A ‘Job Creation’ Stimulus Is a Terrible Idea
by Anthony Randazzo
I agree with Paul Krugman on at least one thing: the continued prospects for high unemployment in America is a bad thing. In his NYT column Monday, Krugman the Keynesian wrote:
The damage from sustained high unemployment will last much longer. The long-term unemployed can lose their skills, and even when the economy recovers they tend to have difficulty finding a job, because they’re regarded as poor risks by potential employers. Meanwhile, students who graduate into a poor labor market start their careers at a huge disadvantage — and pay a price in lower earnings for their whole working lives. Failure to act on unemployment isn’t just cruel, it’s short-sighted.
Unemployment is currently 10.2 percent, and if you factor out the part-time workers it is 17.5 percent. Banks aren’t lending to the limited demand from manufacturers, further depressing employment opportunities. And the recovery outlook right now is bleak. Krugman is right, we have to do something.
His plan, however, is not the answer. Not even close.
It’s time for an emergency jobs program…. Such a program should shy away from measures, like general tax cuts, that at best lead only indirectly to job creation, with many possible disconnects along the way. Instead, it should consist of measures that more or less directly save or add jobs.
So Krugman wants another stimulus package. Just a question first though, uh, wasn’t the point of the first stimulus to create jobs? And how did that work out?
Krugman responds:
The 2009 Obama stimulus bill was focused on restoring economic growth. It was, in effect, based on the belief that if you build G.D.P., the jobs will come. That strategy might have worked if the stimulus had been big enough — but it wasn’t.
That is something Krugman has repeatedly harped on—the stimulus was too small. But this ignores that GDP growth stimulated by government spending is not sustainable. Roughly 85 percent of the GDP growth from the third quarter this year was due to Cash for Clunkers, the First-Time Homebuyer tax credits, and direct government spending (defense and non-defense). This is not a recipe for a strong, vibrant economy.
What does Krugman envision the new jobs focused stimulus to look like?
One such measure would be another round of aid to beleaguered state and local governments, which have seen their tax receipts plunge and which, unlike the federal government, can’t borrow to cover a temporary shortfall. More aid would help avoid both a drastic worsening of public services (especially education) and the elimination of hundreds of thousands of jobs.
Okay, let’s stop and consider something. Imagine someone gets a good paying job and keeps it for five to six years. During this time, that person buys a house, a car, a boat, a couple jet skis, and goes into significant credit card debt. But it is okay because the good job allows the person to make payments on the items every month. Then the job goes away. Suddenly all that debt isn’t so easy to handle. This is what happened to the states.
State and local governments aren’t beleaguered as much as they are obstinate. They just don’t want to make necessary cuts. When times were good (roughly 2002-2007) the states ramped up spending given their increased revenues. Now the revenues are gone, but states aren’t making the hard budget choices. They aren’t pursuing efficient government opportunities like divesting assets and streamlining state operations. Sell the boat, get a smaller house, divest the jet skis.
When it comes to stabilizing services, as Krugman suggests, it is also unnecessary to throw more money at them. According to research for the Reason Foundation, if states had limited increases in their budgets from 2002 to 2007 to just the rate of inflation, plus increases in population, then the 50 states collectively would have had a $2.2 trillion surplus to get them through the recession. Yes, the states increased spending on state services by $2.2. trillion more than they had to during the years of plenty. On the whole, state services aren’t suffering as much as they are returning to reasonable levels.
A “job creating” stimulus focused on keeping states from having to make hard, but necessary choices in their state budgets won’t solve the employment problem in America.
So what should we do? Well, stop trying to help. The more companies get bailed out, the more the government is inflating wages, decreasing how many people firms can hire. The more the government taxes companies and increases their compliance costs, the less people those firms hire or keep on. The more the government decreases the incentives to start new businesses, the less places there are to find employment.
There is no silver bullet to fixing employment overnight, but the government can take the necessary steps to ensuring it doesn’t perpetuate the problem further into the future.
A version of this first appeared at Out of Control: A Job Stimulus Is a Bad Idea
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38 Comments
Yes there is a silver bullet; cut taxes and government spending. Lower taxes means jobs for the people. Higher taxes means slavery. Economic recovery will be faster than you think.
Keynesian economics is right up there with global warming, large and intrusive government, and other statist lib ideas…
Absolutely worthless…
New idea: review what Keynesian policies dictate, and do the exact opposite…
when FDR travelled to Italy to meet his hero Benito Mussolini he left with one of the facsist dictator's pet programs…
And he turned it into the WPA. Get 'em off the streets, out of the breadlines and back to work doing- anything.
Brilliant! make work and create jobs! How cool is that?
And guess who gets to dole them out? Local Democratic politicians!
Sweet…
Present day: Obama's hero is (amongst Frank Marshall Davis and others) FDR. Let's have a new WPA! Create jobs for some- and save jobs for others, namely local congressmen. Gotta love it…
By the bye, the flip of the Roosevelt dime had the Fascia- Mussolini's Italy's emblem- on it.
So there's THAT…
I think the simple truth here is: the last stimulus was nothing more than a slush fund for mostly State Union workers so thet they wouldn't be impacted by he recession. Not a single job outside of these unions has been created, not one. Of course Obama claimed over 600,000 jobs in mostly 440 non-existent congressional districts. Any new jobs bill will be more of the same as the States have not shed any weight in fact they have added bloat and as a result they are running out of cash again so it will be another hand out to bloated States preventing them from improving. It will also dry up and consume any dollars that the private sector could have had.
My contribution for building the GDP. High labor cost have contributed to jobs leaving the country. Let's bust the Unions and give back half of the deadbeats wage to the employer so they can in turn hire nore employees and increase their output due to lower labor costs. Reduce some regulations in states like CA that are heavily burdened by regulations to help reduce costs. Reduce taxes imposed on businesses. Reduce the sales tax by 2%.
Remember to Vote in 2010 and 2012
We need to organize in some way to fight big labor.
Perhaps a consumer strike of some kind.
Krugman is just another one of Obama's America hating handlers.These people are responsible for taking a bad economy and crushing it.
787billion and counting and Obama,Pelosi and the democrats have thrown all this money away on unions,welfare and food stamps and now they can't figure out why 3.5 million jobs have been lost since they started spending all that money.
They're all standing around trying to figure out why the country continues to shed jobs even after all the money they've wasted on unions.
They just don't have a clue that the vast majority of the people at large should have been their only interest.We're just not a congress buying special interest.
Since it is the season for Santa Claus I say why not?!?
Here is an excerpt from December 2008 when our representatives were planning on saving us from ourselves:
"For comparison, the Great Depression and Japan’s lost years of the 1990’s were caused by the same things that are happening now; stupidity, hubris, and complacency by normal people. Both events should have been over in two or three years, as should today’s crisis. In both of those cases the people allowed the following to happen; trade with foreigners was demonized and legislated against, average business owners were demonized and legislated against, labor unions were deified and legislated for, government turned Keynesian and spent endlessly in politically motivated ‘pump priming.’ I believe the media dubbed the mantra “spend, spend, spend, tax, tax, tax, elect, elect, elect.”
Deja vu all over again.
Two not so fresh posts on the same topic, but very familiar:
http://thanksforthelaughs.wordpress.com/2008/12/1...
http://thanksforthelaughs.wordpress.com/2009/01/2...
Lazy Jack
Our economy has not been a true capitalist economy for a long time. With all the tweaking and fiddling by the little monsters in Congress, state and local governments that have created this current mess we are living under. Unfortunately we the people have sat back and let them be irresponsible. There are two days of reckoning possibly coming though, November 2, 2010, and November 6, 2012. Hopefully we will not have a major economic crash before these dates, which I predict Martial Law would ensue with economic chaos. This would be the end for all of our freedom.
With this present Administration there has been a constant onslaught of stealing our liberty given to us by the Constitution. These Lawyers in our political arena have been chipping away at this document for over 30 years. Obama a Constitutional Lawyer, my a$$! Obama and his ilk studied it to destroy it!!! Only divine providence can save us now…
David Horowitz has a new book out called 'Barack Obama's Rules for Revolution the Alinsky Model'.
http://frontpagemag.com/2009/10/30/barack-obamas-...
You can also donate to his ad campaign in major newspapers with articles exposing O and his ilk's crap.
It is a common misunderstanding that WW2 got us out of the Depression. It is simply not true. The depression didn't end until 1946 when the war was over and everyone went back to the private sector. If everyone can work for the government and this creates wealth then the Soviet Union should have been a booming utopia. Everyone there worked for the government and they were all broke. It is a fallacy to think that a war can create prosperity. If that were true then why not endlessly produce tanks and battleship and then blow them all up. It is a destruction of wealth not a creation of prosperity. Also, there were many wage and price controls in effect during the WW2. Thus, the economy was extremely distorted.
Don't forget… get rid of NObama too…
Throw more money at the failing economy because the first truckload of money we threw at it didn't do SQUAT?
Throw more money at the BIG Auto manufacturers because their business model is a failure and they don't make cars anyone wants?
Throw more money at health care…
The STUPIDITY is RAMPANT!!!!!!
3. The following income shall not be subject to taxation:
An amount equal to a year's earnings (arbitrarily set at 2000 hours) at the minimum wage rate, for each adult (age 20-60) member of the household, decreasing 10% per year to 50% at age 15 and increasing 10% per year to 200% at age 70.
All payments for what is classified as necessary health care for all members of the household including medical care, pharmaceuticals prescribed by a recognized health care professional, vision and hearing aids, and membership fees for health-enhancing entities such as gyms or other exercise facilities. Health care insurance premiums may be deducted but not health care expense paid for by such insurance.
All educational expenses including day care for young children or legally incompetent persons, that portion of state and local taxes identified as spent on education, that portion of parochial school tuition, fees and other expenses identified as going for non-sectarian education, tuition, fees and educational materials for private school education at any level, and a per-diem allowance for students traveling more than 50 miles from primary residence for education.
All income saved into an identified account from which investments may be made.
Not according to the "History" book for my kids' class, it talks more about how great FDR & JFK were than it does for Washington, Adams, Jefferson, Jackson & even Lincoln combined. Hell there was more about "the importance of Marilyn Monroe on society" than there was about Washington and more about the "high morals" of Jane Fonda sitting a f****ing SAM missile in N. Vietnam than about Gen. Westmoreland or Gen. Abrams.
The above treats all equally, regardless of marital state (takes marriage out of state, not the other way around), taxes all disposable income equally, ('fairness") no tax on investment, health care or education, the three legs upon which a productive economy is built, makes US products more competitive in the flat world, gives states and cities a way to find their own way out. All with less, not more government.
so true…
the more cynical among us might say it was all engineered that way- but we digress. WWII solved his second slide into depression. Perhaps Barry and Co. have similar ideas?
James, excuse me, if you define a depression, forget GNP stats, as JOBLESS in the most personal sense multiplied with large numbers, then, WWII ended the horrific unemployment of the Depresssion.
Unemployed males in large numbers went into the military and women enter the job market manufacturing war stuff during WWII. Those were defense contracts to PRIVATE companies, not the gov't dole that FDR set up. The US was the only economy left standing at the close of WWII.
Soviets have lived at our Depression standard of living level until the USSR collapsed. So, what's your point about them again?.
There are some days when I am absolutely certain that Krugman's only goal is to see the "rich" get taxed into middle class oblivion. The more money the gov throws away via stimulus, the better chance of that happening.
I cannot stand Krugman.
Thank goodness my daughter's in a private parochial school where she actually learns things.
She said the only historical figures anyone in her global studies class room can call worse than Hitler are Stalin and Mao.
Now that's what I call a real education.
Oh those wacky Keynesians.
Throw more money at the problem. If that doesn't fix it its because you didn't throw enough fast enough, so do it again.
To paraphrase Wes Pruden, only a modern liberal sits on a red hot stove twice. Impervious to real life results of their theoretical ideas.
I wish some one would explain the broken window fallacy to them.
This is so obvious. EVERYONE knows that the stimulus didn't and will not work…This is all done on purpose! Every time a logical productive alternative solution is offered (like tax cuts…), they shoot it down. These people are rocketing to destroying to country:
Health Care
Cap and Trade
Fairness Doctrine (or Net Neutrality??)
Surtaxes (on everything you can think of)
Domestic trials for international terrorist
prosecuting Navy Seals
The list goes on and on…THEY WANT TO DESTROY the USA! That's all this is about…
It is very narrow and disingenuous to define a depression as jobless. A depression is a sharp contraction of an entire economy. Joblessness is a symptom.
It is true that WW2 ended the unemployment, but you put the emphasis on the wrong word in one of your sentences. Let me say it another way: "Those were DEFENSE CONTRACTS to private companies". And who provided those defense contracts? The government. Does the government produce anything and sell it for a profit which it can then use to pay contracts? No. A government can only tax and borrow. So you have all these people that were employed, in private or public firms, and they were producing instruments of war to be destroyed, and they were being payed with taxed and/or borrowed money. Does that sound like a recipe for prosperity to you? People can't just have jobs and create prosperity. People have to have productive jobs that add to the national wealth. This cannot occur while the bulk of production is going towards goods that are being destroyed.
With regard to the U.S. economy as the only one left standing at the close of the war, well we were the only country in the war that didn't have it's homeland bombed to hell. So of course our economy was the strongest and we had an intact manufacturing base.
With regard to the USSR, I was trying to say that everyone in the USSR had a job. They all worked for the government and thus wealth creation was very low due to low productivity. Again, I'm trying to say it doesn't do any good for everyone to have a job if they aren't producing lasting wealth. You could pay everyone 1 million rubles an hour, but it won't buy very much in such a situation.
why not lifetime unemployment insurance
Paul Krugman and other progressives don't get it. The whole debate is lost on the premise, they see money and wealth as government's, we know that it is ours. We are not fools to know that the price of civilized society is taxes, but my question is how much structure do we have to have before it is no longer civilized society, but tyranny.
Send them a message, don't pay your taxes and stand with others who don't.
Exactly! And while we're at it, pull an Alinsky on 'em!
Blessed. My daughter had 2 campus interviews and 2 job offers. She started her career before she had degree in hand and just finished her last 2 classes this fall. She started in June and had her year end bonus before black Friday. We are facing a tallent shortage due to low birth rates and decreased immigration of skilled degreed professionals. This economy purged a lot of low skill and bad attitude workers. Many good people were also pushed out the door. Our economy is growing in short spurts due to replentishing low inventories. We need to layoff Krugman. He is a putz.
IMO, the best thing the government (Fed) can do right now is to announce a flat tax on income tax (20% on all incomes, only deduction being kids) and corporate profit tax (20%). That'll send the stock market through the roof and people would be more apt to take on business risk, knowing that they won't be taxed tooth and nail.
And let the state/local governments suffer, and if they try to increase taxes, the people need to vote them out of office so as to force the politicans to cut waste and other needless programs.
The Depression ended not because of FDR's erroneaous Keynesian economics but because of our entry into WWII. We manufactured all of the war supples and arms for the Allies. The Brits pretty much transfered most of their net worth to us. Plus, our chronically unemployed male population went directly into military service.
FDR has been so overrated. His policies extended the Depression.
To: Ashton M, and others: take a look at this, and let me hear, tbeebe6535atyahoodotcom, your opinions
1. All persons residing in the U.S. shall come together in units known as "households" for the purpose of reporting all income from any source, each item to be identified by payer's and payee's tax number. Members of a "household" need not be related, need not reside together, and a household may consist of as few as one person.
2. Each year congress shall set by legislation a "minimum wage" and a "tax rate".
The unemployment that we are experencing is not a by-product of a failed economic model. IT IS part of the administrations plan to disallusion as many workers as possible, as to bring them into the fold of the "Wards of the State". This is the same model that has been used for forty years in the inner cities. Just ask ACORN.
There are many things we can do to stimulate jobs practically. Right off the top of my head:
Abolish minimum wage laws. Workers would be allowed to compete for employment, employers could reduce overhead thus reducing prices thus helping everyone.
Abolish the Federal Income Tax. Let state and local governments maintain their own infrastructure.
Close all military bases in countries whose names don't include the words “United States of America” and let those people come back and stimulate our economy or protect our borders.
End the wars. They are not benefiting us in any way anymore, but they sure as hell are costing us a lot.
End international welfare (aka Foreign Aid). Let us keep our own money and spend it instead of propping up foreign governments that don't pass the aid on to their own people.
End the massive donations to the U.N., if not U.N. membership altogether.
End U.S. subordinance to the WTO and the IMF.
Abolish the Department of Education
Abolish the Department of Interior
Abolish the Department of Homeland Security, a massive bureacracy hasn't made us any safer and can't even protect the border.
Abolish the Department of Commerce
Abolish the Department of Labor
Abolish the Department of Health and Human Services
Abolish the Department of Housing and Urban Development
Abolish the Department of Transportation
Abolish the Department of Energy
Merge the Department of Veterans Affairs into the Department of Defense
Merge the CIA and FBI. Maybe they would actually be able to communicate with each other then?
PRIVATIZE the TSA
Uphold the law and deport illegal aliens
Abolish the Federal mandate for employee based insurance and return to market based health care.
And last, but certainly not least, abolish the Federal Reserve System and replace it with honest, commodity based money. Such a financial system would provide employers with a strong, stable financial environment in which to operate.
This was the America that rose to the top. It wasn't because our government was so awesome. It was because our government was small and the people were allowed to create wealth.
None of these things will happen through act of government for one simple reason: they are the right things to do for the people and don't benefit the government.
Perhaps Krugman would rethink his position if someone told him government HAS NO MONEY to spend because; it has spent more than its share on the first stimulus political payback program, padded the budget to create record deficits and is experiencing a loss of revenue due to, yep, you guessed it, unemployment. Perhaps.
Sadly, that's not an option where he is so he "helps" me study for my Masters in History & luckily my professors happened to be true & not revisionists, well except one & she stopped trying to argue with me when I soundly corrected here w/ original documentation (thanks to my family for being pack rats) that she apparently didn't realize existed. Though she still tries to argue with me that we never had troops inside Iraq during the first Gulf even though I was there & there are documentation to the effect.
Isn't that what the LAST one was supposed to do? I never had any expectation that government intervention would help America. I drive by all these "Recovery and Reinvestment–Putting America to Work" signs and nowhere to be seen is anyone working. Surely most Americans realize by now that we have been scammed. And now there is talk of doing it all over again.
Hopefully, those who have been paying attention realize that the last "Stimulus" is largely unspent. That is because Obama is saving it for next year when he can use it to buy votes for Democrats. See what we bought?
wow why don't we just send the 20 million illegals back, and pow 20 million jobs.
Fine companies a years wages for all employed illegals. That gets them off Medicaid and food stamps. Plus make a new police force just to hunt them down. More new jobs.
I just created 20 plus million jobs and Im just a normal joe.
Title…
I saw this really good post today….