The American Jobs Act: Why It Will Not Create Jobs

President Obama, last night, outlined his latest greatest proposal for creating jobs: The American Jobs Act. It's a combination of some good things (tax reductions) and some bad things (tax increases). It's his grand plan to finally focus on jobs (after 3 years with unemployment over 9%). All of the past stimulus weren't enough so we are going to try it again with more stimulus money.

What's that definition of insanity? Doing something over and over and expecting a different result. I expect the result after this stimulus to be the same. Why? Because  government doesn't create jobs.

I'm going to explain how a small business grows in simplest of terms regarding hiring. Since there does seem to be agreement that 70% of the jobs in the United States are created by small businesses then it seems relevant to review how those jobs are created by the small business owner.

You are a small business person. You had an idea. You took a risk. You worked on your idea, you sold your idea, and you managed to make a profit from your sales. The key word here is PROFIT. You have to profit from your enterprise so that you have money to put back into your enterprise. Once you have made enough profit, you can hire additional people. That is how small businesses expand. They make a profit and then invest those profits in expansion by hiring people. Without profits they cannot expand. Without expanding they're not hiring.

So, President Obama says he is going to extend the payroll tax holiday. That's great news for the small business owner. But in the next sentence he says he's going to eliminate those corporate tax loop holes. Huh? If I'm a small business owner I'm listening very carefully to that and here's what I'm hearing: He's going to raise my taxes. What does that do? It reduces my profit. What happens when my profits are reduced? I cannot expand and I cannot hire.

Mr. President, wake up and smell the coffee. You have demonized those horrible people that make a profit to the point where they don't trust you. Nothing would make the small businessman happier than to expand and hire again. But it requires money - profit! And as long as you keep telling them you're going to reach into their pockets and take it, they will not be hiring.

The American Jobs Act, even if passed, will not create jobs.