How not to create jobs

The following editorial appeared recently in the Chicago Tribune:

So, things are getting better on the job front, but slowly. What's a politician to do about that?

With the unemployment rate down slightly but still punishingly high, employers shedding payroll and Republicans feeling their political oats after capturing a Senate seat from Massachusetts, President Barack Obama and congressional Democrats are feeling pressure to show they are acting to create jobs.

As Sen. Charles Schumer, D-N.Y., put it, "We heard the message of Massachusetts. They said focus immediately and don't take your focus off jobs."

Nothing wrong with that. But the political class ought to tread warily. Government, after all, can "create" jobs only with resources produced by the private sector. So its chief concern should be providing optimal conditions for private companies to operate. More often than not, that requires the government to do less, not more.

That course has not been the pattern of Obama's first year. Just the opposite — which may help explain the sickly job market. A number of policies have created uncertainty and apprehension among entrepreneurs and investors.

Among them: tax increases on high-income individuals (and thus many businesses), spending hikes and yawning deficits for years to come, proposed health-care reforms that could raise costs, and such ominous initiatives as a cap-and-trade system for greenhouse gas emissions and a change to foster unionization.

Each of these either creates or threatens greater burdens on productive enterprises. None is likely to foster the sort of confidence that leads businesses to start hiring.

One idea floating around is to provide tax breaks to companies that take on new workers, allowing them to forgo paying the employer's 6.2 percent Social Security tax. It's better than most ideas — such as channeling more cash to pork-prone infrastructure projects — but it has a downside, too.

For one thing, it encourages employers to figure out ways to get the benefit even for workers who would have been hired anyway. There is also the problem of the cost to a Social Security system that is already underfunded.