, another worker is employed by a private business selling supplies or services to the government, or providing the things the workers buy with their paychecks.
Since January 2009, the economic crisis has caused state and local governments to cut employment by 397,000. Without the federal funds provided by the stimulus, those job losses would have been more than double. McMahon and the Republicans want to cut the stimulus, throwing hundreds of thousands of teachers, police and firefighters out of work, and forcing states and cities to raise taxes or cut services.
The final piece of economic nonsense is the claim that eliminating the federal deficit is the biggest priority, and that deep spending cuts will somehow help the economy. Most of the media accept this as self-evident. But it is wrong.
Linda McMahon, like most Republican candidates, refuses to say what programs she would cut to eliminate the deficit. But The Center for Budget and Policy Priorities calculates that the Republican plan to cut the Federal budget to 2008 levels would force a 20 percent reduction in non-defense discretionary spending. Biomedical research would be crippled. Local schools, already hard hit, would see federal funds disappear. Local taxes would rise. Hundreds of thousands of jobs would disappear. The Republican plan could easily throw the economy back into the free fall that President Obama inherited in January 2009.
Deficits don’t kill jobs. Spending cuts kill jobs.
McMahon actually supports two big budget-busters: the wars in Iraq and Afghanistan, and the Bush tax cuts for the rich. But the biggest cause of the deficit is the recession itself — unemployed workers and closed businesses don’t pay taxes. Spending for necessary, productive purposes today will help revive the economy and make it possible to cut deficits in the future.
Between two and five million people have jobs or increased hours today because of the stimulus bill, according to the Congressional Budget Office. But stimulus funds are running out, and those jobs will start to disappear in the next months. The best hope for jobs, both public and private sector, is extending and increasing stimulus measures. Enacting President Obama’s $50 billion infrastructure proposal, and the Local Jobs for America Act which funds state and local governments, would be important first steps. That won’t be possible if Republicans like Linda McMahon, with their job-killing priorities, win in November.
Photo: Art Perlo