In the midst of a persistently and painfully sluggish economy, there has been a lot of debate about the role of government in boosting the economy and promoting job creation. Part of this debate has focused on President Obama’s stimulus bill — and whether or not the cost of the “jobs created or saved” was too high. Although the bill’s price tag continues to rise after the fact, the cost to American taxpayers currently stands at $833 billion ($46 billion more than originally advertised), according to the nonpartisan Congressional Budget Office. The office also estimates that the stimulus created from 200,000 to 1.5 million jobs, which would mean that the cost per job could be anywhere from $540,000 and $4.1 million.
Aside from the mind-boggling range, this raises an interesting question: Should “creating or saving” jobs incur any cost at all?
To investigate, I look at my experience as an entrepreneur, business leader and job creator.
I started my first enterprise at the tender age of 8, a sales and service business that lasted less than a year. It did, however, experience exponential growth and received no government support, guarantees or assistance. Jobs were provided for three friends and myself. No startup capital was required and we were always profitable. The cost of jobs “created or saved” in this tiny business: $0.
Twenty years later, I started my second business, also in the service industry. This one lasted in various forms for 21 years and, at its height, employed more than 70 people — that is, it created 70 jobs. Here again, growth was exponential and I received no government support, guarantees or assistance. Payrolls were always met, capital was not a major factor and we were profitable in the aggregate over the duration of the business. The cost of jobs “created or saved” in this small business: $0.
My next opportunity to “create and save jobs” came when I was asked to become president and CEO of a national manufacturer that employed approximately 250 people at the time. Over the next five years, the company grew, remained profitable and hired more than 750 people. For this business, although capital was a major factor, financing was handled through regular banking and equity markets, and I received no government support, guarantees or assistance. The cost of jobs “created or saved” in this midsized business: $0.
The bottom line, at least in my experience, is that the fiscal cost of “creating or saving” jobs in the private sector should equal $0 because true job creation should add value to the employer’s bottom line. In fact, if creating a job was ever a net cost to the employer, a rational employer wouldn’t be hiring anyone — how could his enterprise remain healthy?
This may not be news to you, but if government were a private enterprise, it would be long gone.
That brings us to the real decision that we, as a nation, must make: Is our future prosperity going to come from government largesse or the private sector? How we answer that question will have historic implications for the kind of country we leave behind for posterity. The strength and success of the American Dream has always resided in the free-enterprise system that has empowered entrepreneurs like me to efficiently allocate capital, service market needs and, ultimately, grow our economy.
Ron Lazof is a managing director of Prism Advisors LLC and Job Creators Alliance member. Previously he was CEO of Behr Process Corp.