A recent article by Tim Carney, On jobs, Obama giveth, and Obama taketh away, shows a little sample of how the stimulus package and other government interventions are creating… and destroying jobs, at the same time.
First a little digression. Note the disturbing words of GE Chief Executive Officer Jeff Immelt, quoted in Carney’s article:
“The interaction between government and business will change forever. In a reset economy, the government will be a regulator; and also an industry policy champion, a financier, and a key partner.”
What? An explicit endorsement of corporatism. Yes, Wall Street and the Government are good friends. This ‘key partner’ will make sure everyone behaves. Of course!
If you haven’t already, mark off GE as an opponent of free markets, and supporter of big government.
Back to the original topic… though. Stimulus legislation directs money into specific areas of the economy that would not otherwise receive funds, creating an artificial boom. Of course, often requires the companies in these sectors to hire additional workers, thus ‘creating jobs’.
The government can figure out fairly easily how many new jobs were created, and tout them as a sign of success. Most people buy into it without seeing the other side of the coin.
What we don’t see are the jobs that are destroyed. It’s impossible to figure out how many are destroyed- some are literally destroyed- and some that would have been created are not created.
We should bear in mind that the government does not create new wealth or purchasing power when it passes a stimulus bill. Government has nothing and produces nothing to begin with; it must first take from one part of the economy before it can give to another. By directing resources to certain areas of the economy, the government necessarily directs them away from other areas, depriving those areas of the resources needed to sustain and create jobs.
The problem is that we can’t always figure out how many jobs were destroyed or not created in the process, but it’s quite easy to point to jobs created. And if the stimulus fails and unemployment persists, the government can still claim success, by saying it would have been worse without the stimulus. It also leaves the door open to passing additional stimulus bills- something is probably going to play out soon as the US economy continues to drag its feet.
Unfortunately the stimulus is badly named- it’s actually a more of a sedative, delaying economic recovery by funding unsustainable, nonproductive economic activity, robbing other areas of funds they desperately need.
There is something the government can do to legitimately stimulate and restore a healthy economy based on sound fundamentals: reduce spending and taxes. It’s a proven strategy- though, with the dominance of Keynesianism we have not seen it in awhile. The 1920 Depression was deep but short- unemployment climbed higher than it is today- and recovered completely in less than 2 years. And during that period, the government cut spending, cut taxes, and paid off some of the debt.
On the contrary, during the Great Depression, massive government interventions winded up turning it into a fifteen year nightmare. It boggles the mind how Roosevelt has escaped as a hero even though most of his presidency was spent presiding over and exacerbating the depression.