The Myth of Government Job Creation

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Although the 1983-84 economic recovery generated more than6 million new jobs in less than two years, the problem of poverty in America remains serious. Ever since the mid-1960s whenPresident Johnson declared his "war on poverty," the proportionof the population living in poverty, as defined by the government, has crept steadily upward, although the rate of increasehas apparently slowed in the past few years.[1]

A perennial and admittedly partial "answer" to the povertyproblem offered by the Washington establishment is governmentjobs programs. Such programs are a principal objective of manyproponents of an interventionist industrial policy who fearthat an alleged decline in the manufacturing sector of theeconomy will deprive citizens of many well-paying jobs, leavingonly "dead-end" employment opportunities.[2] Expanding thegovernment payroll, so it is said, is a way of avoiding this"problem." Other advocates of government jobs programs claimthat they can not only alleviate the problem of poverty, butalso provide such additional benefits as improved environmentaland energy conservation, the rebuilding of the nation's "infrastructure" (i.e. roads and bridges), a stronger national defense, and so on, if only "targeted" correctly by the federalbureaucracy.[3] And the U.S. House of Representatives, just afew days before adjourning in October 1984, voted to appropriate funds to revitalize one of the first government jobs programs, the depression-era Civilian Conservation Corps.

Throughout 1985 the topic of government jobs programs willbe widely and thoroughly discussed in the nation's high schools,as the issue of poverty has been chosen to be the focus of the1984-85 annual high school debate competition. One of the mainresolutions to be debated is "whether the federal governmentshould provide employment for all employable United Statescitizens living in poverty."

If the students and others involved in the debates takeadvantage of the exceptional opportunity thereby provided tolearn some basic economic principles, they will discover thatit is inherently impossible for government to create jobs; onlyeconomic growth in the private sector of the economy can createemployment opportunities. Government taxing and spending programs only redistribute existing jobs: taxation reduces theeconomic vitality of the private economy, destroying jobs there,even though jobs may be "created" elsewhere by government spending on jobs programs.

Moreover, the question of whether government should "provide employment for all employable United States citizens living in poverty" revolves around another question, whether it islegitimate for government to benefit one group of citizens atthe expense of another. If one believes that government owesits citizens justice and equality of treatment, then it isclear that government has no role in trying to "create jobs"through government jobs programs.

But jobs programs are politically appealing. When peopleare put to work through such programs the jobs are highly visible: workers know their temporary jobs have been doled out bycertain politicians for whom they will therefore be more likelyto vote. By contrast, the private sector jobs destroyed throughtaxation (to finance the jobs programs) are much less visible:the unemployed are not likely to realize that it is the higherlevel of taxation that has placed them on the unemployment rolls.Thus, referring to government jobs programs as a means of "creating jobs" is misleading at best, and dishonest and deceitfulat worst. This is not to minimize the problem of poverty, butto suggest that government jobs programs are not the solutionand in fact very often make things even worse.

The present paper will discuss the economic logic of whygovernments cannot create jobs and will offer evidence to support this analysis. Special attention will be paid to arguments that are likely to be encountered in the high schooldebates and to appropriate responses.

Thomas J. DiLorenzo

Thomas J. DiLorenzo is associate professor of economics at George Mason University and an adjunct scholar of the Cato Institute. This paper has been prepared in conjunction with the 1985 high school debate topic of poverty and job creation.