Tag: employment

Federal Job Creation

The board game Monopoly first took off during the Great Depression. A different game has become popular during today’s Great Recession. In this game, politicians race against high unemployment to create jobs in order to save their own. The players (politicians) have unlimited tax and borrowing authority, and can call upon friendly economists to help them maneuver. The players even get to keep score, although the media can penalize shoddy scorekeeping. Ultimately, voters will decide which players win and lose in the fall elections.

Okay, I’m being facetious. But as politicians continue to throw trillions of dollars at the economy in a vain effort to create jobs, and the media continues to go along with it by obsessing over meaningless job counts, the entire spectacle has become surreal. If government job creation is a game, the losers have been the taxpayers underwriting it, as well as the employers (and their employees) who are closing shop, laying off workers, or not hiring because of uncertainty over what big government schemes will be next.

Two news articles point to this “regime uncertainty” being generated by Washington.

First, the government’s chief technology officer, Aneesh Chopra, received a somewhat hostile reception at the recent Consumer Electronics Show in Las Vegas according to the BBC:

“The government doesn’t spur innovation or entrepreneurship. The government often gets in the way,” said Mr. [Gary] Shapiro, president of the Consumer Electronics Association (CEA) which stages CES.

It [CEA] also had little support for President Obama’s $787 billion stimulus act calling it “panic spending” and warned of the growing federal deficit.

“The government is often a barrier,” said Mr. Shapiro. “High taxes and regulatory bureaucracy are barriers.”

Mr. Chopra’s response was typical of the political-bureaucratic mindset:

He said the US government was planning a summit with a number of chief executives from the “most innovative companies in the country to directly advise us to make government more efficient and more effective”.

Ah, another summit.

In the other article, the CNBC headline says it all: “Many Reluctant to Hire Because of New Taxes, Rules.” The article makes it clear that what businesses don’t need is another orchestrated summit:

The prospect of increased federal and state regulation and taxes has been particularly disruptive to the hiring plans of small- and medium-sized businesses, which have historically generated about two-thirds of the nation’s jobs. “I don’t really see the private sector hiring much in the next few months,” says Brian Bethune, an economist at Global Insight. “For the small-business sector there is just too much uncertainty about what happens beyond 2010.”

In reporting that its small business optimism index fell for the second straight month in December, the National Federation of Independent Business Tuesday said members’ No. 2 reason for not expanding payrolls was the prospect of government policy initiatives…”We’re hearing it more and more from our membership,” says Bill Rys, the NFIB’s tax counsel. “At the federal level, there’s uncertainty about tax rates, health care costs, energy costs. You also have what’s going on at the state and local levels, with new fees and taxes. They’re reluctant to jump back in.”

Unfortunately, instead of heeding the business community’s message, the Obama administration is focusing its energies on tinkering with the game’s scorekeeping. From ABC News:

The Obama administration has taken some heat and mockery for using the nebulous and non-economic term of jobs being “saved or created” by the $787 billion stimulus program.

So it’s gotten rid of it.

In a little-noticed December 18, 2009 memo from Office of Management and Budget director Peter Orszag the Obama administration is changing the way stimulus jobs are counted.

The memo, first noted by ProPublica, says that those receiving stimulus funds no longer have to say whether a job has been saved or created.

“Instead, recipients will more easily and objectively report on jobs funded with Recovery Act dollars,” Orszag wrote.

In other words, if the project is being funded with stimulus dollars – even if the person worked at that company or organization before and will work the same place afterward – that’s a stimulus job.

The American people are rightly growing tired of this nonsense. But it’s important that they understand that the idea of government job creation was flawed from the get-go. The government cannot simply wave a magic wand and create jobs without making private sector jobs disappear at the same time because of higher taxing and borrowing. There is no free lunch with government.

Perceptions of Government Pay

A new poll by Rasmussen finds that the general public has an accurate assessment of government worker pay.

Compared to the average government worker, most Americans think they work harder, have less job security and make less money.

In fact, 59% of Americans say the average government worker earns more annually than the average taxpayer, according to the latest Rasmussen Reports national telephone survey. Just 15% don’t believe that to be true, while another 26% are not sure.

Among those who have close friends or relatives who work for the government, the belief is even stronger: 61% say the average government worker earns more than the average taxpayer.

Feeding that belief is the finding that 51% of all adults think government workers are paid too much. Only 10% say they are paid too little, while 27% say their pay is about right.

Bureau of Labor Statistics data indeed shows that government workers work fewer hours in a year and have much higher job security than private sector workers. And I’ve argued that they are generally overpaid, and by increasing amounts.

For more, check out:

Is Keynesian Stimulus Working?

In his Brookings Institution speech yesterday, President Obama called for more Keynesian-style spending stimulus for the economy, including increased investment on government projects and expanded subsidy payments to the unemployed and state governments. The package might cost $150 billion or more.

The president said that we’ve had to “spend our way out of this recession.” We’ve certainly had massive spending, but it doesn’t seem to have helped the economy, as the 10 percent unemployment rate attests to.

It’s not just that the Obama “stimulus” package from February has apparently failed. The total Keynesian stimulus is not measured by the spending in that bill only, but by the total size of federal government deficits.

The chart shows that while the federal deficit (the total “stimulus” amount) has skyrocketed over the last three years, the unemployment rate has more than doubled. (The unemployment rate is the fiscal year average. Two months are included for FY2010.)

200912_blog_edwards17

The total Keynesian stimulus of recent years has included the Bush stimulus bill in early 2008, TARP, large increases in regular appropriations, soaring entitlement spending, the Obama stimulus package from February, rising unemployment benefits, and falling revenues, which are “automatic stabilizers” according to Keynesian theory.

The deficit-fueled Keynesian approach to recovery is not working. The time is long overdue for the Democrats in Congress and advisers in the White House to reconsider their Keynesian beliefs and to start entertaining some market-oriented policies to get the economy moving again.

Spending Our Way Into More Debt

Huge deficit spending, a supposed stimulus bill, and financial bailouts by the Bush administration failed to stave off a deep recession. President Obama continued his predecessor’s policies with an even bigger stimulus, which helped push the deficit over the unimaginable trillion dollar mark. Prosperity hasn’t returned, but the president is persistent in his interventionist beliefs. In his speech yesterday, he told the country that we must “spend our way out of this recession.”

While a dedicated segment of the intelligentsia continues to believe in simplistic Kindergarten Keynesianism, average Americans are increasingly leery. Businesses and entrepreneurs are hesitant to invest and hire because of the uncertainty surrounding the President’s agenda for higher taxes, higher energy costs, health care mandates, and greater regulation. The economy will eventually recover despite the government’s intervention, but as the debt mounts, today’s profligacy will more likely do long-term damage to the nation’s prosperity.

Some leaders in Congress want a new round of stimulus spending of $150 billion or more. The following are some of the ways that money might be spent from the president’s speech:

  • Extend unemployment insurance. When you subsidize something you get more it, so increasing unemployment benefits will push up the unemployment rate, as Alan Reynolds notes.”
  • “Cash for Caulkers.” This would be like Cash for Clunkers except people would get tax credits to make their homes more energy efficient. Any program modeled off “the dumbest government program ever” should be put back on the shelf. 

  • More Small Business Administration lending. A little noticed SBA program created by the stimulus bill offered banks an “unprecedented” 100 percent guarantee on loans to small businesses. The program has an anticipated default rate of 60 percent. Small businesses need lower taxes and fewer regulations, not a government program that perpetuates more moral hazard.

  • More aid to state and local governments. State and local government should be using the recession to implement reforms that will prevent them from going on another unsustainable spending spree when the economy recovers. Also, we need fewer state and local government employees – not more – as they’re becoming an increasing burden on taxpayers.

The president said his administration was “forced to take those steps largely without the help of an opposition party which, unfortunately, after having presided over the decision-making that led to the crisis, decided to hand it to others to solve.” Mr. President, nobody has forced you to do anything. You’ve chosen to embrace – and expand upon – the big spending policies that were a hallmark of your predecessor’s administration.

Today’s White House ‘Jobs Summit’

Today’s Politico Arena asks:

The WH Jobs Summit: “A little less conversation? A little more action? ( please)”

My response:

Today’s White House “jobs summit” reflects little more, doubtless, than growing administration panic over the political implications of the unemployment picture.  With the 2010 election season looming just ahead, and little prospect that unemployment numbers will soon improve, Democrats feel compelled to “do something” – reflecting their general belief that for nearly every problem there’s a government solution.  Thus, this summit is heavily stacked with proponents of government action.  This morning’s Wall Street Journal tells us, for example, that “AFL-CIO President Richard Trumka is proposing a plan that would extend jobless benefits, send billions in relief to the states, open up credit to small businesses, pour more into infrastructure projects, and bring throngs of new workers onto the federal payroll – at a cost of between $400 billion and $500 billion.”  If Obama falls for that, we’ll be in this recession far beyond the 2010 elections.
 
The main reason we’re in this mess, after all, is because government – from the Fed’s easy money to the Community Reinvestment Act and the policies of Freddy and Fannie – encouraged what amounted to a giant Ponzi scheme.  So what is the administration’s response to this irresponsible behavior?  Why, it’s brainchilds like ”cash for clunkers,” which cost taxpayers $24,000 for each car sold.  Comedians can’t make this stuff up.  It takes big-government thinkers.
 
Americans will start to find jobs not when government pays them to sweep streets or caulk their own homes but when small businesses get back on their feet.  Yet that won’t happen as long as the kinds of taxes and national indebtedness that are inherent in such schemes as ObamaCare hang over our heads.  Milton Friedman put it well:  “No one spends someone else’s money as carefully as he spends his own.”  Yet the very definition of Obamanomics is spending other people’s money.  If he’s truly worried about the looming 2010 elections (and beyond), Mr. Obama should look to the editorial page of this morning’s Wall Street Journal, where he’ll read that in both Westchester and Nassau Counties in New York – New York! – Democratic county executives have just been thrown out of office, and the dominant reason is taxes.  Two more on the unemployment rolls.

Monday Links

  • Michael D. Tanner on the Senate Sell-Outs: “At a time of 10.2 percent unemployment, they voted to make it more expensive to hire workers, especially low-wage workers. With the economy struggling, they voted for $485 billion in tax hikes. They voted to raise the payroll tax, limit your flexible spending account, and tax your health insurance plan. This is moderation?”

Thursday Links