[I]n a free enterprise economy, increased production increases the number of jobs. It might be said that one job creates another, which is true as far as it goes, but open to misinterpretation; for only productive employment does that. If a man were paid to pick up pebbles on a beach and throw them into the ocean, it would be just the same as if he were in a “government job,” or on the dole; the producers have to supply his subsistence with no return, thus preventing the normal increase of jobs. Putting the unemployed on the dole does not increase “purchasing power.” The dole divides up what is already in production.
Isabel Paterson understood this in 1943 in her The God of the Machine [the emphasis is hers], and FDR’s Secretary of the Treasury, Walter Morgenthau, had come to understand it as early as 1939. But the Progressives then didn’t get it, and the Progressives today still don’t.
Keynesian economics simply does not work in the real world. Government spending, whether on “jobs” programs or on other goals, is not stimulative; it is depressive of an economy, in no small part by crowding out private demand and private spending for products—and here by increasing the cost of private labor. The taxes and the borrowing—which are future taxes—which must occur in order to pay for the spending are even more depressive. The taxes take money out straight out of the hands of the people who have the most interest in its value and the clearest understanding their purpose for their money, and they give it to government bureaucrats for spending on government purposes, whose loftier goals are handed down from on high by fiat. Meanwhile, the government’s borrowing drives up the cost of debt for private borrowers, who have more carefully thought out purposes for the loans and more carefully thought out plans for repaying those loans.
Paterson’s remarks about jobs and productive jobs, in particular, also were clear then, as she wrote in the era of FDR’s Civilian Conservation Corps. The distinction is just as clear today, with the added fillip that at least the CCC laborers were doing something. The present administration’s “jobs” programs have done nothing. They haven’t even produced jobs, as this note illustrates.
These things were apparent in the latter stages of the New Deal, and they’re apparent today. This fall, we will have an opportunity to confirm our choice of two years ago and to strengthen it, or to repudiate it. This fall, we must choose wisely.