Throwing Money at Problems

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Clearly, we’re in the worst recession seen since the 1930s. Unemployment continues to rise, and is 12.7 percent in Los Angeles County while the rest of the country is not far behind at 10 percent. If you include those who have seen their benefits expire, we are well north of 17 percent. That’s one in six people that are ready, willing and able to work that are unemployed.

In recent weeks, the Federal Deposit Insurance Corp. seized California National Bank in Los Angeles and United Commercial Bank in San Francisco as it continues to work toward cleaning up the defunct banks and financial institutions that are basically operating without a pulse. Recent reports indicate that our state budget may have a larger deficit than expected, and will need more cuts and tightening to deal with the shortfall.

Interestingly, the federal government has been touting that 650,000 jobs have been saved or created with stimulus spending. A more in-depth review of the numbers as posted on www.recovery.gov shows that in California alone, we have received $8.18 billion and created 110,185 new jobs at a cost of $74,238 per job. In some instances, such as in South Carolina, the cost is closer to $1.5 million per job.

As a small business owner in Los Angeles, it doesn’t cost me nearly $74,238 to create a job. In fact, if I was given a tax break for this amount, I would be inclined to create three new jobs that would be longer lasting, more productive and much more beneficial to the city and state than any government-created position.

Less optimistic

While some have jumped on the bandwagon of “the recession is over and behind us,” others, like myself, are far less optimistic and much more realistic about the facts. A statistical recovery based on programs like Cash for Clunkers is hardly cause for celebration. All of the “temporary” programs, once taken off life support, will most likely flat-line and cause the gross domestic product figures to drop and unemployment to rise.

In fact, with the current economic conditions, revenues for the city of Los Angeles and the state of California will continue to decline as consumer spending slows, property values drop and unemployment continues to grow. It frightens me to think that we view the current market conditions with too much optimism and haven’t thought about what steps need to be taken to lessen the pain if this recession lasts for another year or two.

Unfortunately, we still have not come around to making the tough decisions that need to be made to turn our local, state and national economy around. We continue to live on credit like a shopaholic who just can’t refuse that one last purchase at the department store.

Instead of providing incentives for productivity and enabling the intelligence and entrepreneurial spirit that drives Los Angeles, we continue to subsidize and prolong our pain. Politicians try to please their voters when they are elected to serve us. Until we individually decide to change our ways, our elected officials will continue to spend recklessly as we pass the buck to future generations.

Californians, especially those in Southern California, are historically very resilient. We have one of the most diverse economies, and some of the brightest people and most advanced technologies in the world. We have to go back to creating more incentives to enable our small businesses to continue to create leading-edge enterprises to get us through these tough economic times. Increased taxes and wasteful spending will only worsen our predicament and ultimately the quality of life for all of our residents.

P. Jacob Yadegar is the founder and chief executive of Empyrean Funding of Los Angeles, which specializes in residential and commercial loans and real estate.

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