
An Idea for the Economy that will Freak Out a lot of People - knowtheory
http://blogmaverick.com/2011/08/10/an-idea-for-the-economy-that-will-freak-out-a-lot-of-people-but-could-be-fun-to-discuss/
======
jswinghammer
Jobs are a means not an end. I've never worked at a job to work at a job. I
work at a job to provide for my family and for my other goals in life.

This sort of top down thinking is just toxic. It seems so great and tidy until
you actually try to implement it and then you realize that your level of
ignorance was greater than you could have possibly imagined. You can't solve a
debt problem with more debt and you can't solve a jobs problem by just
creating meaningless jobs. The only jobs that are sustainable are the jobs
that produce something that other people actually want.

The whole idea of the price system is that we're given signals about the best
ways to serve other people in society. The price system in financial and real
estate markets is completely insane and basically non-functioning. We're all
suffering with these zombie banks we've created for ourselves.

The real question shouldn't be how to create jobs but rather how to create a
society where needs can be met by entrepreneurs and businesses. We've all seen
that when people are having their needs met then jobs end up being created by
the businesses that form in the process of meeting those needs.

~~~
Spyro7
Thank you jswinghammer. This statement right here summarizes the whole problem
with the OP:

"The only jobs that are sustainable are the jobs that produce something that
other people actually want."

This is exactly it. You can not stimulate an economy simply by pushing up
production on the supply side.

Mark Cuban's idea seems appealing on the surface, but he makes a serious
assumption. He implicitly assumes a positive net benefit after you give these
companies money and they _create jobs_ with this money.

Look, if you transfer money from the government to the companies to the people
then that is just a transfer payment. Moving money around like that does not
create wealth within a country, and that is what we need right now. We need to
spend money on things that generate positive net present value, and we need to
curtail spending money on things that do not meet this criteria.

In order for Mark Cuban's idea to work, all of these companies must be
employing the additional labor towards activities that are economically
profitable. Here's a quick thought exercise. What is the likelihood of a
company being engaged in economically profitable activities given that it is
taking advantage of this program? (It is reasonable to assume that a company
with a healthy balance sheet and a healthy income would not want to deal with
government bureaucracy willingly.)

Also, as a side note, the following quote from the blog post is a bit
inaccurate:

"(Stunningly, bailouts excluded)."

That the bank bailouts were repaid so handily owes very little to the bailouts
themselves. Thanks to extraordinary measures taken by the Federal Reserve, the
banks were able to borrow money at an interest rate of virtually nothing and
then use this money to purchase U.S. bonds - effectively lending it back to
the U.S. government. In addition to this, the Federal Reserve also took the
unusual step of dramatically expanding its balance sheet (removing toxic
liabilities from the banks themselves). That was the real bailout, and it was
much larger than the pithy amounts that you saw reported by the
administration.

To get a sense of the scale and size of the _real_ bailout, please take a look
at this graph:

[http://economix.blogs.nytimes.com/2009/05/07/fed-balance-
she...](http://economix.blogs.nytimes.com/2009/05/07/fed-balance-sheet-
expansion-some-takeaways/)

Edit: Also, I forgot to mention one more thing. The current negative rates on
U.S. debt would almost certainly change if we began to issue substantially
more of it. As Europe is rapidly learning, the debt market is far from a
static environment.

~~~
davedx
Here's an even crazier idea:

Is growth economics the only answer? What about creating a sustainable economy
that isn't dependent on infinite growth of wealth?

~~~
gaius
It is crazy, because you haven't thought through the consequences of zero-
growth. Basically any medical research for example is off the table, because
if the population expands or life expectency increases, the economy has grown.
Technical research is off the table, in fact the same production methods in
use today must be set in stone, since an increase in efficiency is economic
growth. Etc, etc.

~~~
toumhi
Not sure if I follow you here.

In some parts of Europe, de-growth movement is quite popular and proposes to
shift the focus of government policies from economic growth to population
well-being (how this is reached lends itself to debates).

It doesn't mean to stop medical research or technical research, it means
stopping to envision growth as being only economic growth. Growth can be seen
as progress of human indicators, not the accumulation of things and economic
growth for the sake of economic growth (which more and more benefits only rich
people).

It originates in the simple fact that the economy can not grow infinitely in a
finite world.

~~~
gaius
Mmm, but wealth isn't cash money - it's "stuff people want". It's entirely a
human concept. If there is more "stuff people want" being produced then the
economy is growing, it is just growing in a different direction. That the
desired commodity is changing doesn't alter this. If people want longer lives,
or more leisure time, or whatever, instead of more consumables, that all has
economic consequences. The de-growth movement, a lot of it is shifting from
many, cheap, mass-produced items to fewer, expensive, hand-made items.

~~~
onemoreact
Wealth is " _tangible_ stuff people want". There is a balancing point where
working less for the same amount of stuff becomes more important than getting
more stuff. EX: Suppose you are working 80 hour weeks and making 200k in 5
years would you rather work 40 hour weeks and make 200k or 80 hour weeks and
make 400k?

That is not to say working less is always a major goal, if someone was doing
20 hour work weeks for 30k they would probably rather have 20 hour work weeks
that pay 60k than 10 hour work weeks that pay 20k. The great thing about free
markets is they let people balance many of those less tangible goals. However,
government policy can easily focus on progress that is out of whack with what
people actually want so an understanding that the Chinese population might
tolerate more pollution for more growth were an American population cares more
about clean air than maximizing growth is nessesary to keep people happy.

------
jerf
I'm just completely at a loss as to what this says.

Companies are flush with cash. The government can't figure out how to spend
money productively. So, we're going to have the government borrow more money
to give it to companies that don't need it, using its incredible inability to
allocate capital to decide which of these companies to allocate capital to?

If the government can't productively allocate capital and companies have
enough, why, _in the terms of this post_ , exactly is it such a bad idea to
have the government stop borrowing all the available capital and let the
companies start allocating it instead?

(I italicize some words to emphasize that it is the internal issues with the
logic of the post I am questioning. I may strongly disagree with it, but I am
well aware of the liturgy for Keynesianism.)

~~~
knowtheory
1) The government is literally _awash_ in cheap credit. Good businesses, when
credit is cheap, borrow and invest. If you think this is a bad idea, please
explain if it is because you do not believe the government should act as a
business does (and for what reasons), or because you think that you should not
borrow when your interest rates are low.

2) If you dislike Cuban's target for investment (fixing unemployment, the
purported goal of the Tea Party and GOP), then please, by all means, pick a
different avenue by which the government could make a return on investment.

~~~
anamax
> The government is literally awash in cheap credit

TODAY. However, do you really think that interest rates will remain low until
that money is paid off?

~~~
2arrs2ells
Bonds/Notes/Bills issued by the Treasury have fixed rates - so yes, the
interest rates will stay that low until the money is paid off.

The point that others have brought up is that if the US Government borrows an
incredibly large amount of money and pushes up the Debt/GDP ratio, future,
additional borrowing will become more expensive. But if today's borrowing is
used efficiently, it should drive up GDP and reduce some of the need for
future borrowing.

~~~
anamax
> Bonds/Notes/Bills issued by the Treasury have fixed rates - so yes, the
> interest rates will stay that low until the money is paid off.

TIPS aren't fixed rate, but I don't know what fraction of new US debt is TIPS.

More to the point, you're assuming that we won't have to roll-over that debt,
which only happens if we're not running a deficit. Since we are for the
forseeable future....

~~~
2arrs2ells
I believe the "real" interest rate on TIPS is fixed - while the nominal rate
fluctuates with CPI.

Your second point is, of course, right on. But if we have to borrow $x, better
to borrow it now at ~0% than later at (likely) >0% interest.

~~~
anamax
> I believe the "real" interest rate on TIPS is fixed - while the nominal rate
> fluctuates with CPI.

According to that reasoning, interest rates almost never change because
they're typically a given premium to inflation.

We don't accept that reasoning because you repay what the note says, not the
relationship between that number and some other number.

> Your second point is, of course, right on. But if we have to borrow $x,
> better to borrow it now at ~0% than later at (likely) >0% interest.

Umm, no. Borrowing now at 0% and rolling that over later to a new loan at 10%
is not better than simply borrowing later at 10%.

Yes, borrowing now is better if you do something useful now with the money,
something that you'd delay by borrowing later.

However, there's little evidence of that occurring. We're running up lots of
debt on dumb spending. If you want to do some smart spending, take the money
from dumb spending.

------
smokeyj
Cuban says big companies are not cash poor. I wonder how many of these have
foreign funds that just won't import it because of the tax hit they'll take.

If you want to create jobs, how about companies under 10 years pay _zero_
taxes. Zero costs to incorporate, and all licenses are free. No costs to
access secondary equity markets, and access to an entrepreneurship courses. I
don't think they want _that_ many jobs tho, might shake things up.

Cuban is just trying his hand at central planning and it's not well
engineered.

Considered the market needs to flush itself of some of these mid to upper
sized companies. Some just exist because their stock maintains, while costing
society valuable talents and resources. Just something to consider.

~~~
knowtheory
The problem with this is that older corporations will just create shell
companies, funnel all their wealth through them, and then transfer it back
through things like IP licensing and other immaterial fictional goods.

Tax holidays are not the solution the the US debt, or better use of the US's
fiscal resources (and yes the ability to borrow money cheaply is a resource).

~~~
tsotha
>The problem with this is that older corporations will just create shell
companies, funnel all their wealth through them, and then transfer it back
through things like IP licensing and other immaterial fictional goods.

They would _have_ to. How could an older company compete on such an uneven
pitch?

------
cyrus_
The conversation we really should be having involves answering these three
questions:

1\. What work could be done that would create a better world for us?

2\. Why isn't this work being done? Is it regulatory paralysis? Insufficient
coordination amongst stakeholders? Are the rewards difficult to capture by the
people doing the work? Are there not enough people with the requisite skills?

3\. Can we stimulate or coordinate the private sector to organize labor and
capital to get this work done? If not, why not?

If you've thought about these questions for a while, it is absolutely shocking
to listen to the economic debate going on around us today. We have two camps
who are both way off -- some people (e.g. the author of the blog post) assume
that throwing money at anyone who asks for it will work, but it doesn't (they
just waste it). Others think that letting people keep the money they have
previously earned and staying outta the way will work, but it doesn't (they
just hold on to it or waste it).

I don't know what the solution is.

~~~
acslater00
I'm 100% with you. I'd quibble with the phrasing of "create a better world for
us", since I think that lends itself to very mushy, subjective notions of
"good" rather than "economic good", but you're absolutely right.

The problem is not, "how do we create more GDP" (forever and ever and ever)
it's "is there demand which is not being met by supply." At the core, that's
what a recession is. The answer is clearly yes in some industries (health care
comes to mind) and is clearly no in other industries (real estate and retail
comes to mind).

You can't just will an economy of 300m people to a certain state. If people
spent more time thinking about optimal long term outcomes and then spent their
time removing impediments to those outcomes, instead of pretending like
there's some magic incantation that is simply being _blocked_, we'd be having
a much more productive national conversation right now.

------
justinsb
This already happens: if you're a corporation promising to create jobs, you
can negotiate with government for tax breaks. I believe Twitter negotiated
with San Francisco city government to get their payroll tax breaks by
threatening to leave the city. Datacenter construction tends to get property
tax breaks from local government. If you're talking about locating a car
factory in a country, much bigger incentives are to be had.

Twitter:
[http://latimesblogs.latimes.com/technology/2011/04/twitter-g...](http://latimesblogs.latimes.com/technology/2011/04/twitter-
gets-6-year-payroll-tax-break-from-san-francisco-board-of-supervisors.html)

Datacenters:
[http://www.computerworld.com/s/article/9217259/Apple_Google_...](http://www.computerworld.com/s/article/9217259/Apple_Google_Facebook_turn_N.C._into_data_center_hub)

Ford Tax Breaks: [http://www.huffingtonpost.com/2010/05/24/fords-to-
invest-135...](http://www.huffingtonpost.com/2010/05/24/fords-to-
invest-135-milli_n_586941.html)

------
groby_b
Completely flawed. Objections in the first 2 minutes:

1) Companies don't really need cash, currently.

2) This is easily gamed. (Hire people for the minimum amount of time, fire
again)

3) It excludes major sources of employment - the majority of gross job gains
comes from companies with less than 50 employes.

4) Jobs worth creating require qualifications. People are not interchangeable
cogs, you would need to create jobs that actually fit unemployed people.

------
jseliger
The problem with a lot of armchair economists is that they get stuff wrong. I
left this comment on Cuban's site:

"Plus our federal government loves to hire people."

This isn't true. As <a
href="[http://www.data360.org/dsg.aspx?Data_Set_Group_Id=228>th...](http://www.data360.org/dsg.aspx?Data_Set_Group_Id=228>this)
data set shows</a> (and it's similar to data I've seen in civics textbook, the
number of non-Census federal employees has stayed more or less constant for
decades.

If you want to know the biggest portion of future federal debt, look for
Medicare entitlement spending.

Back to HN: the other problem is that merely "hiring employees" isn't the same
as productively using employees. He's deploying a variation on the broken
windows fallacy.

------
knowtheory
Other nations have sovereign wealth funds which invest in companies and build
up business and investing acumen.

Instead, America is trying to destroy any expertise or knowledge that the
government has, and keep anyone with experience out of government (look at the
ridiculous confirmation battles over the past 5 years).

The problem is that our current politics won't let the US government act on
societal principles, or on business principles. The US Government is so
hobbled that it can't act to succeed.

~~~
Cushman
_The problem is that our current politics won't let the US government act_

You could pretty much stop right there.

~~~
daniel_solano
Some people would argue that's a good thing: that a government that does
nothing is less harmful than a government that does too much.

~~~
gyardley
Right, because we're lousy at deliberately creating solutions to complex
problems - there's always unintended consequences, which often cause problems
worse than the ones being solved.

The real way to solve complex societal problems is through many small-scale
experiments, not a single top-down proposal imposed by a central authority.
Tim Hartford's TED talk on this is well worth watching:

<http://www.ted.com/talks/tim_harford.html>

~~~
knowtheory
I don't think i'm clear on what you mean.

What sort of processes do produce good solutions to complex problems?

And if you can outline such a process, what prevents a government, or a polity
(i'm more than happy for citizens to do stuff rather than the government) from
performing the processes that do produce good solutions?

~~~
daniel_solano
I think that the general argument goes that something like "the economy" is
something so immensely complex that any effort to manage it top-down down is
likely to fail, regardless of how brilliant, talented, or well-meaning such
efforts would be.

As analogy (imperfect though it may be), it's like trying to fix a bug in a
program that consists of trillions of lines of code, except that you don't
have access to the source code or a debugger. Instead, you have just a few
high-level variables you can adjust (which may or may not be useful).

In summary, the issue is that there are some problems that have a scale and
complexity for which a top-down approach is really beyond human comprehension.

~~~
knowtheory
Yep, I get the top down argument, but what i want to know is what _does_ work,
and why can't our government enable that?

Government is a massive bureaucracy, no doubt, but then so are large
companies. And large companies can partner with smaller organizations, or buy
them and use their knowledge and expertise to make money.

Look at what Disney did with Pixar.

~~~
skyraider
Government has the power of force, which includes the power to circumvent the
price system by taxing or borrowing against future taxes, irrespective of the
information the price system conveys about the efficiency of the actions
undertaken with that money.

Since the government's actions may not be subject to the pressures of the
price system, a government solution is less likely to reflect economic reality
as described by the price system. In more than a few ways, this means the
government's actions are not likely to succeed, because the primary
motivations for experimentation won't be economic, but political.

Individuals and groups without the power of force must create solutions that
can stand up to the pressures of the price system. In this model, shifting
experimentation to the scope of individuals and groups by liberalizing (if
necessary) or fine-tuning economic policy is what works.

Of course, this explanation requires an well-functioning price system, and
making the system function well is a subject in itself. There's also the
question of how often actors in the price system actually act rationally,
given the information they receive from the price system.

------
rmason
What he is proposing was already tried by the Michigan Economic Development
Corporation.

Politicians from both parties loved photo ops where some entrepreneur was
creating jobs, especially in a distressed area in exchange for state money.
Even if all the promised jobs never got created.

Then it got to the point where a con man showed up who never intended to
create any jobs.

[http://record-eagle.com/opinion/x908934006/Editorial-MEDC-
ou...](http://record-eagle.com/opinion/x908934006/Editorial-MEDC-outdoes-
fiasco/print)

------
owyn
This idea will never work, but on top of that his "rules for entry" are
totally silly. Just take a glancing look at this data and you can see that his
criteria should be inverted <http://www.census.gov/econ/smallbus.html>

There are ~6M firms in the USA but only ~90K with revenues of 100M+ so his
pool is very small to start with. Firms with 100+ employees count for 1.8
percent of employment and capture 65% of total payroll and something like 2/3
of total revenues. I think ANY company that is pulling in 100M in revenue has
probably got things figured out already. The vast majority of employers in
this country are small firms so why not try to help small guys turn into
bigger guys.

So I think if anything, there should be more investment in firms with less
than 100 employees, less than 100m in revenue and less than 10 years old.

~~~
MatthewPhillips
The point of restricting the pool was partially as a filter for gaming/con. I
agree though that this pool might not need it.

------
acslater00
This is a good idea from a "look, i'm being counter-intuitive" sense. But it
will not work.

There's a reason the federal government can borrow at 0% short term and my
hypothetical auto parts manufacturing company can't. I am a default risk; the
federal government is not.

IRL, banks essentially borrow at 0% from the federal reserve. They do exactly
what Cuban is suggesting the federal government do. They have lots of money.
Their mission is to lend that money to businesses who will "create jobs" with
it. They price those loans at an interest rate which The problem right now is
that not enough businesses see good investment opportunities that justify
taking out a loan at rate X, and not enough banks see businesses who are not
so risky that they can justify making the loan at a price they would pay.
We're in equilibrium, but it's a lowish one.

At the margin, we can increase some of that activity by either (a) making the
loan cheaper for business or (b) making the risk lower for the bank of (c)
both. In this case, the federal government acts as a guaranteeing middleman
between a bondholder (the "bank") and a business. Because the bondholder
doesn't have to worry about a business default, the lending takes place at
essentially 0%. So this plan boils down to having the federal government
guarantee loans to businesses, only instead of saying, "I'm guaranteeing a
private loan to a business," they're going through the process of actually
initiating the loan themselves (with a website?? please.)

The idea of federally guaranteed loans is not new. Organizations like Fannie
Mae and Freddy Mac literally do exactly that; subsidize loans to achieve some
kind of social good (in that case, home ownership). The problem is that --
unsurprisingly -- people default, and the programs end up going hundreds of
billions of dollars in the hole. And then the taxpayer is on the hook. And
that's, kind of what we want to avoid here.

More oddly, Cuban is making the assumption that not only should the federal
government subsidize the loan, they should originate and (probably) administer
it, which only makes sense if you believe the federal government has a better
eye for businesses that will actually succeed and "create jobs" (I suppose)
than the many thousands of banks that do this professionally. Color me
skeptical.

Yes, money is cheap. But disintermediating the entire corporate paper industry
is not a solution here.

~~~
knowtheory
This is by far the clearest response to the core of what Cuban is aiming at,
and thanks for that.

I am interested in drilling down deeper on your comment about Fannie & Freddy.
I don't view their failure as a criticism of the idea of loaning for the
public good. I definitely view their failure as a lack of oversight combined
with perverse incentive structures and a truly mind-boggling denial on the
risk of loans.

But what befell Fannie and Freddy also blew up Wall Street. So the deeper
underlying question is if there are people out there who are better at
assessing loans who the government could use as intermediaries for taking
advantage of the low credit available to the gov? (yes that's predicated on
this being feasible at all in the first place, which i don't take for granted)

~~~
wisty
I'm also dubious about how Fannie and Freddie failed. There was a bubble
(caused by what, low rates? guarantees? demographics? the credit bubble?), and
it deflated. But the US government is not the only entity to screw up in this
way. The UK housing bubble also burst. Japan had the same problem. And while
the government was certainly _involved_ , so was private industry and the
general public. It doesn't prove "government = bad", that's just confirmation
bias.

What it does prove is that you (the government, industry, or general
population) shouldn't pour too much money into areas that show all the signs
of a credit bubble.

------
Alex3917
How about 10,000 X-Prizes, each with a 10M or so prize. That seems much more
sensible. Everyone who wanted to compete for a given prize could register with
a transparent prediction market, which would give investors an easy way to get
to know the different people competing in each category.

~~~
nl
How does that fix employment?

It might be a highly efficient way of developing new technology, but prizes
_don't_ immediately generate large amounts of new employment.

Think about it: most X-Prize-type competitions rely on the intelligence of a
few highly skilled people, and even then only a few of them will actually win.
The other teams generally make a loss, and so have to rely on "investors" to
pay the bills.

To fix employment you need to employ 10,000 ex-auto workers, who at best have
some machinist skills if you are lucky. Then you need to do it ten more times.
Then ten more. Then you need to do the same for the construction industry, for
hospitality and for agricultural workers[1][2]. What's more, you need to do
this _fast_ \- in months, not years. I cannot imagine anyway to structure a
X-Prize to do that.

[1] See the unemployment rates by sector:
<http://www.bls.gov/news.release/empsit.t14.htm>

[2] To be fair, the hospitality industry will probably pick itself up once
employment improves in other sectors so you might only need to generate a few
100K jobs instead of a million.

~~~
tomjen3
If they only get some machinist skills at best, then they are effectively
unemployable. So rather than getting a job, they should start taking classes
at the local community college. Then, once they have become nurses, care-
takers, welders, electricians, etc, etc they won't have such a big problem
finding jobs.

~~~
nl
_Seriously_??!

Nurses, care-takers: Unemployment rate = 5.9%, with 1.2 million (already
trained) people unemployed

Welders, electricians: That would be either the _construction_ sector
(Unemployment rate 13.6%) or the _manufacturing_ sector (Unemployment rate
9.2%).

Re-training will help some people, but isn't immediate and will never help the
majority.

There seems to be a weird view that manufacturing in the US will be dead in
the future because it is struggling now. It's probably worth noting that rich,
first world countries like Germany have huge manufacturing sectors, employing
large number of people, and yet have to compete directly with countries with
low wages. It isn't clear at all why some people believe the US is fated to
lose its manufacturing sector but Germany isn't.

~~~
tomjen3
The US isn't going to loose its manufacturing sector anymore than Germany.

It is just that there will be a lot less jobs in the future.

------
yaix
Why 100 employees? Why 100mm turnover? What are all these random values about?
Any science in it, or just a guess?

There are and have been all kinds of stimulation policies in Europe. If you
are looking for ideas, have a look at which of them where successful and which
were not.

For example in 2008/09, the German gov't paid companies a part of wages if
they abstained from laying off people. Was a win-win a year later. The
companies saved money because they did not need to re-hire tons of employees
when the economy recovered, and the gov't saved money on all kinds of welfare
expanses they could avoid paying.

There are many other such programs around, some successful, many not. But it
would probably be better in the hands of the US states and not the federal
gov't.

------
Lambent_Cactus
"The Republican/ Tea-Party approach to job creation is to cut taxes. The
theory being that more money in the pocket of individuals will cause people to
spend more money in the economy thereby creating more jobs. Nope. Not
happening. Why ? Because individuals have too much debt. Any money they get
goes to pay credit cards, student loans and for the smart and fortunate into
savings.

Individuals now have debt = to about 119pct of income vs historical levels of
.17pct in the 40s, 55pct in the 50s , 65pct in the 60s and a high of 133pct in
2007)."

This is clearly wrong. Never mind cutting taxes, that's much too indirect. New
plan - the government borrows as much as it can at negative real interest
rates until it bids those rates back down to 0. Then it just mails checks to
every American. Some will spend the money (probably with great efficiency!
They know what they need!), but most will use it to pay down debts. This is a
feature, not a bug. The debts that Americans owe have positive, and in some
cases substantial, real interest rates. Bam! You have just accomplished to
biggest interest rate arbitrage play in history.

------
DanielBMarkham
I like the creativity here, but the naivete is a bit much. Very strange that I
should make that observation about Cuban, but there it is.

We already have this incredible sophisticated and involved system for creating
jobs -- its called the startup market. Each year, tens of thousands of folks
come up with ideas to do things people want, and that always means creating a
job, if only for the founders. Each year folks invest, or not, and those folks
get a shot at succeeding.

So we have tens of thousands of highly-motivated folks putting their own lives
and money on the line to make jobs. How could this possibly stack up against
BigCorp getting subsidies to create busywork?

The Tea Party used to be non-partisan, at least in theory. Probably never
really were, though. But there's a critical non-partisan meta point that you
have to acknowledge before you spin off with a bunch of creative top-down
ideas: we've been here before. Every time there's an economic problem people
come out of the woodwork with all sorts of totally awesome ideas. Some of
these work, some don't. The only difference between these implemented ideas
and the startups I mentioned is that these ideas are huge things and we can
only do a few at a time as a nation.

I think this creative problem-solving is great, but you have to face facts:
been there, done that. Whatever we do, we have to have a system that continues
to let us come up with and fund these ideas when we need to. Running huge
deficits and debt loads over 100% of GDP doesn't let us do that. [insert
argument about how I exaggerate when exactly we become limited in our options,
but note that at some point even the hardiest Keynesian must realize that the
time has arrived.] So debt arguments are not necessarily about philosophy for
how to run the economy and create jobs, they can be about the simple _ability
to do so._

If you ask me, we need to talk about policies that are going to create
millions of failures from the bottom-up, all trying to build things to help
folks. Not trying to pick among the hundreds of great ideas for the top 3 or 4
that we then throw hundreds of billions of dollars at. It might feel great all
rallying around one or two cool ideas, but this is a numbers game. We need to
play it intelligently.

~~~
RockyMcNuts
Naive is pretty much what I thought. The organization he describes is called a
'bank' - the government could just tell banks they will guarantee loans
properly underwritten based on X criteria that correlate to number of new jobs
created.

Starts to sound awfully like Fannie and Freddie, which made sense when there
was no national banking or mortgage market, but tens of thousands of banks
with no access to capital. But later they become pure rent-seeking
bureaucracies monetizing an implicit Federal guarantee doing nothing a
national bank wouldn't do. (not blaming Fannie/Freddie for the crisis although
they didn't help matters, and based on bank behavior banks arguably would have
done an even worse job).

Could be creating a monster that never goes away and distorts the market.

Cuban's proposal is also paralleling oil policy in the 70s - deregulate 'new'
oil and put a 'windfall profits tax' on already discovered oil.

In theory it promoted drilling - in fact it also promoted game-playing to
launder 'old' oil into 'new' oil. Similarly, this would be limited to
employers who can navigate the paperwork, and it would make economic sense to
use this for projects they would have done anyway or somehow laundering
existing jobs into 'new' jobs by transferring work to new entities.

Good idea to study why people aren't hiring and provide appropriate incentives
to reduce the costs and risks of hiring. The payroll tax holiday was a good
idea to reduce cost of employees; extra deductions for training programs to
increase productivity, maybe tax credits for hiring long-term unemployed. The
more broad-based and the less paperwork the better. I'm not sure the reason
companies aren't hiring is related to access to credit.

There are labor economists who spend their lives on these problems, Cuban
should probably talk to some of them, they might have a lot of ideas, some of
them might even be politically feasible, and make sense to a business guy like
Cuban who can get support for them.

------
steins
Facepalm.

I normally love Mark Cubans blog, but this is a terrible idea. If a company
cant afford to keep employees it shouldn't hire them. This would be almost as
bad as the bailouts were.

This would send inflation skyrocketing.

What happens to all of those small companies that don't have the connections
or legal know-how to get the government money? They go out of business because
they would not be able to afford the new inflated cost of hiring.

What happens to the people who can barely scrape a living out of their current
wage when the inflation this would cause sends food prices sky rocketing?

~~~
knowtheory
Would it send inflation skyrocketing the way that the stimulus sent inflation
skyrocketing? :P

Because if you look at the data, current inflation doesn't seem to be out of
line with inflation prior to the 2009 economic collapse:

[http://www.fintrend.com/inflation/inflation_rate/CurrentInfl...](http://www.fintrend.com/inflation/inflation_rate/CurrentInflation.asp)

More to the point, the whole point of borrowing to invest, is that if done
successfully, your business grows in a sustainable manner, and you can
continue to pay that person money for the business you have built.

This is how business loans are supposed to work. You start with nothing, you
get a pile of money, you build something that will earn that money back, and
hopefully have built a stable company in the mean time that will continue
generating wealth even after the terms of the loan come due.

This shouldn't seem foreign on a startup and entrepreneurship site.

~~~
danenania
There is actually rampant inflation. Global prices for food, energy, gold, and
many other commodities are at or near all time highs. The reason this might
not show up in some metrics is because we are also experiencing deflationary
collapse in previously inflated sectors like housing.

~~~
tsotha
This. Doesn't anyone around here shop for groceries?

~~~
jeffool
Correct me if I'm wrong, but wouldn't this be a sign of inflation if food
prices were going up here, but not in non-dollar places?

Food prices are going up universally. It's not a matter of shopping for
groceries, it's knowing how much other nations are paying.

~~~
danenania
It's not so simple when the dollar is the world's reserve currency. The US
exports inflation.

~~~
jeffool
Well, consider me educated! Thanks!

------
jules
Imagine this scenario:

Once upon a time the total money in a country was $1. Then the guy with the $1
put it in the bank. The bank lent the money to another guy, and that guy then
owed $1.10 to the bank after interest. That guy happened to be a car dealer,
and the bank owner bought a $0.10 car from him for the interest he earned.
Everyone is happy.

Now imagine this scenario:

Once upon a time the total money in a country was $1. Then the guy with the $1
put it in the bank. The bank lent the money to another guy, and that guy then
owed $1.10 to the bank after interest. That guy happened to be a car dealer,
and some other guy bought a car from him for $0.10. That guy got the money by
lending it from the bank. After a couple of years of this stuff, through
interest, the total money owed to the bank was $2. So the interest these
people have to pay in total is $0.20 that year. There is _no way_ that all
money can ever be paid back to the bank, unless the bank owner spends a lot of
money. If the bank owner spends say $0.10/year, the total money owed to the
bank is bound to increase. Everyone is now a debt slave to the bank. People
are going to have to default on their debts, there is no other possibility,
because there simply isn't enough money in the world to pay back the bank.

Is it possible that we are in scenario #2?

------
csomar
You don't need money to create jobs. I'll give you a scenario:

Imagine Mark and Adison, two neighbors. Both are living happily and have 10
hours a day of free time. Mark can plant trees, while Adison can do house
decoration. Both of them are idle. Both of them are jobless. Why? Because Mark
can't plant trees, he doesn't have a land. Adison had already done decoration
for his home.

One day Adison comes to Mark and suggests that he does home decoration for
him. In return, Mark will plant some trees for Adison. Trees are like a long
term investment for Adison and house decoration is an improvement in the
living standard of Mark. Now both of them are working full time. No money is
required.

For the economy, the living standard of the population had increased. Did we
require money? No!

So what's wrong? It's not about the money. We need to enthusiast people with a
fair, free and open system and they'll start working.

~~~
dhume
So Mark's gone from having an uninspired house interior and no way to pay the
bills to having a nicely-decorated house and no way to pay the bills.

Directly trading one luxury for another doesn't help when what you need is a
way to feed yourself, pay the rent, heat the house, etc.

~~~
csomar
What I said is

>> Both are living happily and have 10 hours a day of free time.

Forget about the bill and currencies. These are abstraction layers we made to
make small exchanges possible and fast.

------
chefsurfing
Why not? If the Chilean government can do it, I imagine government(s) in the
US can make it happen. Maybe it could start in smaller cities and towns. The
missing part it the meme and forward thinking. <http://www.startupchile.org/>

~~~
podman
Funds like this already exist. New York City has the NYC Entrepreneurial Fund:
<http://www.nycedc.com/FinancingIncentives/Financing/NYCEF>

------
adammichaelc
When are smart people going to stop falling for central planning? How can a
person believe that any central power can accurately plan for more than a few
others?

In any economy, millions of individual buy/sell decisions affect the system.
One central committee will never be able to mimic that complexity and then
accurately plan for it.

PS to the OP. I wouldn't say it's high taxes that are hurting jobs as much as
it is stifling regulations. Our system is basically a 200 year-old Windows
computer that has had its kernel and registries tweaked and changed so much
that the machine is slow and a pain to use. Not to mention the malware (think
lobbyists)...

If we could re-boot from source in the US and just end most regulations jobs
would come back more quickly than any other scheme. Or perhaps we just need a
new OS.

------
Xlythe
This would put a large amount of money in the hands of a small group of
people. Money that isn't theirs, yet they get to decide where it goes. If the
payout justifies it, corporations will hire lobbyists or set up backroom
deals. There will be a huge influx in demand for essentially free money,
meaning the paperwork to go through will be enormous. Shell Corporations that
meet the requirements will sign up in addition to their actual corporation.
And by setting minimum requirements (Especially 10yrs, 100workers), you end up
targeting corporations who already have money in the bank. It's the uprising
corporations that spend their revenue on expansion, that take out loans to
rent a bigger office.

------
gallerytungsten
The process Mark Cuban describes already goes on all the time at the state
level. States routinely give giant tax breaks and other financial goodies to
companies that promise to build a plant, create jobs, or otherwise invest in
the state economy.

The problem right now is that this system is generally highly political,
unfair, and non-transparent. Cuban implicitly identifies this problem with his
idea that the decision-makers should have not made political contributions for
five years.

Additionally, states routinely fail to put an enforcement mechanism in place,
and they're shocked, just shocked, when they discover they've been fleeced.

------
tomjen3
Great he wants to make it even more difficult for small businesses to compete.

Anyway the reason to cut taxes isn't to create jobs, but because taxing
anymore than what is required to fund basic government services is immoral.

~~~
icebraining
Why isn't taxing enough to fund basic government services immoral too?

EDIT: And how do you define 'basic'?

------
TheCondor
Are there enough good people to hire? Not that many years ago tech companies
were hiring every H1B they could because there weren't enough local talent.

The more I think about it, the solution might make the problem worse in the
near term but I think the solution is to clean the slate so we can start over
with a new playing ground to make our compromises on. Let's make a flat tax
for all businesses and then a flat tax for all individuals, price it to
balance the budget and put a 5 year holiday on new tax law. Then in 5 years we
can start making our compromises again and recomplicate the tax code to let
companies game the system and try to coerce culture changes and what have you.
In the mean time, all businesses pay x% and all individuals pay y% on all
income, period. Perhaps graduate the tax for incomes below $50k, maybe. And
perhaps instead of 5 years, we do it until the AAA rating is restored or the
debt shrinks to some number or something. Just radically simplify it all.

I'm just tired of all the unintended consequences and how complex the tax code
is. I can't see how we can make it better by trying stuff like this and it
seems easy to game without some sort of oversight. (Could you hire your 3 year
old and give them a salary no the government's dime? Could you hire a bunch of
people for really cheap wages and skim?)

------
retube
> if you can borrow money at a negative rate you should borrow as much as you
> can

True, but the treasury can't borrow at a negative rate. Actual yields are
positive [1].

So called "real" yield is the actual yield minus a forward inflation component
as implied by the TIPS (Treasury Inflation Protected Securities) curve. All
this means is that the return you earn on owning the bond is _likely_ to be
less than what inflation is projected to be. And from the Govt perspective,
they will still be paying back more than they borrowed (yields are positive)
but that the payback is likely to be devalued to a "real" value less than
today's value.

[http://www.treasury.gov/resource-center/data-chart-
center/in...](http://www.treasury.gov/resource-center/data-chart-
center/interest-rates/Pages/TextView.aspx?data=yield)

------
jgervin
One issue, companies that meet your requirements really aren't innovating or
releasing new products. If they are, a overwhelming majority will be investing
in short-term micro growth, like building a new bridge.

We actually have this system in place, VC's, Incubators and Angels. They
verify opportunities and fund them. Startups are our future, whether you like
it or not. And yes many will fail, but those that don't will provide long-term
macro growth.

The biggest winner in about 10 years will be DST, they get it.

If the government wants to solve this issue lend capital to startups directly
or via VC's, Incubators, Angels, or whatever. Maybe only lend it to those
seeking C rounds to verify a companies stability and to prevent a bubble.

------
f1gm3nt
This is a good idea, but will never work. First of all the requirements
wouldn't work. You would be investing in companies that would hire a ton of
people only to lay them off after a project.

You would have better success by finding businesses that would hire and retain
people. These won't be a company that has been around 10+ years. Those
companies would put this money to better use.

Also it would be a crazy bet to give money to any business that has only been
in business for a short time.

If you're really looking to freak people out, put your presidential candidates
on American Idol and see who gets the votes. Why not just make a push for a
resource based economy? Not THAT would really freak out a lot of people.

Good article :)

------
gavanwoolery
Creating jobs is good, but why put this in the hands of the government? You
(Cuban) have already argued they are too bureaucratic and wasteful in
organizing any of their sectors.

Cut taxes. Tax cuts give VCs, banks, and other lenders/investors more money to
invest. Tax cuts also make employment cheaper for everyone (since they get
taxed less, you can pay less and they will still get as much money). And they
will invest in the things they think are going to be most successful, which I
would argue the government would not be good at doing.

Stop giving the government money. They have already proven they do not spend
it well, and they create more debt than value that they add.

------
T_S_
tl;dr Wage subsidy in the form of credit extended to established companies. No
benefit to you, HNers.

Remember green jobs? They aren't happening. So here's an alternative. Cut
sales and income tax. Impose heavy carbon tax (enough to get gas to $10 gallon
in 7 years). Impose carbon-linked tariff on imports. No subsidies to energy
research, only to verifiable carbon sequestration. The realignment needed to
adjust to that will be very US-labor intensive. And people will feel great
about meeting the challenge of fixing the world's biggest externality. Some of
us will anyway.

------
mdonahoe
We need a better vision than "everyone must be employed."

Something more specific than "Win the future", and ideally something most
people can believe in.

It seems like an implicit goal is world peace. The US spends a ton of money on
defense, but the problem is our current methods involve lots of killing. It's
hard to feel good about mass murder. I think we should still spend tons of
money on defense, but just explicitly give more money to non-lethal
technology.

We should be very clear that our goal is world peace and come up with very
specific subgoals we want to see.

------
itissid
I dont mean to hijack this post but I think granting citizenship to non
citizens living here for sometime, provided they buy a house, would be a great
way to raise real cash instead of printing and borrowing and cash for
clunkers. There would be a lot of people willing to spend some serious money
to get a citizenship in the US. And giving it to only a certain category of
people who have stable jobs for a certain period of time here can address the
immigration and job killing issue.

------
gosub
I'd like to see a serious discussion about the possibility that western
economies reached their maximum capacity for employment. Probably the level of
production for goods and services will hit a plateau (even if we increase the
number of products to infinity, we don't have the time to consume all of them,
so the market will reject them), while the productivity (production per unit
of workforce) naturally tends to increase. I think there are serious
sociological implications.

------
nhebb
Charles Gasparino has a similar idea. US companies have about $1 trillion
parked overseas that will be taxed at 35% if transferred back to their US
operations. His idea is to let them transfer the money tax free, on the
condition that they use 25% of the funds to hire workers. and grow US
operations. that may sound like corporate welfare, but the truth is that those
companies are not going to bring that money back anyway.

------
ojosilva
Here in Spain, and in other countries I've lived in (Europe and South
America), there's something called a Savings Bank
(<http://en.wikipedia.org/wiki/Savings_bank>): a non-profit, regional/local
state controlled bank. Good folks put their money in them and the savings bank
invests it back into the economy for public good, social and cultural
projects, and job creation - doing precisely what the OP suggests.

But savings bank are being dismantled in Spain now, and in many places like
Brazil 10+ years ago. Why? Because politicians need money for their campaigns.
Politicians control these savings bank. Eventually the savings bank money
makes into the ruling parties friends pockets and financial supporters. Or
into senseless investments, investments a private bank has a much lower
probability of making since private banks have shareholders and higher stakes
that make them much more accountable for their actions.

Government should not lend money directly. That's what banks are for.
Government should not replace the private sector. Ever.

Government already has enough resources to incentive the job market: tax cuts
for companies that hire new people. Deregulation of the market. Interest
rates. Money printing. Hiring public workers. Starting public projects.
Declaring wars in foreign countries.

Creating jobs with loans is currently available anyway: companies can show a
plan to banks and investors, so they can decide to grant the loan or not based
on things like risk and profitability for both parties. Risk aversion and
accountability is something that Government overlooks considerably. Private
loaning and investing is a very flexible system: the company may then chose to
use the money to cut down on its work force, replacing people with robots.
That's great, because it makes companies more competitive. That's more
important down the road. Lending money, as the OP suggests, to companies so
that they can just go out and hire is reinforcing a negative behavior: become
less productive first, then see if you can catch up. That's just creating a
country of sweat shops.

Recessions can actually be a positive thing for the economy when good,
functioning companies (who have cash flowing) have better choice to hire great
people (who became suddenly jobless). So don't inflate the job market
artificially and mess it up for the well-managed companies and deserving
people out there.

------
JeffffreyF
Great idea. Liars and thieves would kill it. They kill all the ideas that can
work, until liars and thieves are under control nothing will change.

------
jaekwon
Face palm.

Yes, let's have the business of government be exactly that of venture capital
/ angel investment.

The government is bankrupt because special interests and incompetence makes it
an unprofitable business. I'm actually _glad_ that the federal reserve is
relatively immune and separate from the government. That way maybe we won't
have a catastrophic failure when the government finally becomes illiquid.

------
NHQ
How is idea different from taking "short term debt for long term project",
which he assails up front? The money is short term debt; the job, we hope, is
long term--presuming best case scenario where _the program operates as
planned, and creates jobs that don't evaporate_.

I don't know logics, but that doesn't seem like a natural good conclusion,
when the positive negates the whole.

------
nhangen
I disagree that the Republicans and Tea Party can be tied together in the same
/ - but also that their sole method for fixing the economy is lowering taxes.

Regardless, the answer isn't jobs, but transitioning people from being skilled
in trades that no longer matter, and becoming skilled in modern trades, such
as programming, design, etc.

------
guelo
> The problem for the Democrats is that the government hasn’t shown that they
> can earn a positive or even a break even return on their spending.

How do you calculate the return on health care for old people, or school
lunches for kids, or clean water in your faucet, or adding a lane to a
congested highway?

------
Symmetry
We could just borrow money to buy foreign debt, lowering the value of our
currency to help our export center. Basically doing the same thing we always
complain about China doing to us. We could probably earn a profit even if some
of the countries we end up investing in default.

------
doctoboggan
I hate to be cynical but I give this a near zero chance of happening. I do
think its a good idea though.

~~~
knowtheory
When someone says "x could never happen", i always want to ask "what would
have to change for x to happen".

If congress has to act on this, yeah i think it's DoA, regardless of how good
of an idea it is. But why couldn't the Federal Reserve do this?

Why can't the Obama administration who's still sitting on a pile of stimulus
money team up with the Fed to do this? Grants + loans?

The Fed absorbed a huge amount of weird shit (assets like houses and such) in
the aftermath of Lehman Brothers collapse. I would be interested in what they
would have to change to set something like this up.

~~~
seats
Seems like a modern equivalent of the FDR work programs. What did it take for
him to pull it off?

EDIT: <http://en.wikipedia.org/wiki/Works_Progress_Administration>

Looks like the executive branch should have enough power to do this on its
own.

~~~
knowtheory
Well, i think a key difference is that the Works Progress Administration
directly employed people (as far as my understanding goes).

<http://en.wikipedia.org/wiki/Works_Progress_Administration>

The difference in what Cuban is suggesting is that he's just asking why the
government can't loan directly to businesses to hire.

~~~
seats
Right, but that's why I'd say it is a modern take on it. It actually makes the
program more like an opportunistic specialized VC/investment bank combo.

------
tybris
Dig a hole and fill it up. Our economy is saved!

What the government needs to get better at is extract money from the economy
in a way that creates, rather than destroys economic value. This is what
almost every business does, why can't the government?

------
lkrubner
The USA has suffered a loss of $2.8 trillion in GDP that the USA could have
but chose not to have:

<http://krugman.blogs.nytimes.com/2011/08/11/the-waste/>

------
bennesvig
Why not just adopt something like the Fair Tax where business would pay
significantly less taxes. Wouldn't that be just as good, if not better than
doling out money to companies who "promise" to hire?

~~~
jbri
Basically half the article is stating that generically cutting corporate taxes
doesn't actually create jobs.

------
maxwin
This assumes that China and the rest of the world are idiots. By borrowing
more and more money and devaluing it, US is gradually losing one thing :trust
which is very important for the US economy.

------
iwwr
_Any money they get goes to pay credit cards, student loans and for the smart
and fortunate into savings._

What's wrong with THAT?

------
monochromatic
I see a whole lot of conclusory statements in this article. Why should I take
your word for a single one of them?

------
chrismealy
Another edition of "Let's pay attention to what the rich man says."

------
shawndrost
yeah we're already doing that

------
chailatte
Here's another wild thought.

Do nothing.

Let the bankers steal from the middle class. Let federal reserve steal more
money from its citizen. Let the government accumulate more debt. Let the jobs
go overseas. Let inflation run rampant. Let people go deeper and deeper into
housing/student debt. Let small businesses die.

In fact, encourage it.

Why? because the current system/society, as it stand, is dying body that
cannot be healed. It is too old. Too lazy. Too morally corrupt. Too broke.

Because common citizens will wake up one morning. They will be out of a job.
They will be losing their house. They will be in massive debt. And they will
not be able to afford even the most basic food/gas.

Then they will be truly angry. Not angry as in chatting about it online. Angry
as in massive protests in the capitals. Angry as in shutting down major
websites. Angry as in rioting. Angry as in burning down houses. Angry as in
everywhere.

Only then will there truly be changes.

~~~
jodrellblank
_Why? because the current system/society, as it stand, is dying body that
cannot be healed. It is too old. Too lazy. Too morally corrupt. Too broke._

Who cares about 300 million citizens suffering through a total economic
collapse, as long as The System improves? It should be encouraged, they should
sacrifice themselves willingly to the idea of a better System.

------
jpr
Yeah, stupid, ignorant and dangerous ideas tend to freak people out...

------
donnaware
Mark Cuban for president

