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Yes Obama, There Are Silver Bullets for Job Creation

"There is no silver bullet and I have not heard one proposed by anyone in Washington or beyond that there is a silver bullet to help our economy grow faster or create jobs."

Jay Carney
Obama Press Secretary
August 4, 2011

After promising that his $800 billion stimulus package would be the jobs “silver bullet” that would keep unemployment under 8%, Obama and his spokesman now claim that there are no silver bullets that can arrest the chronic unemployment crisis that has been lingered for years.

That’s said, experts generally expect Obama to propose more government spending and even fatter government payrolls as the cornerstone of his long promised Job’s Speech on Thursday night.

The truth is that borrowing money to grow the government does not create real jobs for three reasons:

First of all, everyone knows that it is temporary and nothing more than an attempt to sacrifice the future economy to spurn the current one.

Second, it must be paid back in the form of higher taxes and when Obama talks about paying for his bloated government, he always points to the very people who create real jobs – American businesses and wealthy investors.

Third, when the borrowed money is used to create more government jobs, the debt math is staggering; adding over $5 million in national debt for each new job created.

Private Sector “Silver Bullets”

The truth is there are tens of trillions of dollars in private sector capital sitting on the sidelines (or invested in gold) that could be used to create millions of jobs if the government would simply encourage it to do so.

Over the coming days, I plan to share a number of proven ideas that would bring down unemployment immediately, if only Obama would give them a try; here is the first:

The Private Capital Recovery Act

After 4 years of anemic economic growth, businesses simply have no rational reason to add new workers, so we need to create one. I spent 30 years working in entrepreneurial growth companies that were hiring people “hand over fist.”

They weren’t hiring people because they needed them right away, they were hiring them to handle anticipated growth and they were able to afford them because they had investors who were handing them money to do so.

This is what private capital does. It looks for promising new ideas and puts money into them to capture some future opportunity before anyone else does. By and large, that capital goes straight into hiring people.

I highlighted the word capital because it’s so special. Capital is not a loan from a bank or the government, it’s not left over profit generated by a company, it’s money that investors put at risk in exchange for “a piece of the action” if the business succeeds.

The act of putting capital at risk is a long term thing. In 1998 I invested in 50 small companies, knowing more would fail than succeeded. I had no idea that 49 would fail to return any capital gains to me. I also had no idea that one of them was named Google; I did all right. But, I didn't see a single penny until the summer of 2005, my capital was at risk for 7 years.

As I mentioned, Forbes estimates that there are as much as $20 trillion in private capital sitting on the sidelines thanks to Obama’s anti business/investor policies. The Private Capital Recovery Act would create an incentive to suck hat capital into job creation.

The Private Capital Recovery Act would have three simple features:
1. It would drop the capital gains tax rate for certain investments by 50% (from 15% to 7.5%). This would be “tax revenue neutral,” since there is virtually no capital gains tax revenue coming in these days thanks to the recession.

2. It would lock the 7.5% capital gains rate for certain investments in for 5-7 years, which is the average length of time it takes for new business venture capital to generate a gain. This extended term would remove the uncertainty that is freezing new business investment every time Obama gives a “shared sacrifice” speech.

3. This special capital gains rate would only apply for investments in companies that were incorporated in the United States, engaged in non-financial activities, and create jobs in America.

Of course, the current administration could never embrace such an Act of Congress, because “the hero” would end up being the private sector and the wealthy.

Next up -- The Power America Act

Dave

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Yes Obama, There Are Silver Bullets for Job Creation
Tuesday, 06 September 2011

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