by Dom Armentano: FDR
and Obama: Separated at Birth
highly touted $300 billion "jobs" bill is a non-starter.
It is unlikely to get through the Republican House of Representatives
and even if it did, it would not create viable private sector jobs.
After three years of sluggish economic growth and meager private
sector jobs growth, politicians in Washington D.C. still insist
on playing smoke and mirrors with the American people.
spending create jobs? Governments can certainly create jobs in the
public sector; they do it all the time and Obama’s bill will do
more of it. Governments can hire school teachers, social workers,
and millions of other bureaucrats to administer its thousands of
programs and regulations. Importantly, however, the funds for these
jobs must be provided by either taxation or by borrowing from the
private sector. Thus as almost all economists recognize, public
sector employment comes (in some real sense) at the expense of opportunities
for private sector employment.
To see why
this is so, assume that $1million dollars is raised by taxation
to, say, fund new staffing at the Environmental Protection Agency.
No debate; public sector jobs get created. But note that the very
same $1million cannot be spent by taxpayers on new washing machines
or trips to Las Vegas or newspaper subscriptions. Thus for every
job created by government spending there must be a tradeoff of jobs
NOT created (or maintained) in the private sector of the economy.
In economics, there is no free lunch.
jobs, on the other hand, are created in an entirely different manner;
if they are sustainable, they are self-financing. Private employees
are hired with the expectation that their wages will be paid by
the additional revenue or value that they generate for the employer.
Individuals that work for washing machine retailers or for a travel
agency or for a newspaper must generate a stream of benefits for
the company that compensates for the wages they are paid (or they
will be fired). In short, private firms can hire workers — that
is create jobs — if and only if it is profitable for them to do
It is now easy
to understand why the Bush and Obama stimulus programs of the past
did not create jobs and why the current bill, if enacted, will also
fail . First, government programs that loan taxpayer money to private
firms with poor profit expectations (like Solyndra) are recipes
for disaster. The $528 million that was wasted on Solyndra could
have been spent by consumers supporting local retailers and their
employees. Instead it was pure crony capitalism with money and jobs
down the drain.
all of the funding for so-called public works programs in the Obama
jobs bill is temporary. Even if the taxpayer money is paid to private
firms to, say, pave roads or repair bridges, the money is short
term and provides no long-run sustainable jobs. When government
funding runs out so do the jobs.
we have already explained, federal government spending for health-care
professionals or for infrastructure improvements must come from
either taxation or borrowing (or reductions in other government
programs ) and that means that new public sector employment must
come at the expense of older public service jobs and/or private
sector jobs not created. Thus the notion that government spending
can engineer a net increase in employment is dangerous political
create sustainable jobs when management and employees generate profitable
benefits for their consumers. Absent the expectation of profit,
no firm will hire anyone to do anything; would you? Running a profitable
business is already difficult enough (due to competition and changing
consumer tastes) but it becomes even more difficult when taxes,
regulations, and health care costs create strong disincentives to
start a business or hire additional employees.
need another political jobs bill but it does need a dramatic change
in public policy. We need sound money and a balanced (and far lower)
budget; we need a moratorium on any new taxes and business regulation;
and we need the Supreme Court to step up and declare Obamacare unconstitutional.
always survived and prospered despite corrupt political management.
We will again if we can get our public affairs in order.
Armentano is Professor Emeritus at the University of Hartford (CT)
and the author of Antitrust
(Independent Institute, 1998) and Antitrust:
The Case for Repeal
(Mises Institute, 1999). He has published articles, op/eds and reviews
in The New
York Times, Wall Street Journal, London Financial Times, Financial
Post, Hartford Courant, National Review, Antitrust Bulletin
and many other journals.