Jobs is Job One in America, or ought to be, so how’s that working out, exactly?
We’re not in a recession anymore—that ended two years ago. The economy is growing, too—at a 1.4% rate for the second quarter of 2011, and it’s expected to grow at less than 3% for all of next year (the Fed had been projecting, as recently as last April, a 2012 growth rate of over 4%). Never mind that it sure doesn’t feel like that to the 14 million Americans who are out of work, or who are badly underemployed.
Let’s review the bidding. After the debt ceiling agreement was concluded in August, President Obama pivoted to generating jobs, after two years of one of the highest unemployment rates our country has seen since the Great Depression, two years during which he pushed his pet projects at the expense of putting Americans back to work. His first move was admirable, on the surface: he called on the private sector to hire or train 100,000 unemployed veterans or their spouses by the end of 2013. His incentive to business was a couple of temporary tax credits for the purpose. Then he proposed to pay for this with some permanent cuts in Defense: a $400 billion cut in the Defense budget passed that same month (yes, by the Republican House, as well as the Democratic Senate). That this will force the discharge of still more sailors, soldiers, marines, and airmen is unimportant: they’ll just queue up for Obama’s 100,000. And he wants reductions in the GI Bill, which has educated countless veterans. However, at the time of Obama’s proposal, unemployment nationally was over 9%, unemployment among Black Americans was over 15%, and unemployment among military veterans was in the neighborhood of 8.5%. Was the President serious here, or was he just vote pandering? One might ask Rep Maxine Waters (Dem, CA).
This is only one example of the failure of trying to give special treatment to select groups. It doesn’t work, but it does angrify other special groups, who get jealous.
But there’s a larger problem here, and to grow jobs, the entire current set of policies must change. Government spending is not stimulative, Obama’s claim to the contrary: “So then you get the argument…this is not a stimulus bill, this is a spending bill. What do you think a stimulus is? That’s the whole point.” Government spending is inhibitive of growth: it directly crowds out private sector spending; it drives up prices, which crowds out private sector spending; to the extent that government spending is funded by government borrowing, it crowds out private sector borrowing, which reduces private sector spending; and on and on.
Government spending to stimulate the economy was known to be a failure as far back as FDR’s administrations. FDR’s Secretary of the Treasury Henry Morgenthau finally figured out, writing in his diary,
We have tried spending money. We are spending more than we have ever spent before and it does not work. I want to see this country prosper. I want to see people get a job. I want to see people get enough to eat. We have never made good on our promises. I say after eight years of this administration, we have just as much unemployment as when we started. And enormous debt to boot.
Keynesian “stimulus” spending does not work. And even Keynes didn’t intend “stimulative” spending to be a permanent régime, but only a temporary bump.
On the other hand, temporary tax cuts don’t work, either. All such temporary tax “stumuli” do is bring future consumer and business spending forward to the present. When that spending is done, and the temporary tax cuts expire, spending falls off a cliff, as the spending that would have been done (that future having become the present) has already been done. On top of this, there is no new spending to take its place—especially in an economic environment like today’s, with our high unemployment, few consumers able to afford more than the bare necessities and struggling to afford these, and few businesses willing to increase spending in the face of falling consumer demand.
More than just these two examples exist, though. It’s hard to run economic experiments; there are no labs in which to try ideas. But our history has empirical data from additional efforts at stimulation both with spending and with temporary and permanent tax cuts, together with their results on economic growth and accompanying job growth. This article from The Wall Street Journal summarizes that history. It’s a history of the failure of government spending and of temporary tax cuts to stimulate and of permanent tax cuts to foster private sector growth and job growth—by leaving private money in the hands of the experts at money handling: those who earned the money, the private citizen and the private business.
Or we can just go with this President’s same old same old: all those unemployed/underemployed Americans are just getting soft. They just need to take off their bedroom slippers. Put on their work shoes. Shake it off. Stop complainin’. Stop grumblin’. Stop cryin’. They have work to do.
Somewhere. Over the rainbow, maybe.