Tomorrow (Thursday, December 3rd) President Obama will convene a “Jobs Summit” with hand-picked business leaders and economists to confront the nation’s high and rising unemployment.

A Few Observations

• Understanding how jobs are created should have been a prerequisite for being elected President.

• Obama was elected 13 months ago.  Why did it take so long to organize an event to solve the unemployment problem?

• If a Jobs Summit has any chance of producing benefit, wouldn’t it have been a better idea to hold one prior to spending $800 billion on Stimulus purported to limit unemployment?

• Thus far, the President has demonstrated little understanding of how sustainable, private-sector jobs are created.  In fact, he has proposed or adopted a variety of initiatives which directly impede employment gains.

There is no doubt that the President needs help responding to the unemployment crisis.  Obama’s most significant failure to date has been his reaction to job losses.  As President-Elect he sold the public on stimulus spending under the claim that it would prevent unemployment from rising above 8%.  A mere 10 months later that rate has exceeded 10.2% and is still rising.  Even now, this failure is bizarrely celebrated as a triumph by the Administration as it claims to have created or saved jobs. 

While I was not invited to the Job Summit I hazard a few suggestions for the Administration should it be interested in productive solutions to the problem:

• Companies employ people.  These businesses are created when and where they are able to earn a profit.  The easiest, quickest and most effective means by which to encourage sustainable job creation is to remove Government erected impediments to the ability of companies to form and operate profitably.

• The United States has the second highest corporate tax rate in the civilized world.  As such, we operate at a self-imposed competitive disadvantage in attracting businesses (employers).  This arrangement is absurd and counter-productive.  Why would a company with the means to locate itself anywhere choose to do so in a market where 35% of its earnings will be confiscated?  The corporate tax rate should be reduced at minimum to an internationally competitive level.

• Sustainable jobs are not created by wasting borrowed money unproductively even when done so under the moniker of “Stimulus”.  Incremental debt does have a negative effect on economic activity and job creation, though, as it must be serviced and repaid.  Stimulus spending initiatives have failed to accomplish stated goals and should be abandoned as the costs of the programs (present and future) far outweigh benefits (real and imagined).

• There is no doubt that some number of jobs presently exist solely as the result of Stimulus Spending.  What happens to those jobs when the stimulus is exhausted?  Over the next 18 months these jobs will be lost or require new rounds of Government spending to sustain them.  The President claims to have created or saved more than 600,000 jobs.  At what point will the unemployment rate be low enough that these job losses will be economically and politically acceptable?

• Capital flows globally to where it can earn the best rate of risk-adjusted return.  A permanent reduction in the capital gains tax, and/or the indexation of this tax for inflation, would make investing in job-creating businesses more attractive. 

• During the best of times the minimum wage is an unproductive act of price fixing.  During the worst of times it is an economically devastating, immoral abuse of the poor who suffer disproportionate unemployment.  The minimum wage should be reduced or eliminated. 

• Personal income taxes should be lowered.  Individuals who earn paychecks make efficient spending decisions with their own money.  Politicians vehemently defend the benefits of Government spending, but discount the impact of incremental consumption if taxes were lower.  Spent stimulus checks are argued to be a positive for the economy, but the benefit of increased consumption derived from the retention of one's own paycheck is ignored.