How To Create Jobs In The Us Economy

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What is the number one topic on the mind of American citizens? The answer is Jobs, Jobs, Jobs (and not Steve Jobs of Apple)! High unemployment and a slow recovery have everyone worried about the current job market. Policymakers, business owners, and individual citizens all have different ideas about the best way to stimulate job growth. The ideas being proposed vary from spending more money to cutting taxes. Let's take a look at a few of the best job creation ideas being discussed:

A Second Stimulus

Congress passed a $787 billion dollar economic stimulus bill in 2009 which included nearly $500 billion dollars worth of investments in different economic sectors and nearly $300 billion in tax cuts. The bill did have some effect on the United States economy but was not the job creator that it was expected to be. There is currently talk of a second stimulus bill which would be more focused on actual investments in the economy. Some economists believe that a stimulus bill focused more on infrastructure building may provide a greater boost to the economy as this may have more sustainability.

Tax Cuts

Another proposal being discussed is creating further tax cuts for small businesses and corporations. I recently wrote a post about the pros and cons of tax cuts. Tax cuts would allow companies to retain more of their earnings. The hope is that large corporations and small businesses would then turn around and hire more employees. Another benefit would be increased capital expenditures spending. Increased CapEx spending would require the sectors that help supply and build the "Capital" (or physical assets) to hire more workers in order to keep up with the increased demand for goods and services from the businesses that are now spending more due to the tax cuts. Congress is currently debating whether or not to increase business tax cuts on both small and large businesses.

Jobs Bill

The simplest solution to create jobs may be to pass a jobs bill. A jobs bill would be directly aimed at creating jobs in the small business sector. The goal would be to increase the availability of credit for all small businesses. Since the economic collapse of 2008, credit has been tight for small businesses. Over the past year, credit has become readily available for large businesses, but small businesses are finding that banks still have not turned on the spigots. The jobs bill would be aimed at increasing SBA lending and lowering capital gains taxes, which would encourage entrepreneurship and incentivize investment.

Funding To State and Local Governments

The best bet for the federal government may be getting the money into the hands of state and local governments. Funds disseminated to local governments have the greatest multiplier effect. The Goldman Sachs Group estimates that funding to state and local governments provides twice the bang of individual tax cuts for the rich. By getting funds to these governements, it would allow states to stop raising taxes on residents and from cutting needed services, which would help lower the unemployment rate and not further punish overly-taxed residents.

Do Nothing

This philosophy is rooted in the belief that the private sector alone creates jobs and government policy simply gets in the way. It doesn't matter what the federal government does because the government cannot create jobs. Less regulations would foster a favorable pro-growth business environment and allow the private sector to create more jobs. Sometimes the economy, just like the stock market, needs a correction and you need to let it run its course.

In my opinion the best way to create jobs would be to take a hybrid approach of creating a jobs bill and offering tax cuts. The jobs bill would focus on bolstering infrastructure and manufacturing so that we do not continually outsource jobs overseas. The tax cuts would only be offered as an incentive to companies that hire new employees. Employers currently get a $1,000 tax credit for hiring new employees. This needs to be boosted since employers aren't likely to take on a long-term, salaried employee for just $1,000.

What do you think is the best way to create jobs in the United States?

(Photo credit: The Cleveland Kid)

Mark Riddix

Mark Riddix is the founder and president of an independent investment advisory firm that provides personalized investing and asset management consulting. Mark has written financial columns for Baltimore and Washington, D.C. area newspapers and is the author of the book, "Your Financial Playbook."

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