I love all the analyst talk lately about how the government has to do something to create jobs. My boy John Stewart (of “The Daily Show” fame) said it best the other night when he said that members of various levels of government from both parties now use “more jobs” the way they used to use “terrorism.” In other words, whenever someone is making a point you don’t agree with, or succeeding in winning a debate against your side, you simply can’t loose by saying, “Why are we talking about _____, we should be talking about jobs/terrorism, that’s what really concerns Americans.”
The Private Sector Is The Key – No Matter Where You Fall On The Political Spectrum
I watched President Obama’s speech last week and I was glad he mentioned that it will be the private sector that leads the USA out of the recession (and by extension, Canada’s private sector). I also agree with him that government can sometimes provide some useful regulations. Where I disagree with apparently almost everybody is the whole idea that government can “create jobs.” I put the phrase in quotation marks because the definition of creating jobs might be different for various people. If you look at a short term projection, the government can sign more pay checks to people who would be paid to do infrastructure work, or hire more teachers/police/firemen etc. To many people this counts as creating jobs, but this is a faulty definition in the true sense of the word “creation.” You see the government cannot truly create jobs. They can shift jobs around in the form of tax dollars, but they aren’t going to really innovate or create new industries.
Create Jobs When Is New Wealth Through Job Creation Actually Achieved?
Think about this new infrastructure spending (which the President was very careful not to call stimulus, because we all know that would have radically changed the package), where does that money come from? In a best case scenario it comes primarily from large businesses and the personally wealthy people that own them. Every few thousand dollars taken from Apple is a job that could have been created. For every Warren Buffett who doesn’t mind paying a little extra to the taxman there are wealthy people who will decide to move somewhere that has a lesser tax burden. This all has negative long-term effects on REAL job creation that can only occur in the private sector. The far worse case scenario is that we borrow to fund this spending. This forces the government to pay more of the budget each year to interest payments, instead of investing the money in industry-supporting ways such as better job training, or lowered tuition fees.
A job is only truly created when NEW wealth is fashioned in some way. By definition this means that some sort of new innovation or industry must spring up and pave the way for these government spin-off jobs to come about. Having parties yell at each other to make new jobs is ridiculous. Yes, there are some various ways that government can create jobs. Keeping interest rates low, figuring out which tax cuts which ultimately generate the best incentives for the country, and providing training and relocation grants all help support the private industry. But ultimately, in the Capitalism model that the Western World has subscribed to it has to be the private sector that creates new wealth. I think it is worth repeating that the government cannot directly create jobs, it can only shift tax dollars around into the pockets of other people. I think it is a pretty important distinction to make.
Ask Not What Your Government Can Do For Your Mortgage…
I believe that the end result of this conclusion is unsatisfactory to most people. We want to believe that the government has some financial magic potion that can be used to avoid recessions, keep gas prices low, and reduce the unemployment rate. The truth is that there are strict limits on what the governments can do to drag us out of this mess, especially if we keep badgering them to give each of us our own special handout. As long as we keep growing this culture of entitlement from cradle-to-the-grave, tax rates or debt rates have to keep going up. The more this happens, the more restrictions you put on private industry that should be innovating its way out of this mess.
“It’s About How Hard You Can Get Hit and Keep Coming Forward” – Rocky
I keep coming back to the fact that the USA survived two World Wars and a Great Depression. Every time the country was down, entrepreneurs and political leaders with a will to compromise on tough issues fought their way to the forefront in order to propel the entire Western World forward. Even with things looking a little bleak, I still can’t bring myself to bet against a country that has fought its way back from the brink on several occasions that seem to be more challenging than this one.
BTW, I am semi-aware of how ironic it is for a teacher to be arguing that his job isn’t a true wealth-producer in an immediate sense. My union may just take their card back now (hopefully they’ll at least give me my dues back too!).