trickle-down job creations *still* not a boom for small business

Earlier this morning, President Obama outlined a series of steps that would help companies make the decision that it’s time to bring more employees on board. The process, even if it works according to economists plans, will take a long time. Meanwhile, not only do small businesses hold back (correctly so) on hiring people, but they also suffer from an economy where the combination of widespread unemployment and the fear so many of us have about the security of jobs.

Without jobs, people don’t spend. Without spending, businesses don’t hire. Without hiring, people remain unemployed.

Yes, huge bailouts to the financial system probably helped this country avoid a catastrophic depression. And yes, in time, free-er money will find its ways to small businesses as capital for growth. In the meantime, remind a small art frame shop owner who saw his revenue decline 20% last year, and anticipates another 20% this year – *remind* them that patience pays off.  Better still, remind an unemployed husband and wife balancing the decision whether to keep paying a mortgage or buy health insurance that patience is a virtue.

Plan B is the direct intervention of government to create jobs. Direct intervention.  Almost every city in this country has parks, or government buildings, or bridges, built by WPA employees in the Great Depression. The Civilian Conservation Corps employed my own father in rural Ohio 80 years ago. (just to counter the argument that ‘make work’ jobs create so many layabouts who grow used to government handouts: this same man went on to be a decorated bomber pilot in WWII and from then, used GI loans to become a physician and later, a psychatrist)

A few days back, Paul Krugman wrote a piece for the NYTimes about this politically impossible option.

I include his short column in it’s entirety.


A question I’m occasionally asked at public events is, why aren’t we creating jobs with a WPA-type program? It’s a very good question.

As it is, job-creation efforts are generally indirect. Tax cuts and transfers in the hope that people will spend them; aid to state governments in the hope of averting layoffs. Even infrastructure spending is routed through private contractors.

You can make a pretty good case that just employing a lot of people directly would be a lot more cost-effective; the WPA and CCC cost surprisingly little given the number of people put to work. Think of it as the stimulus equivalent of getting the middlemen out of the student loan program.

So why aren’t we doing this? Politics, of course: government is the problem, not the solution, even when it is, you know, the solution, and cheaper than running things through the private sector.

Still, it might be worth discussing whether we shouldn’t try to include an, um, public option in stimulus, too.

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