Wednesday, November 16, 2011

Just because a business has money, doesn’t mean they should hire…

It’s a catchphrase the Left has been using for a while: “Business owners have money, but they aren’t hiring…they’re hoarding their money.” This mentality explains the fundamental flaw in the way President Obama and the Left sees the purpose of business and the purpose of jobs.

My friends, individuals do not open businesses to give you a job or to give you benefits. Individuals open businesses because they believe that by investing their money in a venture they can create a product or offer a service and sell that product or service for more money than it costs to produce. That extra money made beyond the total cost of production; which includes costs of labor (that’s “workers” for those of you from Palm Beach County, FL), raw materials (for Palm Beach, that’s “stuff you make other stuff out of”), overhead (for Palm Beachers, that’s “building where you make stuff at”), fixed expenses like electricity and insurance on your property, and machinery (that’s “machines” for those of you in Palm Beach), and also taxes, employee benefits, and so forth; the money left over all that is called a profit. That is why people open businesses…they risk losing all the money they pay for all that stuff I just mentioned so that they can turn that investment into more money. That is why people start businesses.

As for employees, the reason a business would hire another employee is if they have so many orders for products or so much demand for the services that business offers that the current number of employees cannot keep up with that demand, it’s time to make the investment to hire new people so that you can make more of the product. (For those of you from Palm Beach County, that’s “we can’t keep up with all this work, we need more workers.”) The result of that is business owners are making a BIGGER investment in hopes for a larger net profit. They take a bigger risk because that bigger risk could bring a bigger gain.

Here’s the reality the Left does not understand: Businesses don’t hire because you can afford to hire any more than you would hire a babysitter because you can afford it if you don’t have a child. I could afford a babysitter for a few hours on a Friday night. I have no need for a babysitter, because I don’t have children! What would the babysitter do…keep an eye on my cat? (I can assure you that Benny the cat is perfectly capable of taking care of himself for an evening, thank you very much.)

This is where liberals fail to understand how businesses work…and it’s not surprising, since most of them have never run a business. Rather, they expect businesses to hire because they have profitable businesses. The reality is that if there are no customers, there’s no need to increase production and thus no need to hire new employees.

I can hear at least one of my regular readers asking me “but aren’t you a committed Supply-Side economics adherent, Chris? Isn’t supply supposed to create its own demand?” To a point, yes, supply does create its own demand, in that having a good product to put to market that is either necessary or desirable will create its own demand, and yes competition to fill that demand creates lower prices that continues to create increased demand. There is a positive cycle created by new products in the marketplace. However, you don’t just simply start churning out new products so that people will buy them and expect that to work. That’s not how economics work, and it’s not how Supply Side Economics is intended to work. Supply of a NEW product creates a demand. Increasing supply of a current product doesn’t create demand, it just causes businesses to go under because they’re now making more than they can sell.

In short, my friends, it’s not access to capital that will cause businesses to thrive and thus hire. What will cause businesses to thrive and thus hire and thus cause unemployment to fall is individuals having more money left over after their paycheck buys necessities. That means we need reduced inflation so that paychecks stop being eaten up by gas and food and heat and electric and clothing and all the other necessities that we all must purchase before we consider buying a new computer or iPod or hockey jersey or tickets to a concert. The second thing we need to do is reduce the overall tax burden so that we’re all seeing more of our income in our paychecks. Then and only then can we expect unemployment to improve.

I close with a paraphrase of Ronald Reagan: Recession is when your neighbor loses his job, Depression is when you lose your job, and Recovery is when Barrack Obama loses his job. Obama’s policies will not increase jobs. Government can’t create jobs. All it can do is cost jobs, and so far that’s all Obama has done. So please remember the principles I’ve discussed today, because there is nothing government can do to assist job creations, save for get out of the way.

No comments:

Post a Comment

All posts will be reviewed subject to the Rules for Commenting. Any post that does not abide by these rules will not be posted, entirely at the discretion of the blog editor.

Commenters who repeatedly violate these rules will be permanently banned from commenting, and thus none of their comments, regardless of content, will be posted.