Saturday, February 13, 2010

Obama: Blame Banks for Lack of New Jobs

I have referred to this chart several times in the past when discussing the unbelievable lack of private sector experience in the Obama Administration. Earlier this week, Obama conducted a brief press conference in which this paucity of experience was on full display when he attempted to answer a reporter's question about the lack of hiring by small businesses. Paraphrasing, Obama pronounced that the reason small businesses aren't adding payroll is because they can't get loans. In other words, Obama took a day off from blaming Bush for the poor macro economy and on this day blamed those dastardly banks. Anything other than his statist economic policies, of course.

C. Edmund Wright, in a piece at American Thinker, takes issue with Obama's absurd assertion:

Mr. President, did I really hear you say that businesses aren't hiring because they can't get bank loans? Are you kidding me?

Please indulge me for a moment, and we can get to the actual reasons.

But first, I must add that every time you step up to the microphone -- for example, your impromptu presser on Tuesday -- the painful decision to shut down my business of eighteen years is validated by your words. And I should thank you for that.

For the record, that decision was formalized on November 5, 2008. Check your calendar.

Wright was doing what all business owners do on a daily basis: taking all potential risk factors into consideration when assessing the future prospects for the continued viability of their business, including the political climate. Wright next assesses the wisdom of the decision he made:

Some fifteen months later, I can say that it was the best business decision I have ever made. With your hands on the levers of the government and the economy, I wanted to have as little at risk as possible.


It's not complicated. I am neither a swooning David Brooks enamored of your pant crease nor a silver-spoon trust-fund baby like Christopher Buckley. I've simply had some twenty-five entrepreneurial ventures -- with a good number of strikeouts to be honest -- and real-world experience told me exactly who you are and exactly what the business climate under your rule would be like.

And I was exactly right.

Indeed he was exactly right. Toward the end of his article, Wright gives Obama a succinct lesson into the mindset of small business owners:

Any business idea, from the first day it is hatched, is nothing more than a series of cost-benefit analyses that the idea-holder either acts on or passes on. Sometimes the first decision is to forget the idea. Sometimes the first decision is to move ahead and invest some cash.

Perhaps a few million cost-benefit analyses later, you might have Microsoft or Home Depot or ESPN. Or you might have Bill's Plumbing or Johnson's Quality Homes or a café or an electrical wholesaler, and so on. And those businesses still operate on a constant stream of risk-reward decisions. In the business world, there is no neutral gear.

Wright then concludes by indirectly pointing out what not to do if enticing businesses to expand payroll is really the goal:

I never really doubted my decision. Yet when I see you hold job summits featuring environmentalists and unions, lawyers, and poverty pimps, I am even more thrilled to be out of the game. When I hear you fantasize that the only reason businesses won't hire is that they can't get a loan, my decision is further validated. And when you say that small business is clamoring for you to pass health care, I know that you have taken total leave of your senses.

So again, thank you, Mr. President. Even without your teleprompter, you are convincing. You have convinced me I made the right decision and convinced others not to hire. I only hope and pray that the midterms of 2010 might reverse my decision. That is what every fiber of my being is hoping for.

I would add to Mr. Wright's discussion by pointing out that Obama's logic regarding jobs is, dare I say it, back asswards. Adding payroll is a consequence of a profitable business, not the other way around as Obama believes. Businesses don't borrow money to "create jobs". That's not the purpose of a business, as anyone who runs one can tell him. After an appropriate cost-benefit analysis, they borrow money to expand their operation and, hopefully, profits. Profitable businesses do tend to add jobs, but only if they need to, while unprofitable businesses hemorrhage them. Obama, who has never run a business, is essentially saying that businesses exist to create jobs. Any business owner who follows this model will soon become an ex-business owner.

Successful entrepreneurs are constantly looking to the future. Anything that causes them to suspect that future business conditions will be less than favorable (such as an administration hostile to business) will result in less business expansion, not more. Businesses not confident about future economic conditions will not expand production and add payroll, regardless of credit conditions. Businesses are rightly terrified of Obama's economy wrecking policies such as cap and tax and the resulting skyrocketing energy prices, a government takeover of health care, unprecedented budget deficits as far as the eye can see, and Obama's looming tax increases on businesses and their customers, to name a few.

In order for businesses to hire new workers and thus, create jobs, they have to have the reasonable expectation that there will be a sustained increase in demand for the product (or service) they provide. Such business conditions are generally associated with a robust economy. The threat alone of the above policies decreases the likelihood of a strong economy and makes it far less likely businesses will expand their operations and add payroll.

This is remarkably uncomplicated and does not require a bunch of "really smart" policy wonks with zero practical business experience sitting around a table in Washington trying to impress media elites and each other with their latest ideas du jour. What it requires is a government smart enough to get out of the way and allow businesses to grow and thrive and prosper. This is what Reagan did in the 1980s and is exactly what Governor Palin has been repeatedly advocating since she arrived on the national scene. If the government wants businesses to create jobs, they must follow policies which eliminate barriers to business expansion, not create them.

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