You’ve probably seen the headlines - the J.O.B.S. bill passed in the Senate.
So that means more “jobs” in the American economy, right?
As President Obama and a large portion of the Congress run for re-election, Washington is obsessed with this rather illusory concept of “job creation.” And the “J.O.B.S.” Act, named with an acronym that stands for “Jumpstart Our Business Startups,” is the latest legislative effort to stimulate business startups, and thus, to entice job creation.
The bill actually resembles a hodgepodge of several different legislative agendas. And even if the bill accomplishes what its supporters claim, it is probably still several steps removed from actual “job creation.” It may also be yet another governmental wet blanket thrown on top of an economy that is ready to catch fire.
But before I get in to these latest details, let’s consider what Washington has been doing to “create jobs” over the past few years.
In February of 2009, the federal economic “stimulus” bill became law. It cost us over $850 billion, and it was promised that, as long as the bill passed, the national unemployment rate would not rise above 8%.
Well, the unemployment rate rose well above 8% after the bill’s passage, and it still has still not dropped below that mark. One can argue that the bill was necessary at the time – or not – to prevent further erosion in the economy. But there would seem to be fewer “jobs” in the American economy, in the aftermath of this big Washington spending binge.
Then in 2010, there was the monumental healthcare reform bill. This bill was sold as a means of curtailing healthcare costs, making healthcare “universal,” and, as the President noted, it would prevent the government itself from “going bankrupt.”
It was also sold as a job creation bill. Former Speaker of the House Nancy Pelosi claimed right before the bill’s passage that it would create4 million jobs – “400,000 jobs almost immediately." Since it became law 2 years ago, healthcare costs have skyrocketed, private sector employers have dropped health coverage for some 1-2 million workers, and 400,000 new jobs have yet to be created.
My point here is that our federal government has spent untold amounts of our scarce tax dollars in the name of “creating jobs,” with little or nothing to show for it. Given this, we should all approach the new “J.O.B.S. bill” with a healthy dose of skepticism. Politicians have a built-in incentive to appear as though they’re doing things that make our lives wonderful. But just because they claim to be doing great things, doesn’t mean that they are.
As for the new “J.O.B.S. bill,” a version in the Senate passed, but now it goes to the House of Representatives for amending, and a vote.
One of the claims about this bill is that it would expand a phenomenon known as “crowd funding.” As writer Catherine Clifford noted at Entrepreneur.com, the bill seeks to make it “easier for startups to raise small amounts of money from large pools of investors” by utilizing this burgeoning mechanism for funding.
But this great effort on behalf of the U.S. Senate raises an important question: does the process of crowd funding need help from the government?
Crowd funding is the term of art used to describe a process whereby people pool their money to support a particular cause. Raising money for disaster relief is an example of this process, yet in recent years crowd funding has been utilized to fund everything from social movements (think “Occupy Wall Street” supporters plopping thousands of dollars in a bucket along the side of the road) to private artistic creations to small businesses.
So with crowd funding going so well, why would the Senate need to make it “easier” for businesses to utilize the technique? Might it be the case that government’s effort to “help out” with crowd funding might makes matters worse?
One of the expressed concerns of the Senate about expanding business owners’ access to capital was that investors would be adequately protected in the process. And the J.O.B.S. bill addresses forms of funding other than crowd funding, and allows businesses to raise investment capital more easily.
But crowd funding by its nature is not an “investment.” Visit Kickstarter.com and notice the artistic and creative endeavors that one can help fund – yet if you contribute to a project, you’re really more of a “donor” than you are an investor, and you do not receive a “share” of the enterprise.
So how does Congress “protect investors” who provide crowd funding, when in fact crowd funding is not an investment matter in the first place? If the final J.O.B.S. bill seeks to impose regulations on crowd funding as though providing crowd funding is similar to buying securities, the bill could severely hamper the very essence of this grassroots phenomenon.
Until Congress and the President demonstrate that they have a respect for the entrepreneurs, artists, and risk takers who make our economy function, we should all be skeptical of politicians who purport to “create jobs.”