Why Can’t New Jobs Be Created Immediately?

BY Paul Solman  September 22, 2010 at 3:11 PM EST

This entry is cross-posted on the Business Desk, where business and economics correspondent Paul Solman answers your questions on economic news. Follow Paul on Twitter.

Question: First of all, thank you for the articles on the 99ers. We need all the attention we can get. My question is this: Why can’t U.S. business leaders take IMMEDIATE action, perhaps with the help of our government, and begin making MakingSenseLogo_horizontal.gifproducts in America? There are many communities that could benefit. If a warehouse could be utilized as soon as possible and people could be hired (with the understanding that this is not a permanent job and it may or may not have benefits), at least people could begin getting back to work. It seems so simple in my mind. Why can’t this plan with Made in America help us out? With the discussion of providing business loans to small businesses can’t we immediately start to turn things around? Please help me understand. Thanks.

Paul Solman: Write to the Business Desk, and your prayers will be answered. But be careful what you pray for.

This question came in about a month ago. In the meantime, the bill to provide Small Business loans and tax cuts has been weeding its way through Congress, passing the Senate last week. It’s expected to pass in the House within days, after which it should soon become law. The bill includes a $30 billion fund to increase access to lending for small businesses, $12 billion in tax cuts, increased loan limits, and a 90 percent federal guarantee for Small Business Administration loans.

But nothing is “simple” with regard to economic policy, including this one. Do such loans guarantee the success of American small businesses which take them? China, for example, continues to operate with a huge advantage in labor costs, not to mention laxer environmental standards and, often, government support. And China has been challenged for years by countries with even cheaper environments. How much of the gap between American and emerging market manufactures could possibly be closed by access to slightly cheaper money?

Furthermore, the borrowed money, even if government-subsized, still costs SOMETHING. Right now, American businesses, both small and large, aren’t investing much because they see many of their former customers out of work and saving instead of spending. So why should they invest just because they’ll get a somewhat cheaper loan?

As for the tax cut aspect of the bill, using the same “why invest?” logic, there can be no assurance that the money will be used to rehire 99ers (those whose unemployment insurance benefits have run out after 99 weeks) or any other jobless American.

So trying to help “Made in America” firms might not work as intended.

Moreover, where does the money come from? There are only two real possibilities.

One: government borrowing. But at the moment, the country is up in arms over the amount of borrowing that’s already being done. Increase the annual deficit — and cumulative national debt — still further?

Second is to raise taxes to cover the new loans. How likely is that?

We live in an extraordinarily — and increasingly — complex economy, further complexified by the politics of a democracy with no limits on what interest groups can spend to promote their views and candidates. Policy in such an environment is a witches’ brew out of MacBeth by way of Washington: toe of Pelosi, eye of Newt, tongue of Tea Party, Obama’s foot — anything but simple.

On the other hand, despite steadfast Republican opposition, the Small Business bill was supported by the U.S. Chamber of Commerce. It too sees an economy with too little spending and figures, understandably, that if government won’t step into the breach, who will?