Friday, June 10, 2011

Why Business Hires, and the Deficit Isn't It

Why would you hire a new employee for your business assuming you had one? All of the answers generally come down to one root: to make the company better.

Better could be a lot of things: producing more products/services, reducing vulnerability to some risk, producing better products/services, improving public image, broadening supply resources, strengthening relationships with vendors/clients/customers, etc. They all more or less seek the same goal. You want your company to bring in more income and do so more reliably.

What's this have to do with the deficit? Nothing.

Seriously, how many businesses can you name that consider the deficit when making a hiring decision? A few financial companies may occasionally see some impact from really big deficit changes on the need to create or eliminate positions related to bond trading. That's most of the jobs that are impacted by the deficit in any real way. Ordinary businesses hire because they need more employees to cover their production or to pitch their products, with absolutely no factoring in the size of the deficit.

None the less, Republicans want us to focus on cutting the deficit despite that many of them campaigned on the idea that they would improve the job situation. So now they're trying to make people think there's a connection between what they promised and what they're trying to do.
"Cutting the federal deficit will create jobs" -- Rep. Cantor (R-VA)
That's completely and utterly divorced from any sort of reality on where we get jobs. The GOP have begun spinning elaborate stories to try to pretend there's a connection. Why is Rep. Cantor making that claim? Voters are concerned about jobs. The Republicans know that right now there's no better pitch for anything than jobs. And they wants to eliminate any govt program they can get their hands on. There's no way to get more support for their plans to ransack govt than to convince voters that it'll help what voters really care about: jobs. Unfortunately, the truth is quite the opposite. The truth is that -- during a troubled economy -- the sort of cuts the Republicans are pushing are worse than doing nothing at all.

Cutting the deficit won't give businesses more customers. Cutting govt spending takes customers away from businesses that provide goods and services to the govt. That's most businesses. Indirectly, that's all businesses. During good times, when the economy is humming along at a fast pace, a govt cutback wouldn't necessarily be a big problem. With the economy struggling to recover from the massive credit crunch and layoffs that were the finale of the Bush II administration, we can't afford so many businesses losing demand from govt purchases. The most obvious reason to hire is to handle greater demand. The most obvious reason for layoffs is because of a drop in demand. There's no more surefire way to drive ourselves back into recession -- or worse -- than massive budget cuts. That's a recipe for even higher unemployment.

On a related note, for a decent catalog of the Republican record as far as jobs, see ""Where Are The Jobs?":The GOP's Two-Year Campaign Against Job Creation and Economic Growth"

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