November 16, 2018

The Government Can’t Create Jobs (And It Shouldn’t Try To)

As the November elections approach, politicians are doing what politicians do best: making promises. President Obama’s anti-business image, justified or not, will not score points with voters this year as unemployment continues to court 10% on the government’s math and 20% in the real world. With these figures virtually unchanged since he took office, the president has been unable to sell the idea that his economic policies have created any jobs. So, he is doing the best he can with the hand that he has dealt himself and trumpeting the millions of jobs his policies have “created or saved.” In addition, he has rolled out yet another boondoggle from the Keynsian toolbox in the form of a $50 billion infrastructure package designed to stimulate the economy and finally create some actual jobs.

Meanwhile, the Republicans are gearing up for what should amount to shooting fish in a barrel in the coming mid-term elections, getting incredible traction on criticizing Obama policies which largely mirror those of George W. Bush, for which he and the Republicans were tossed out of office just two years ago. They correctly point out that Obama’s policies haven’t created a single job. Americans must put them back into office or face economic Armageddon. Polls show that Americans are largely buying what the Republicans are selling, having apparently forgotten the “jobless recovery” of the early part of the last decade, which occurred while the Republicans controlled the White House and both houses of Congress.

The truth is that neither the Republicans’ “supply-side economics” nor the Democrats “demand-side economics” have ever really created any jobs. Certainly, the housing boom successfully put some people to work in the homebuilding industry for a few years. However, when that bubble popped there was nowhere for those people to go. The Democrats’ success seems to have been limited to the 600,000 or so people that took jobs with the census bureau. Unfortunately, the demand for people counting won’t sustain a census-driven recovery. Obama’s latest act of political desperation isn’t getting much traction with anyone – even liberal talking heads are finding it hard to get behind another supposed “infrastructure” program, especially one that pales in comparison (in terms of dollars) to the American Recovery and Reinvestment Act, which was long on investment and short on recovery.

So, if neither supply-side nor demand-side economics work, if neither the Republicans nor the Democrats have a program that will actually create jobs that will outlast the average car loan, where else can we look for an answer?

Perhaps we should reconsider exactly what it is that we are asking the government to do. People of all political persuasions talk about “creating jobs” as if there were no question that the government should be trying to create them, the only question being what program will create the most jobs, the highest paying jobs, or the longest lasting jobs. This is just another in an endless series of false dichotomies that accompany every election year, when voters are served up a “debate” that is framed to include two undesirable alternatives, with no acknowledgment that there may be a third. On job creation, that third alternative is this: the government can’t create jobs, regardless of whether conservatives or liberals are at the controls, and moreoever, it shouldn’t try to create jobs.

Amidst the noise surrounding an election year, it is easy to forget the obvious. Before deciding what to do about unemployment, let’s answer a few fundamental questions. The first one is, “What is a job?”

A job is an agreement between a buyer and a seller that involves an exchange of private property. The buyer is the employer, the seller, the employee. The two parties reach an agreement wherein the buyer will purchase a specific service from the seller at a mutually agreed upon price. This simple fact does not change whether the employee is selling his services as a brain surgeon or a custodian. In each case, the buyer has a need for the seller’s services and the seller is willing to sell those services to the buyer if the buyer is offering the market price or better. The most important aspect of this transaction is that it occurs with the mutual, voluntary consent of both buyer and seller. This is the only way in which a job can be created.

When people are perfectly free to dispose of their labor as they see fit, including their unconsumed labor in the past (their savings or capital), there is a natural coordination in the labor and capital markets that results in people and resources being used most efficiently to meet the demand of consumers. People are not employed to produce products that consumers don’t want or can’t afford because employers are risking their own money and livelihoods and therefore must invest their capital (savings) in projects that will be profitable. Neither do most employers prefer to invest in temporary projects that will end in six months or a few years, because they would then have to take the risk of starting a whole new business. Neither employers nor employees are ever 100% correct, but for the most part they make the right choices because they stand to gain or lose personally based upon those choices. These natural market forces regulate the market, based entirely upon the voluntary choices of employers, employees, and the consumers who buy their products.

However, when the government attempts to create a job, all of these natural forces are removed. The market has produced no demand for the government-created job. In other words, no buyer has voluntarily agreed to purchase those services, because to do so under current market conditions would be unprofitable. Were it profitable to hire someone to do the government-created job, an employer would have done so voluntarily. So, the government steps in and forces the taxpayer to purchase those services against his will. In additional to violating the taxpayer’s rights, the entire coordination that existed between employer, employee, and consumer is disrupted.

A typical response to this argument from the left would probably revolve around how the profit motive and the greed of employers is what kept the person unemployed. However, this argument begs the question: Why were these greedy employers unable to make a profit from employing this person?

The answer is that the services of the employee were not demanded by employers because the products that would be produced as a result were not demanded by consumers. If consumers were willing and able to buy the products that the employer and employee would have produced together related to this job, then there would be no need for the government to create it. By overriding the choices of consumers and forcing them to purchase those services for the employer, the government not only engages in a theft, but causes vast resources to be devoted to producing products that no one will eventually buy. Thus, when the government “investment” in the job is spent, the job no longer exists. It generates no revenue on its own to allow it continue to exist.

To use one of the favorite buzz words of the progressive left, government-created jobs are unsustainable. They are all doomed to fail by their very nature because they attempt to set aside economic laws that cannot be set aside. Commerce cannot exist without voluntary choice. Government job programs attempt to override the choices of capitalists on what to invest in and the choices of consumers on what to consume. This is what produces millions of empty homes, food shortages born of miracle energy programs, and mass amounts of people unemployed. Worst of all, these programs destroy the capital that otherwise would have created real jobs that were demanded by the market. This is not because private investors are more noble creatures than government bureaucrats, but because their own livelihoods depend upon investing that capital wisely and profitably.

While it is easy to see how this argument applies to the government spending programs that are presently more associated with the Democrats, one should not forget that the Republicans’ ideas are no less wealth redistribution and no less destructive to the economy. Most arguments made by the Republicans involve targeted tax cuts that will either stimulate specific areas of the economy or merely leave more money in the hands of private investors in general. While this sounds like the exact opposite of what the Democrats are proposing, it is really just the same strategy dressed up in “free market clothes.”

In the present paradigm, where the supposedly free market is already distorted by a thousand government interventions and taxes are sky-high for everyone, decreasing taxes for a particular class of people is merely a back-door way to try to override the free choices of investors and consumers. If the cuts are targeted at specific industries, such as the oil industry, then more oil will be produced regardless of the true demand for oil by consumers. If the cuts are general in nature, then whatever that capital is invested in will be investment not by private decision but by government central planning.

One might ask, “How can this be?” Aren’t the investors spending their own money? Not really. The Republican plan never involves a reduction in spending to go along with reductions in taxes for the investor class. In fact, every Republican administration in the past forty years has increased government spending while cutting taxes, leading to large deficits that are funded by debt or inflation. This merely transfers the tax burden of that government spending to other taxpayers.  In other words, the jobs “created” through supply-side economics are really funded by taxpayers – by present taxpayers through the loss of their purchasing power due to inflation or future taxpayers through government debt. This explains why the artificial booms accompanying Republican administrations never last either.

The only real answer to the economic malaise is to stop asking the government to create jobs in the first place. Real jobs can only be created by individuals agreeing to exchange their labor and capital by mutual, voluntary consent. The use of force cannot create a job any more than it can create freedom, either here or anywhere else in the world. Furthermore, it represents violation of the very rights that government exists to protect. Instead of voting for candidates that claim that they can create jobs, Americans should demand that government get completely out of the job-creating business in particular and central planning of the economy in general. Only a massive decrease in government spending, leaving capital in the hands of the people who earned it and allowing employers, employees, and consumers to make their own choices can stimulate true job creation. Anything else is just another government program that is destined to fail.

Check out Tom Mullen’s new book, A Return to Common Sense: Reawakening Liberty in the Inhabitants of America. Right Here!

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© Thomas Mullen 2010

The Three Types of Government Spending

U.S._federal_government_spending,_2010-2014Any objection whatsoever to some new, tax-funded government program elicits a consistent response from liberals or progressives. “You just don’t want to pay your fair share,” or “I guess we won’t see you driving on any of those government roads or calling the government police or fire departments.” The underlying assumption is that taxation is an all or nothing proposition. Either there is nothing that the government can collect taxes for or there is nothing that the government cannot collect taxes for. There are no principles upon which to base an answer to the question, “Is this a legitimate function of government?”

While there are probably thousands of different services that governments spend money on, they can generally be divided into three broad categories: security, public services, and wealth redistribution. Libertarians[1] argue that the only legitimate government spending is on security. Conservatives generally approve of security and some public services with their rhetoric while engaging in all three types of spending when in public office. Liberals generally endorse all three types of spending with both their rhetoric and their actions while in public office.

“Security” includes all government functions which attempt to defend citizens from aggression against their rights by other human beings. These would include the military, various police forces, and the civil and criminal courts. These are the functions of government whose purpose is to secure the individual rights of life, liberty, property, etc.

It is important to remember that even if these are legitimate functions of government, it does not mean that they cannot be abused. For example, a small suburban village in a low-crime area may not need more than the county sheriff for a police force, but may instead bear a tax burden of village, town, county, state, and even federal police forces. However, these debates revolve around how efficiently the services are being provided, not whether they should be provided by the government at all.

“Public services” generally refers to services provided to all members of society. What makes a service a “public service” is that it can be reasonably assumed that every member of the society has an equal opportunity to utilize it. Examples include roads, bridges, public libraries, garbage collection services, and fire departments. Libertarians argue that these are goods and services that the private sector can provide. Their objection to providing them with tax dollars is that those who do not consent to purchase them are still forced to pay. While this is also true of security services, libertarians acquiesce to those on the assumption that it would be impossible to exercise property rights without a government in place to defend them.

Certainly, a bridge between a new suburb and the city may improve commerce for the entire city. However, it is not necessary to protect anyone’s rights. Therefore, libertarians argue that those who want to build the bridge should provide the capital for it themselves and are perfectly within their rights to charge a fee to those who wish to use the bridge. Conservatives have traditionally argued that these services can be funded by the government and provided by private corporations under government contracts. Liberals generally support public services as well, although they sometimes object to them being provided by private firms.

Like security services, public services are prone to abuse and corruption, even if one accepts that they are legitimate functions of government. Public funds are often wasted on services that are not needed or services that are poorly rendered because they are provided by politically-connected government employees or private firms, rather than by the most qualified. Consider the “bridges to nowhere,” the roadwork construction projects that never end, or the multitude of scandals where it was discovered that $500 was spent on a single nail or some other gross abuse of public funds occurred.

The third category of government spending is wealth redistribution. Wealth redistribution collects taxes from one group of people in order to provide services to another group. What makes this type of government spending different from public services is the fact that the goods or services provided do not benefit all members of society equally. For example, health benefits under Medicaid are paid for by all taxpayers but are only available to people whose income is under a defined eligibility level. Thus, those funds are literally taken from one group and redistributed to another. Both libertarians and conservatives argue that this is nothing more than legalized theft, although conservatives have often led or acquiesced to expansion of this type of spending once in office. President Bush’s expansion of Medicare is one of the most recent examples. Liberals and progressives generally support this type of spending, arguing that it is each person’s moral responsibility to “contribute.”

In order to have an informed debate about a new government program, one must identify which category the proposed program belongs in. Too often the distinctions between these categories are blurred by both critics and proponents. Most often, a program that would properly be categorized as wealth redistribution is represented as a public service in an effort to persuade those that must pay for it that it is their civic duty to do so.

Read the rest at Euro Pacific Capital…

 

Tom Mullen is the author of Where Do Conservatives and Liberals Come From? And What Ever Happened to Life, Liberty and the Pursuit of Happiness? Part One and A Return to Common Sense: Reawakening Liberty in the Inhabitants of America.

>Putting Some Lipstick on the Bailout Rip Off Pig

>I’m not sure what is worse: having your life savings and future stolen by armed criminals or having to endure the charade of a Congressional debate that attempts to portray the theft as something that is in the best interest of the victims. In case you have become distracted by all of the theater, allow me to state clearly what is happening right now. The federal government has taken the “liberty” of confiscating trillions of dollars from the citizens whose property they have sworn to protect. This has been done for no other reason than to prop up their failed monetary system so that they can continue to siphon off the wealth of the productive members of society – rich, poor, and middle class alike – and direct it to the privileged few who would not prosper in a truly free market. Regardless of the endless minutiae that is thrown at the American public over the next several days, weeks, or months, this is the REALITY of the government’s response to the predictable meltdown of their socialist monetary and financial system.

If a little diversion is necessary to distract people when an ordinary crime is being perpetrated, then obviously an extraordinary diversion is needed when you are perpetrating the greatest heist of all time. In this respect, for once, our federal government did not let us down. It began routinely enough, with Chairman “Mao” Bernanke attending a hearing in Congress to answer questions on the details of the heist, including how the loot would be split up, etc. Of course, it was immediately assumed by all in attendance that the bailout was going forward. So, in an attempt to appear to be “fighting for their constituents,” many of the Congressmen began arguing for a clause in the bill that would limit the compensation of CEO’s of companies that made use of the stolen money. The extent to which this was debated was practically insufferable, as the underlying assumption was that the American people are so stupid as to believe that saving tens or hundreds of millions of dollars would make some significant difference when they were being divested of trillions. Still, for decorum’s sake, somebody had to put some lipstick on this bailout, rip-off pig.

There was also some discussion about the clause in the proposed bill that would give the Treasury Department and Federal Reserve unchecked power to spend the money any way they want, without oversight by Congress. Under the pretense of them representing “the people,” many of the Congressmen blustered that unelected officials could not be entrusted with this much money without oversight by the people’s representatives. Of course, anyone that has seen The Godfather movies, Goodfellas, or Casino knows that infighting is common inside criminal organizations. What this really represented was a power struggle over how the loot would be split up, or at least who would decide how it will be done. The most laughable part of this is that even if Congress gets oversight into the bill, they have already demonstrated while squandering the other $3 trillion dollars that they stole from us this year that they are going to roll over and agree to whatever the executive branch wants to do anyway, no matter how unconstitutional or even criminal (is there a difference?) the policy may be.

Finally, there was also some discussion about not appropriating the entire $700 billion all at once. Honestly, some of the Congressman seemed genuinely concerned about the calls that they were getting from their constituents. Apparently, significant segments of the population in some districts had not slept through this one, and were letting them know that they weren’t happy about this latest scam. False Prophet of Freedom Charles Schumer suggested that perhaps Treasury could pilfer $150 billion now, and return at a later date to collect the rest. There are always those who lose their nerve in every crew.

At this point, it is probably clear that never was there going to be a debate about WHETHER OR NOT THE MONEY SHOULD BE STOLEN FROM THE PEOPLE AT ALL. By the end of the news coverage of the congressional hearings, the debate had been framed to focus on whether or not to let CEO’s share some of the loot, who would decide how it was divided, and whether or not it would be stolen all at once. Of course, the media outlets for both major parties (Fox for the Republicans and MSNBC for the Democrats) immediately took their cues and tried the best they could to characterize these trivialities as “weighty issues.” However, there was still a feeling of uncertainty in the air about whether or not the syndicate could actually get away with this. Never fear, because the best theater was saved for last.

I have to give some credit to the political professionals that are running John McCain’s campaign. I wouldn’t have given him a chance to win this election six months ago, when it became apparent that he would be the Republican nominee. Somehow, his campaign has managed to convince a significant amount of people that this man, who barely graduated from college, whose mental stability has legitimately been questioned on many occasions, and who literally cannot be trusted to give an unscripted statement within range of a microphone, should be the next president of the United States. His selection of Sarah Palin as running mate seemed to swing momentum to his side at a time when Obama was poised to distance himself in the polls. After more McCain blundering at the podium had revived Obama once again, giving him a six point lead in the latest national polls, the McCain campaign pulled off its greatest coup to date. John McCain was suspending his presidential campaign, and calling on Barack Obama to do the same. There was a danger that the heist wouldn’t come off without their help, and McCain was heading immediately to Washington.

Finally, this was the diversion that the plot needed. The media was energized. Fox’s Carl Cameron appeared onscreen literally out of breath (I hope he was acting) with the scoop on McCain’s startling decision. Now, the debate had really been framed. Should Obama follow McCain’s lead, or was this just a political move? Should the debates go forward? Who actually called who first? McCain or Obama? There was simply no longer time to argue dry, philosophical issues, such as property rights for instance. No, there was now high drama in the presidential campaign charade and a prime time television event that was in jeopardy of being cancelled. The heist was on, and all that was left was to make sure that Stacks didn’t fall asleep in the getaway truck.

While without question a political stunt, and what will probably prove to be a very successful one, there was a little sincerity amidst all of the theater. McCain called for a presidential commission including Republicans and Democrats. It was time to put politics aside. Obama said that this was “no longer a Republican or Democratic problem, but an American problem.” I would only add one word. It is not a Republican or Democratic problem, but an American Oligarchy problem. The oligarchy is in some jeopardy here, with its phony monetary and financial system in danger of collapse, and it is time to put the pretense of being ideologically different aside and work together to save it. I was reminded of Mel Brooks in the classic “Blazing Saddles,” when he said, “We’ve got to protect our phony baloney jobs!” If there was ever a question of whether we are ruled by “Republicrats,” that question has been answered now that the chips are down.

There is some hope, though. For once, Ron Paul was not the only one calling the system into question. Jim DeMint actually said that he was disturbed that free market capitalism was being blamed for the crisis when in actuality it was entirely caused by government. Richard Shelby said that he was opposed to the bailout, as did Jim Bunning, who has been vocally critical of the Federal Reserve. Most importantly, even though the media jumped right in line with the Republicrat spin to frame this debate away from the real question – can the government actually steal this money from the American people – they were nevertheless forced to report that large sections of the American public are ANGRY about this. Unfortunately, they don’t know exactly what to be angry at, and are probably going to be quite easily manipulated to focus that anger in the wrong direction. But they’re pissed, and they are not being quiet about it anymore. One thing is true: the American people have been poorly educated, misinformed, lied to, manipulated, and conditioned to a certain extent, but they are not stupid. They know something smells about this and they are starting to figure out what direction the odor is coming from. Once they rediscover their individual rights – the rights that cannot be bought with fiat money nor voted away in an election – the criminal gang is going to be in grave danger. This may be their last score.

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