November 15, 2011

It’s the Jobs, Stupid!

While Republicans are making little traction cutting expenses and Democrats are getting nowhere with their “taxing millionaires” strategy, there is one approach that both parties should agree upon to balance the budget, create jobs!

For every 1% drop in the unemployment rate, we can reduce the budget deficit by $100 Billion. Our nation cannot have a balanced budget with 9% unemployment and 14 million Americans without work. We can continue to talk all we want about cutting expenses and raising taxes, but until we get back to creating the jobs and cutting the unemployment rate, we will see no results. Our President and Congress must get Americans working again. Simply put, if we do not create jobs, we cannot balance the budget. Our deficits can only be lowered when the economy starts to grow again and creates more jobs.

In his new book Back to Work, Bill Clinton said, “We all need to contribute something to help meet our shared challenges and responsibilities, including solving the debt problem.” If the focus is dedicated to securing jobs for American citizens, we will all benefit. Currently every year, the federal government spends about $50,000 on each unemployed American. These are people paying no payroll or income taxes, but instead drain on our welfare system, as we pay them unemployment compensation, food stamps, and Medicaid. This approximates $50,000 per unemployed person, per year.

It is essential that our government supports the institutions that have consistently been creating jobs for Americans. Agencies like SBA and USDA’s B&I loan program are proof of this fact. The funding for these programs should be increased, if not, more Americans will lose jobs. The small and medium businesses, supported by the SBA and B&I job programs, create jobs and therefore fuel our economy. These job programs must be increased, not cut. According to an article written by Tony Wilkinson, the CEO and President of the National Association of Government Guaranteed Loans (NAGGL), SBA alone lent $30 billion to small businesses. This resulted in the creation and preservation of 600,000 jobs in 2011 (this figure was calculated using the USDA’s matrix, as no data has been published at this time for the SBA). This is a record breaking amount, and would not have happened without government funding of these agencies.

Almost thirty-five years ago, I was in charge of reorganizing SBA for President Carter. We were asked to conduct a study on SBA’s role as an economic stimulus vehicle. The task was simply to determine how many jobs SBA loans had created. The study found that SBA’s loss rate could reach 20 cents on every dollar guaranteed before SBA’s losses exceeded the new revenues the government received on taxing the new employees. SBA currently looses 5 to 6% of every dollar lent, so it generates three to four dollars for every dollar lost. A subsequent independent report conducted by Pricewaterhouse Coopers in 1990 confirmed the same findings.

In President Clinton’s administration, the country was able to create 23 million jobs with major advances in innovation and technology, a 300% growth in SBA, a 1,000% growth in USDA’s B&I Loans, and even a turnaround from deficits of $290 billion in 1992 to a budget surplus of $236 billion in 2000. To fix our budget, we have to realize that it all starts with jobs. The sooner we take action to get the funds to small and medium businesses, the sooner we can have a balanced budget. We must support the SBA and B&I programs, as they put more money in the Treasury than they “cost” or take out.