Job creation key: Businesses need tax cut that encourages capital spending

The watchword for 2011 is very likely going to be jobs.

So, while politicians will pontificate about how you create them and blame each other for why we don't have them, the reality is that if we do not find a way to come up with some, all the economic recovery in the world will only be a minor victory.

Here's the thing: People who do not have jobs or who are worried about losing their jobs do not make major purchases -- or really any purchases they are not sure they need. They cut back on holiday spending and they put off things like travel and recreation and leisure. They are lured only by bargains -- and retailers know it.

When consumers cut back, retailers cut back, too. There is less demand for their products or services, so they do not need as many people to sell them. So, they lay off distribution people as well as salespeople. And they cut back on what they order.

When there are fewer orders for more inventory, the producers of the products the merchants sell have to cut back, too. They buy fewer supplies to make their products and need fewer employees to construct them, resulting in more cutbacks and layoffs.

Economic concerns affect communities in other ways, too. When people buy less stuff, they pay less sales tax -- and that affects revenue that funds schools, roads and government services and jobs -- and you can guess what happens then, more cutbacks.

So no matter what the legislators say and no matter how they try to distract you with health care, START treaties and other issues, the real concern, the No. 1 priority right now, is jobs.

Corporations cannot be forced to take on new employees -- and if you own stock in any of them, you shouldn't want them to. It is not a fiscally responsible move to take on more people if your sales cannot cover their salaries.

So to get businesses to add the jobs that employ the consumers and in turn make the economy work, there has to be an incentive -- and one that makes business sense.

That incentive has to be a significant tax cut and

a means to encourage capital spending. And, by the way, that does not mean a one-year deal, either. Businesses need to know that the investment they are about to make is a safe one and that they will not be slammed with a huge tax increase in a year or two. Otherwise, they will stand firm where they are -- cautious and waiting.

It might be hard to understand if you are a regular person who does not manage a payroll, but the truth is a business budget is much like a home budget. Just making the bills does not leave a cushion for emergencies, expansions, maintenance or anything else that is necessary to keep a business healthy and growing.

When businesses are healthy and their future is less uncertain, they will add jobs and get the economy rolling again and not before -- no matter what the politicians claim.

So it is our job as voters to make sure businesses are not only held accountable for behaving in a responsible and forthright manner, but also that they have the tools to grow responsibly.

Otherwise, we are only throwing good money after bad.

And while we are at it, we have to demand two other things: More money in taxpayers' pockets and less spending in Washington. If we are spending responsibly and we have more money ourselves, we are more likely to buy the products and to feel safer making major purchases as well.

And that, not fancy speeches and fiery rhetoric, is how you fix a faltering economy.

Published in Editorials on December 29, 2010 11:10 AM