Cut Taxes, Forget More Stimulus: Malone's Job Fix

Dec. 4, 2009 -- The White House Jobs Summit was Thursday, and in case you have any hope for it actually helping produce real jobs, keep in mind two things.

First, it was billed as a "listening" event by the administration -- and everybody knows what that word really means: We'll pretend to listen in order to shut everybody up, then we'll do exactly what we planned all along.

Second, the invite list is mostly representatives from academia and think tanks, big labor and big business ... in other words, three groups of people who know almost nothing about how to actually create, rather than merely preserve, jobs.

In other words, if you're on line at the employment office right now and you're hoping that the jobs summit is actually going to help you get, you know, a job, you'd better keep filling out that form in front of you.

In watching President Obama the last few months, it's become increasingly apparent that there are certain things he is very much interested in. Nationalized health care. Protecting and expanding organized labor. Instituting a national energy scheme. Repositioning America's role in the world as a partner rather than a leader.

Meanwhile, there are two nettlesome problems that continue to demand his attention, but he seems annoyed at having to deal with: Afghanistan and unemployment. And like most of us, he has reacted to both by dithering, postponing decisions and acting busy on other, equally pressing matters.

But this week, the president appears to be trying to get both items out of his in-basket. And he is dealing with each of them in a classic committed/non-committal way.

With Afghanistan on Monday, it was to commit to, almost, give the Gen. Stanley McChrystal the added troop numbers he requested ... and then to immediately announce a departure date.

And now with jobs -- which, polls say, has become the single most important national crisis in the minds of Americans -- we're going to get the temporary sop of a big publicity event, with administration representatives listening soberly and taking careful notes.

This isn't to say that the White House is indifferent to the jobs crisis. On the contrary, it appears to be hugely embarrassed to see the unemployment rate break 10 percent -- especially after it confidently predicted it would stop the bleeding at 8 percent -- and worried about what that general unhappiness will mean in next year's mid-term elections. Thus, the self-evidently inflated job creation numbers that supposedly have resulted from the stimulus. And the interesting, behind-the-scenes maneuvering by Rahm Emanuel to relax the rules on Sarbanes-Oxley regulations for young public companies.

That said, it is also hard not to notice that the administration doesn't seem especially desperate to do something about these high unemployment figures -- no doubt secretly understanding that, as Breaker Morant said just before taking a chest-full of bullets, "This is what comes of empire building." When you nationalize large segments of the economy, tilt the playing field towards unions, and threaten to tax business until it screams, you are going to get high, and lingering, unemployment. The White House and Congress seems to believe that millions of lost jobs are worth the cost of a better, fairer society -- and now merely needs to convince the rest of us that the broken eggs will pay off in a tasty omelet.

Still, the White House says it is listening -- and has asked the public to make suggestions on how create jobs. So, writing from Silicon Valley, I'm willing to make my contribution, despite the knowledge that it will have exactly zero impact. Here goes:

The U.S. economy currently has an unemployment rate of 10.2 percent, the highest in a quarter-century, and a number that is likely to increase slightly in the next few months, then begin to decline at a depressingly slow pace over the next couple years. By the end of this month, about 8 million jobs will have been lost in the last two years. Meanwhile, the U.S. workforce is growing by about 1 million workers per year. On the other hand, the most jobs created in a single year in the last three decades by the U.S. economy was 4.3 million, in 1984.

In other words, even if the economy enjoyed one of the greatest turnarounds in American history, it would still take more than two years to restore all of those jobs lost, while absorbing all of the new workforce. And such a turnaround, the product the last time of pro-business Reaganomics, is hardly likely to happen this time. So, plan on at least four to five years to get back to full economic health as the U.S. economy's natural capacity to heal itself slowly overcomes all of the anti-business obstacles put in its way. And that's only assuming that Obamacare gets modified in important ways and cap and trade fails entirely. Throw those two into the mix, stir in historically unprecedented trillions in debt, and the teens in U.S. will be very dreary indeed.

Not very promising is it? What's even more shocking is, if we really wanted to reduce the debt, restore growth and reduce unemployment, we know exactly how to do it.

First of all, no more stimulus. This Keynesian solution, if it works at all, is only for the beginning of a downturn, as a kind of fiscal defibrillator. And it only works if the shock is big and fast. The Bush-Obama stimulus was certainly big enough (no matter what Paul Krugman says), but dribbling it out -- most of it is still unspent -- made it worthless. Trying a second giant stimulus -- which, no doubt, a lot of the summit attendees would love -- is just another fortune in taxpayer's money wasted.

Second, stop favoring unions. Trade unions are a phenomenon of the 19th century that had their zenith in the 20th century -- and are now niche institutions in the 21st. They don't create jobs, but merely protect them -- often at the cost of competitiveness and innovation. To make them the centerpiece of the nation's industrial policy, and even fix the game for them with non-democratic advantages like "card check," is to put the nation's small business owners in perpetual fear and wary of making any additional hires for fear of never being able to fire them. Instead, let the unions compete for their place in the economy like everyone else.

De-regulate and cut taxes. Every penny business spends filling out unnecessary paperwork, or hiring consultants to help with paperwork, is money that could be spent hiring new employees, investing in new equipment and expansion, or spending on the development of new products and technologies. This is even more true with taxes -- especially for small businesses, where the proprietors are essentially taxed twice for their contribution to society.

Invest in the future, not the past. Most of the folks at the jobs summit belong to established institutions -- big corporations, unions, universities -- and have a vested interest in maintaining and strengthening the status quo. Follow their lead and the economy may get back to where it was before (at the cost of considerable individual opportunity) but no further. It won't answer that need for a million new jobs each year. Moreover, history has shown that the dominant firms of one decade are rarely at the top of the next. Rather, the companies that will lead us into the next economic era likely don't even exist yet. That means that the best strategy for long-term economic health (and jobs) is company creation, not company preservation. That, in turn, suggests freeing up investment capital, easier paths to IPOs, and changing education, tax law and regulations to support entrepreneurship.

Embrace the revolution. Great economic/technological cycles inevitably result in radical transformations of markets, consumers, products and organizations. The natural human tendency, unfortunately, is to try to restore what came before. Hence the desperation to save companies that are "too big to die," or the creation of "shovel ready" and "make work" jobs to replace the missing employment. But the only real solution is to develop a vision of the future and begin working towards it. Obviously, this is fraught with risk, but there are some things that already seem apparent. For one thing, companies are going to be faster moving and will, thanks to the Web, increasingly compete on a global stage. And, in part because of this, jobs are going to become more fluid, less-often permanent, and workers themselves will become more like freelancers, contractors and entrepreneurs. They will need access to vast stores of online training and education, portable health insurance, access to business and career support, new sources of capital, and most of all not be punished (by law or taxes) for their growing independence.

There you are, my suggestions for how to not only restore America's lost jobs, but to put our nation back on the path to new job creation and prosperity. Do I think the White House or Congress will listen to these suggestions -- or the thousands of similar ones being made by other people around the country?

Not a chance. In their minds, they have far bigger fish to fry. And the whole point of greater government centralization and control is that they know best what's good for the rest of us.

This is the opinion of the columnist and in no way reflects the opinion of ABC News.

Michael S. Malone is one of the nation's best-known technology writers. He has covered Silicon Valley and high-tech for more than 25 years, beginning with the San Jose Mercury News as the nation's first daily high-tech reporter. His articles and editorials have appeared in such publications as The Wall Street Journal, The Economist and Fortune, and for two years he was a columnist for The New York Times. He was editor of Forbes ASAP, the world's largest-circulation business-tech magazine, at the height of the dot-com boom. Malone is the author or co-author of a dozen books, notably the best-selling "Virtual Corporation." Malone has also hosted three public television interview series, and most recently co-produced the celebrated PBS miniseries on social entrepreneurs, "The New Heroes." He has been the ABCNews.com "Silicon Insider" columnist since 2000. His new book, written with Tom Hayes, is "No Size Fits All."