Throughout the first year of the Obama presidency, the administration and Congress completely ignored the problem of rising unemployment. Instead, they pursued the Democratic Party’s long-time dream of government-run health care.

Now that the voters of Massachusetts appear to have stopped them in their tracks, Obama has decided to do the only thing worse than neglecting the jobs situation: He is going to pay attention to it.

President Obama, who recently gave up trying to claim he had “saved” anywhere from 19 to 7,435,926 jobs with his reckless federal spending, now presumes to incentivize the creation of jobs by offering targeted tax cuts for businesses who hire new workers.

According to the Associated Press, which may be the only institution in America that knows less about economics than Obama, this has prompted any  number of questions from “tax experts.” (Not to be confused with the AP’s other friends, “government economic experts.”) You couldn’t expect the AP to know this, but only one of the following questions they cite is relevant, even though it’s asked in a rather backwards manner:

_How would the government prevent abuse by companies that artificially increase payroll?

_How would new companies be treated?

_How would a firm be prevented from disbanding and reopening under another name just to claim the credit?

_How would the government ensure firms add long-term employees when the credit is only for a year or two?

_Would firms be willing to add workers to get a tax credit when consumer demand for their products has not increased?

Bet you couldn’t guess . . . it’s the one in red! It’s the only relevant question, but it’s also the wrong question. Why does the Obama Administration want companies to hire more workers if market demand for their products and services doesn’t justify their doing so?

That’s a recipe for making your business fail, and the fact that Obama policymakers hope they will do so is merely the latest demonstration of Obama’s complete lack of understanding about business and economics.

As George W. Bush might have said, I understand small business. I was one. Still am, actually. And once upon a time, I saw it as my mission to create jobs. It was one of the things that excited me most about my business. I loved the feeling of giving opportunities to people who were willing to work hard.

And I decided to take the attitude that a big, strong team of good, hard-working people would bring in the business we would need to cover all the associated costs and turn a profit.

That business is gone, and I’ll be finished paying for those decisions in about three years.

Now, the failure of my business doesn’t prove that the game plan described here can never work. Maybe I should have made better hiring decisions. Maybe I wasn’t a good enough CEO.

But one thing I know for sure is that the only reason you should ever make a hire is that you have a solid strategy by which you can see that the investment in the person will result in greater profits for your company – and I’m talking about profits of at least twice what the person will cost you.

Obama hasn’t been specific about the amount of the tax credit, but some of the proposals floating around suggest a credit of 15 percent of the cost of the new employees. (Whether that includes only salaries or other benefits is not specified.)

Now, if I decide to spend $200,000 on new employees, would I be happy to get a $30,000 tax credit? Of course. But if I don’t have enough business to turn that $200,000 in employment costs into some $400,000 worth of additional profits, it’s suicide for me to make the hires anyway just to get a $30,000 tax credit.

This is the whole problem with Obama’s economic policy-of-the-week. He insists on making it about jobs. But the fact of the matter is, when business profits are plentiful, jobs are plentiful.  During most of the presidency of the Scourge of All Humanity George W. Bush, the economy was growing and unemployment was around 5 percent. No one had to incentivize businesses to hire people back then. It simply made economic sense for them to do so.

Instead of blathering on about Jobs Jobs Jobs, Obama needs to make his priority Profits Profits Profits for private sector companies.

But herein lies the rub: Business profits come from customers spending their money buying goods and services. That means the companies supply what the customers are demanding. What can the federal government do to make private citizens demand the products and services of private-sector companies?

Nothing, really. Except this: Free up and support the value of capital. The government does two things that impact all this. One is the confiscation of capital from the private sector in the form of taxation. The more the government minimizes this, the more capital remains in the private sector to be invested by companies in products and services (including their employment costs), and to be spent by consumers to purchase the products and services.

Generally speaking, federal confiscation of private sector capital has been around 18 percent of the GDP. Obama’s proposals for the next decade explode this amount to nearly 24 percent. The total GDP is about $14.4 trillion. That means that, each year, the government is going to be sucking out an additional $864 billion from the private economy. That’s more than the $787 billion “stimulus” Obama thought would turn around the economy.

Bet you didn’t know that.

The other thing the government could do to help would be to support policies that strengthen the value of the dollar. But under the leadership of Ben Bernanke (who was, to be fair, originally appointed by Bush), the Federal Reserve has been doing exactly the opposite – keeping interest rates obscenely low in an attempt to somehow prop up the economy.

That’s killing the value of the dollar, which is making it harder for American companies to make a profit when they sell their products internationally.

In an environment like this, why would anyone hire more workers? Because Obama proposes to refund 15 percent of the cost? The hire is still a losing proposition if markets don’t provide the revenue potential necessary to make the person you hire a profit-generator.

Remember when Obama told Joe the Plumber that raising taxes on business owners would help his plumbing business because he would redistribute the money to people who would then turn around and hire Joe to fix their sinks?

That was all we needed to hear to conclude that Obama didn’t have a clue about economics. We didn’t need to elect him president so he could spend four years further proving it to us.

But we did. If ever there was a case of person being employed, but his employer enjoying no prosperity as a result, this is it.

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