[*Sixth in a series of policy papers from the Emken for U.S. Senate campaign.*]
Americans are hard-working people and the most productive workforce in the world. So it`s ironic that, while most other nations are now moving toward our uniquely successful free market economy, at the same time Democrats like Dianne Feinstein want to take us in the failed direction of a government master planned economy.They seem to have forgotten that the free market is, and always will be, the source of our success.
The federal government has created so much uncertainty with its overreaching laws and regulations that job creators, large and small, are unwilling to commit to expanding and hiring. The latest jobs report bears it out, showing once again the disappointing results of a lackluster and languid recovery with little hope ahead.
The truth is that millions of Americans – many of them right here in California - have simply become so discouraged that they have dropped out of the labor force altogether. If the percentage of the population over 16 that was participating in the labor force was the same now as it was at the beginning of the recession and the unemployment rate was also the same, then our economy would have an additional 10.7 million jobs. This country is almost 11 million jobs behind where we were in November 2007.
We must revive our economy and remove the obstacles that have slowed American job growth. This is what Californians want from their investment and demand from their leadership – and our political leaders must understand that it`s not just about less government, it`s about more opportunity.
Opportunity is not found in government driven programs promoted by Democrats where bureaucrats unilaterally pick winners and losers and redistributes profits through the sinister tentacles of "shared prosperity." Real opportunity is where government gets out of the way and allows the ingenuity and drive that has always sparked the American spirit to expand employment horizons and encourage the confidence to take risks and reinvest the rewards.
It all starts with small business.
Small businesses are the backbone of the American economy. Small business owners are vital to the growth of our economy because they`re willing to take the risks.
Small firms (less than 500 employees) accounted for 65 percent (or 9.8 million) of the 15 million net new jobs created between 1993 and 2009. A study by the National Federation of Independent Businesses found that 72 percent of small-business owners would like to expand by adding employees within the next five years, but a labyrinth of obstacles are currently standing in their way, including uncertainty over future policy actions by Congress, bureaucratic regulations and impending tax hikes.
According to the federal government itself, it costs business with fewer than 20 employees almost $11,000 a year just to comply with the federal regulations imposed on their businesses. In comparison, it costs a large business just under $8,000 a year.The difference is significant. The burden of federal regulations falls heaviest on the smallest firms that in fact create the most jobs.
- While recent reports seem to reflect an improving unemployment situation, with a growing population, our economy needs to create at least 100,000 jobs a month just to stay even.
- In California, we total nearly 250,000 fewer jobs today than we had when the so-called federal "stimulus" was passed in February 2009 despite the fact that our labor force is almost 1 million people larger. California`s official unemployment rate is 10.7% and ranks 49th of the 50 states. However, according to the US Bureau of Labor Statistics this does not include people who have looked for work in the past year and have become discouraged or people who are employed part time for economic reasons. The Bureau calls this "labor underutilization" and in California this rate is currently 20.3% and it also ranks 49th of the 50 states.
- Private sector jobs provide a greater return to the economy than government jobs because there are 110 million private sector jobs and 22 million government jobs-it takes five private jobs to support one government job.
- Policy failures began with encouraging banks to make risky loans and through the use of securities protecting lenders from their loans. Lax enforcement of existing regulations allowed banks to circumvent long-established banking rules. Arbitrary and unpredictable bailouts followed and were financed with unprecedented money creation and massive issuance of debt. This was followed with the ineffective "temporary stimulus package."
- Having "skin in the game," unsurprisingly, leads to superior outcomes. As Milton Friedman famously observed: "Nobody spends somebody else`s money as wisely as they spend their own." When legislators put other people`s money at risk-as when Fannie Mae and Freddie Mac bought risky mortgages-crisis and economic hardship inevitably result.
- Recognize that long-lasting economic policies based on a long-term strategy work; temporary policies don`t. Oppose and phase-out all short-term fixes to the economy. Recognizing the value and uniqueness of small business in regulations and tax laws must be a part of our federal government`s long-term strategy.
- Change federal laws that prevent capital from flowing freely to its most efficient use, such as tax inducements favoring excessive financial leverage and reducing the tax code`s bias in favor of debt relative to equity.
- Return to predictable rule-like monetary policies similar to the 1980s and `90s that produced a more stable economy. We must have policies that are predictable and protect the purchasing power of the dollar, thereby providing stability in the marketplace and protecting the property rights of individuals.
- Repeal Obamacare - uncertainty over future regulations and costs of Obama-care is a major impediment that is making employers reluctant to hire new employees and expand their businesses.
- Reduce the number of federal regulations. The annual cost of federal regulations in the United States increased to more than $1.75 trillion in 2008 according to a study commissioned by the Small Business Administration. That is an amount equal to 12% of our entire economy. The burden falls particularly hard on small businesses which are the life-blood of job creation.
- Reduce energy costs – our government has artificially limited our supply of energy through regulations and restrictions. This drives up the cost of manufacturing and the cost for an employee to get to work. This is an unappreciated drag on our economy by the Washington elite.
Here`s the simple truth. Small business owners want to grow, but the threat of more taxes, more regulations and high gas prices and health care costs have held them back. Students want to work, but the uncertainty of the Democrats` failed economic agenda gives them little opportunity. Women want to work, but the weakest recovery in American history is providing them no room to show their skills or fulfill their promise.
At a time when the overwhelming majority of Californians think our state is headed in the wrong direction, it`s clear that the fiscal policies created by Democrats and promoted by Dianne Feinstein aren`t working and they never will. It takes a special kind of elitist indifference for Senator Feinstein to ignore the people of California by not explaining what she will do differently to fix the economic mess her policies have created.
California needs new jobs, new markets, new vision and new leadership, not more of the over-taxation, over-regulation and over-litigation that are crushing our job creators. California families are tired of the unemployment treadmill and California voters are saying they`re ready for a change in Washington.
They can help by sending me to the U.S. Senate. Republican members of Congress have given Dianne Feinstein and her fellow Senate Democrats plenty of opportunity to encourage small businesses and empower job creators but have been ignored. They need a partner in progress and I`m ready to serve.