In a debate posted on YouTube between Connecticut Senate candidates Richard Blumenthal and Linda McMahon circulating on many conservative blogs and sites, Blumenthal falls for the trap set by his opponent when she asks him “how do you create a job?” He gives a long clumsy answer involving a lot of government involvement. Linda responds simply (paraphrased) “when a company can sell a product or service for more than it costs a job is created.”
Linda’s response is so simple and so obvious that it seems brilliant. We have descended into a climate made so unnecessarily complicated by well meaning but incredibly ignorant bureaucrats that stating the obvious has become a sign of superior intelligence.
In Newsweek economic columnist Robert Samuelson in The Real Jobs Machine notes that the problem is not just that we are not hiring but that startups are very weak. A lot of businesses die for a lot of reasons and we need a steady supply of startups just to replace the ones that close or fail. Most startups are not glamorous high tech sporting brilliant new items like iPads; most startups are electrical contractors, pest control services, the guys that comes and inspects our trucks, welders, restaurants, dry cleaners, health foods stores, and just about any other common business we see daily but pay little attention to.
While credit is important, many of these people are able to start with little credit. They often start with just their reputation and a few solid customers that are willing to give them a chance. They keep their expenses low and grow as they are able. Most people outside of the business world are shocked to find out how small the net profit margins are with such businesses. They delicately balance their expenses with their sales and manage to eke out a living. If they get new business and earn more profits they create more jobs. Linda McMahon has it exactly right.
These entrepreneurs do not need tax credits for R&D and those that think that will create jobs just show how ignorant they are of the real small business people. But mandated expenses such as the health care bill requires, and higher regulatory costs stops these businesses in their tracks. Many who started small business ignorant of these costs quickly throw in the towel, but many who would otherwise have made the leap of faith every entrepreneur makes decides they would be better off keeping the job they have or taking another job elsewhere. Most of the time this is a wise decision.
I see auction notices of businesses closing come across my desk every week. I have seen a wave of businesses close their doors that have been doing business successfully for decades. They just do not see any light at the end of the tunnel.
By comparison the Reagan revolution was built on small businesses and entrepreneurs. They grew like wildfire. Low taxes, less regulation, and most of all sound money made small businesses flourish. This drove unemployment way down. We are experiencing the opposite policies and we are getting the opposite outcomes.
This administration has less understanding of American entrepreneurship than any in memory. They have fewer people by far from the private sector than any president in a hundred years. They truly believe that the government can create consumer demand and that they can create jobs.
They should listen to Linda McMahon.