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Businessmen Aren't Marionettes

4:22 PM, Jul 12, 2011 • By JIM PREVOR
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Alan Blinder’s Wall Street Journal column today, “Our National Jobs Emergency,” unwittingly provides an answer to why all the Obama administration’s machinations to improve our economy have failed. Professor Blinder is surely a smart guy, but, like the president himself, he seems to view businesspeople as marionettes, thinking that politicians can pull a string and get people to respond in a specific way.

For example, Blinder, once again, brings up his favorite job creating suggestion: 

What are some realistic options? For several years many economists have promoted a tax credit for new jobs. (I advocated the idea on this page in November 2009.) While the details matter, the basic idea is to offer firms that boost their payrolls a tax break. As one concrete example, companies might be offered a tax credit equal to 10% of the increase in their wage bills (over 2011 levels, say). No increase, no reward.

You might think Republicans would embrace an idea like that. After all, it's a business tax cut and all the new jobs would be in the private sector. But you'd be wrong. Frankly, I'm not sure why. Maybe it's seen as "left-wing social engineering."

This idea is wrong and won’t work. Instead, it would likely have the opposite effect of what Blinder would expect.

It is wrong because it puts government on the side of particular competitors. A stable business in town, one which has long provided employment, is going to suddenly be vulnerable to a new competitor who has lower expenses. For what reason, or on what basis, should the government want to drive a long-established coffee shop, for example, out of business just so another one can take its place? There is no justification for this—and it’s not even good for the economy.

Yet the fact that the government might do it, that learned people suggest such things and politicians consider them, sends the message to businesses that they are vulnerable and that the government might decide to impose policies that would unfairly burden their particular business.

That message screams out: Don’t invest, play it safe, take your money off the table.

Folks don’t like to be treated as marionettes: the more you pull their strings, the less they want to dance.

Jim Prevor is founder and CEO of Phoenix Media Network, Inc.

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