Give Us Some Answers and We'll Start Hiring: Business Owners
For business owners, the worst thing is not knowing.
Not knowing whether they will have to pay for their employees health care or how much it might cost. Not knowing whether a temporary payroll tax break will be extended or for how long. Not knowing how sweeping banking reforms approved last year by Congress might impact their ability to borrow or provide credit to customers.
More than anything else its this pervasive mood of uncertainty that employers cite for their reluctance to hire new workers.
Id love to hire. Id do it in a heartbeat, said Craig Broswell, owner of Machinax Fabrication Inc., a Chino, Calif., machinery maker. Ive got machines sitting that are normally busy.
But Broswell cant hire if his customers, who include some of the largest U.S. food and beverage companies, arent hiring. And they arent because, like Broswell, their ability to plan ahead has been frustrated by the dual impediments of a relentlessly sluggish economy and maddeningly partisan gridlock in Washington, D.C.
Broswell said big clients like PepsiCo. (NYSE:PEP) and Ocean Spray are holding off on orders for new equipment because of uncertainty generated by the health-care-reform bill passed in March 2010, as well as potential changes to the tax code that could affect future operating costs.
They dont know whats going on. I talk to them all the time, he said Theyre doing what they have to do to get by today because they dont know what their bottom line is going to be tomorrow.
Perhaps President Obama will clear things up in a major speech hes planning for early September to address the two most pressing issues facing Americans: the stumbling economy and lack of jobs.
Obama has been touting four specific measures for creating jobs: extending the 2% payroll tax holiday in place since last December; massive investments in infrastructure improvements; free trade pacts with South Korea, Colombia and Panama; and patent reform.
Each of those proposals has its critics: a payroll tax extension is said to be too little too late; no one knows where the money will come from to fund infrastructure improvements; free trade pacts can potentially kill as many jobs as they create; and opponents say patent legislation in its current form will benefit a handful of industries but wont necessarily create jobs.
Few business owners will openly take issue with an extension of the payroll tax holiday. It puts cash in consumers pockets, cash that may find its way back to local business owners. The other proposals make for easier targets.
None of those will help me, said Todd Magatagan, owner of Around the Grounds, a Houston-area landscape irrigation firm, who is concerned that the exploding U.S. budget deficit is dragging down the broader economy.
The U.S. government has to show the same discipline as business owners. We all cut costs and reduced employees to survive and keep our obligations up, and they should do the same, he said.
Nothing short of a massive overhaul of the U.S. tax system will lift Magatagans confidence. The existing system is too confusing and burdensome, qualities that generate endless calls for reform -- and consequently more uncertainty.
At the end of the month I should be able to sit down and figure out my taxes, said Magatagan. Instead, I pay a lot of money to an accountant just to keep me in regulatory compliance.
Taxes and regulations on businesses need to be scaled back and simplified, he said.
Broswell took aim at the free trade pacts. Hes not alone. Heres a look at both sides of the argument.
Trade agreements with South Korea, Colombia and Panama would ostensibly boost sales of U.S. goods to each of those populous countries through the elimination of tariffs that discriminate against U.S. companies.
Presumably more sales means more jobs; backers in Congress argue the South Korean deal alone would generate 280,000 jobs. The Chamber of Commerce, meanwhile, big supporters of the pacts, says the U.S. will lose 400,000 if the deals arent signed soon because similar agreements with Europe are already in place and the U.S. risks losing lots of business to European companies.
Opponents say free trade pacts are job killers, invitations to U.S. companies to ship jobs overseas to take advantage of cheap labor elsewhere.
The trade pact isnt going to do any good for anyone who manufactures here, said Broswell, who speculated that 90% of the trade generated by such deals is comprised of cheap goods coming into the U.S. while the remaining 10% is U.S. goods exported to other countries.
And it will cost us thousands of jobs, he said.
The president has recently floated the idea of an infrastructure bank to finance improvements to crumbling roads, bridges and tunnels. The bank would provide low-interest loans to attract private investment into these kinds of sorely-needed projects.
Terry Brennan, director of the Office for Veterans Workforce Development with the Connecticut Department of Labor, said infrastructure work programs ripple through the economy, especially in Small Town America.
The programs would be helpful to veterans returning from tours of duty in Iraq and Afghanistan, many of whom are finding it hard to transition back into civilian society with unemployment hovering above 9%.
The labor market has been especially tough on veterans aged 18 to 24, according to Brennan, who estimated the jobless rate for that group at about 20%.
When jobs are created patching bridges or paving roads workers and employers buy their clothes, supplies and equipment locally, which gives a boost to local retailers. Those workers then have more money in their pockets to spend in restaurants, grocery stores, movie theaters and so on.
It has a domino effect and its really needed, Brennan said.
But a lot of politicians will be leery of a government-run bank charged with doling out taxpayer funds for public works projects with an eye toward kick-starting the struggling economy. Recent stimulus programs with a similar goal have been deemed largely ineffective.
In any case, Brennan said he hopes the government steps up job training programs in partnership with private business in an effort to reduce the high unemployment rate for veterans, a rate likely to jump sharply higher in the coming months as the U.S. scales back military efforts in Afghanistan and Iraq and thousands of soldiers start returning home.
Brennan said the government and the employer should divide equally the costs for training veterans, and the government should supplement the effort by easing employee taxes on businesses that hire veterans.
I really think the small companies would love to hire veterans, but the cost of training is too expensive, said Brennan. But the burden shouldnt be entirely on the government and we wouldnt ask for any new money because were aware of the fiscal constraints. It wouldnt be that costly because were asking private industry to step up.