Obama The Jobs Salesmen Fails

President Obama hosted 20 CEOs from major corporations in Washington. Many of the chief executives wanted to speak about trade policy and taxes. The president wanted to talk about jobs. He had no leverage with anyone in the group, but he pressed for the firms to add workers anyway.

Obama looks at the $2 trillion on the balance sheets of American companies and sees money for payroll increases. CEOs view the cash as a way to increase dividends and fund M&A activity. Many of the managers remain concerned about the future of the economy. Cash may be important if there is a second economic downturn.

Obama did not give Corporate America much to trade if they will add new workers. New tax cuts may help to improve net income. That is not a reason to hire. It is a way to raise earnings to please investors. US firms have had to rely on job and other expense cuts to raise margins. They have learned to improve productivity by relying  on smaller numbers of employees to operate their companies. Most of those efforts are exhausted. Lower taxes can provide another avenue to boost profits.

Obama’s trouble is that little of the huge stimulus package he launched two years ago gave corporations reasons to add employees. The recession actually caused them to reduce payrolls. The new tax package needs a component that gives companies a concrete benefit to add new employees. It has none.

Economists have often argued that the best way to get companies to add people is to give firms direct and immediate incentives to do so. One of the ideas mentioned is that every corporation which adds a person to payroll will get a tax break commensurate to the salary of that worker. It would be an expensive initiative, but it would work.

Obama did not stand in front of the 20  CEOs and tell them he could give them something they could sell to their investors. He did not give them proposed legislation to make the cost of adding new jobs during an economic slowdown palatable.

Douglas A. McIntyre