Unleashing Entrepreneurs to Create Jobs

A Free Enterprise Prescription: Unleashing Entrepreneurs to Create Jobs

 by James Sherk , Karen Campbell, Ph.D. and John Ligon

Abstract: The Obama Administration’s $862 billion stimulus bill was an expensive failure that increased the federal deficit, contributed to America’s deteriorating fiscal health, and failed to reduce unemployment. Instead of repeating this mistake, Congress should alleviate business fears and economic uncertainty by maintaining the current tax policy (extending the 2001 and 2003 tax rates) and freezing costly new regulations. Then, Congress should rescind unspent stimulus funds, suspend federal regulations that unnecessarily suppress economic activity, conclude pending free trade agreements, and adopt other pro–free market steps. By enacting these reforms, Congress can unleash substantial economic growth, reduce unemployment, and reduce the deficit without spending a dollar of taxpayer money.

At the start of his Administration, President Barack Obama pushed through a massive $862 billion stimulus bill. The stimulus increased government spending and has increased the federal deficit. However, it failed to reduce unemployment.

This expensive failure was predictable. Businesses hire workers to produce the goods and services that consumers value, but the stimulus emphasized government spending, which only shifts resources around the economy. Government spending neither increases overall demand nor gives private businesses a reason to invest in new projects.

To reduce unemployment, Congress needs to motivate businesses to invest and expand. First, Congress should alleviate business fears and economic uncertainty by maintaining the current tax policy (i.e., extending the 2001 and 2003 tax rates) and by freezing costly new regulations.

In a speech at The Heritage Foundation, Representative Eric Cantor (R–VA) proposed measures to catalyze economic growth without adding to the deficit.[1] The Heritage Foundation has proposed similar ideas. Congress should adopt a Free Enterprise Prescription to help the economy recover, implementing six steps to eliminate Washington-imposed threats to a recovery and to improve the business climate. Specifically, Congress should:

• Rescind unspent stimulus funds;
• Reform regulations—specifically repealing Section 404 of the Sarbanes–Oxley Act—to reduce unnecessary business costs;
• Remove barriers to domestic energy production;
• Suspend the job-killing Davis–Bacon Act and prohibit Project Labor Agreement (PLA) requirements on federally funded construction projects;
• Conclude the pending free trade agreements (FTAs) with Colombia and Panama, as well as the recently announced agreement with South Korea; and
• Reduce taxes on foreign earnings to encourage companies to repatriate the profits to America.

These measures would encourage hiring in the short term and lay a foundation for long-term economic growth, which is the ultimate goal of “stimulus.”[2] These measures are not a panacea for all of America’s economic problems. However, they would help the economy. A strong recovery and new hiring depend on improving the business climate. Congress can do this without additional government spending.

Using the IHS Global Insight macroeconomic forecasting model, The Heritage Foundation has simulated how adopting the Free Enterprise Prescription would affect the economy. Compared with the baseline economic forecast,[3] the Free Enterprise Prescription would:

• Increase real gross domestic product (GDP) by $6 billion in 2011 and by an average of $56 billion a year between 2011 and 2020,[4]
• Lead private-sector businesses to hire 52,000 more workers in 2011, an average of 305,000 workers a year between 2011 and 2020,
• Reduce the unemployment rate by an average of 0.1 percent between 2011 and 2020,
• Increase the value of an index of equity holdings by 2.7 percent in 2011 and by an average of 4.9 percent a year between 2011 and 2020,
• Reduce the federal budget deficit by $27 billion in 2011, and
• Reduce the projected level of the national debt by $305 billion by 2020.
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• The rest of the article is at the link below.
• Failed Stimulus