First came TARP, which set aside $700 billion to bail out Wall Street and other financial institutions. Next came the stimulus package, which allocated $787 billion for various programs primarily intended to stem job losses in the short term. Yet of the well over $1 trillion in federal funds, only a drop in the bucket has gone directly to what experts agree is the best source for job creation - our country's small businesses. Even the government concedes that small businesses account for 60 to 80 percent of new jobs and generate about $1 trillion in economic activity, or 40 percent of our GDP. Small businesses are more nimble and innovative than large corporations, and as a result are much more likely to develop the breakthrough ideas we need for global competitiveness. Our employment future rests on the shoulders of the small employer and we should be investing with them.
The problem is, on our current path towards larger federal deficits, higher consumer debt and government ownership of private assets, small businesses and entrepreneurs will face significant obstacles to continue its role as the creator of jobs - high taxes, high interest rates, a weak dollar and overbearing, or as some argue, unfair competition.
If this continues, jobs growth will be directionally negative as growing federal deficits will stifle broad based economic growth and capital investment. In addition, companies will be cautious and reluctant, even if they believe forecasts of an improving economy, to rehire laid off employees, and many of our traditional big employers will continue to face increased global competition, which will put even more adverse pressure on employment.
It is my view that we need to do three things:
First, restore financial discipline. We have been dealt a very weak hand by the financial market meltdown, bail outs and recession. We can't act like it's a strong one. We have to spend carefully on critically important government programs (like education) and investments that actually create sustainable jobs. As a country, we are borrowing at record levels from the developing world and using the money to stimulate consumer spending, not for long-term job creation. In the not too distant future, the developing world will want its money back for use in its own economies, and our repayment will be extraordinarily painful absent a healthy economy with an employed and productive workforce. We have to reverse spending trends that are not job creating.
Second, encourage private sector investment. We must provide tax incentives and other programs designed to encourage investment in our next generation businesses in order to give them the initial boost they need to get traction in new markets. These companies will create competitive and sustainable jobs. Tax incentives don't always mean lower taxes; they can mean higher taxes, for example, on things such as traditional energy sources in order to give new alternative energy sources a chance to grow and succeed.
Finally, ensure proven government programs are maximized. The government has taken a step in the right direction with the some of the changes made to the Small Business Administration program, but much more is needed. The government should dramatically increase loans to small businesses, which have been left behind in the credit market recovery; it should provide services to small business that go beyond loans and range from business consulting to basic financial literacy; and it should have targeted funding programs to foster investment in critically important industries, such as green technology, health care cost containment, alternative energy, and workplace and educational training. We have to remember that our next generation infrastructure is not just roads and bridges, but technology and intellectual capital. This will be money well spent, or money well lent.
To be an employed nation we have to return to our roots and embrace, encourage and reward entrepreneurs and small businesses. Small businesses will not only create most of our jobs but also will continue to embody our nation's forward leaning spirit, our relentless pursuit of innovation, and our burning desire to move forward and improve the station of our citizens. The government and big companies will neither create all the jobs we need nor will they create all the jobs we want.