Here's How You Quickly Create Jobs

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Despite wallowing in the most rancorous and dysfunctional political environment since John Adams had a falling out with Thomas Jefferson, a consensus is building in Washington about what the nation's biggest problem is. It's About Jobs, Stupid.

The financial system has stabilized. The housing market is a mess that may take years to clean up but is no longer threatening to take down the rest of the economy. Inflation has not yet reared its ugly head. The economy is slowly climbing out of recession. Yet unemployment remains stubbornly high - 9.5% according to government statistics and over 15% if you want to know the truth.

The Obama Administration has taken to the hustings to promote its plan to create jobs by ratcheting up federal spending, paying people to stay out of work longer, dishing out billions in subsidies to refugees from the collapsing solar industry in Spain, and terrorizing companies that produce jobs by increasing regulatory uncertainty. Oh, and don't forget jacking up taxes.

Does this make sense to you?

All of this has caused corporate America to go on strike, sitting on an estimated two trillion dollars in cash. Businesses refuse to invest fearing they'll be trashed when Barney Frank has some inspired thought at 2am and sticks some devastating provision in the next abomination working its way through the Congressional sausage factory.

If Progressive ideologues really believe that running up the federal deficit is a small price to pay for creating jobs then I have a proposal for them that is guaranteed to work.

Abolish the corporate income tax.

That's right, don't just reduce it. Don't cherry pick favored businesses according to some ideological industrial policy that rewards "good" industries and punishes "bad", good and bad being defined by who ponies up the most campaign contributions to whom. Just abolish the corporate income tax completely. Now and forever.

Imagine what would happen next.

Business investment would explode. Trillions would come out from under the metaphorical mattress to create jobs, finance growth, fund innovation, build factories, and beat back foreign competition. Trillions more would flow in from investors from high tax countries around the globe looking for better returns. High paying expat jobs would come back to our shores and the net wage advantage enjoyed by cheap foreign labor would be diminished. The job market would get so tight we would be begging immigrants to show up rather than chasing them away with pitchforks. America's growth rate would leap into the double digits rivaling emerging nations. Billions of deadweight dollars spent twisting businesses into pretzels to reduce their tax bills would be freed up to grow the economy. And finally, the stock market would take off like a rocket shoring up all those underfunded pension plans and anemic 401(k)s.

The downside?

Corporate income taxes represent about 12% of Federal revenue. In the short term abolishing corporate taxes would certainly increase the deficit. Look at the numbers, though, and it would increase the deficit less than another so called "stimulus" bill. The difference is that stimulus money once spent is gone. Corporate investment turns into profits that sooner or later make their way into the pockets of employees and investors. And employees and investors pay taxes. Lots of taxes. It may lag by a year, but the capital gains taxes alone generated by a sustained business boom would more than pay for the loss of corporate tax revenue.

Mr. Obama, do you really want to be an agent of change? Do you want to have your own Nixon-Goes-to-China moment? Do you want to make sure the Democratic Party doesn't get thoroughly thrashed in November? Then get behind this proposal. Earn your place in history. Watch Republicans freeze in horror as you cut their legs out from under them.

Demonizing business and handing out subsidies to favored constituents may play to your demoralized Progressive base but it is driving the country toward bankruptcy. You say you are a pragmatists and not a socialist? Prove it. There is still time to climb down from the precipice. It means giving up your dreams of assigning a czar to run every business you touch, but that approach is not working. It never has and it never will.

Jobs don't come from Washington, they come from employers. And employers are corporations. So far you have driven most corporations into the bunker. Instead try taking off their shackles and watch them soar.

Bill Frezza is a fellow at the Competitive Enterprise Institute, and a Boston-based venture capitalist. You can find all of his columns, TV, and radio interviews here.  If you would like to have his weekly columns delivered to you by e-mail, click here or follow him on Twitter @BillFrezza.

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