The recent unemployment report showed that the loss of jobs for November was only 11,000, and average hours worked increased from 33 per week to 33.2. The Dow surged 130 points, and some analysts described it as a “wow” moment — explaining that the loss was so much less than expected.
We really do live in a world of lowered expectations when news like this is considered cause for celebration. I guess it’s all relative. The news must be good because it isn’t so bad.
So while some see bad news as good news, we still have 10% unemployment and an anemic recovery. But have no fear: the government has a solution. After all, it doesn’t take much to create jobs. According to the government’s own data on the effects of the stimulus, an order worth $890 to Moore’s Shoe Service in Kentucky resulted in the creation of nine jobs. And a Minnesota company that makes lawn-care equipment created (or saved) 50 jobs for $1,047. So, between ordering some more boots and lawn mowers we’ll have the unemployment problem solved. And for good measure we’ll have the “Cash for Caulkers” program: a tax credit for weatherizing your home.
The Definition of Madness
Apparently, ovens weren’t the only places turkeys were being cooked up over Thanksgiving. One proposal being seriously considered is another stimulus package. Since the first two were so successful in lowering unemployment all the way from 7% to 10%, another one is obviously the way to go. I’m reminded of someone I worked with who was failing at some task and told me that her solution was to re-double her efforts. The definition of madness is to do the same thing and expect a different result.
The last stimulus package did help bring the economy back on track, but it has not done anything of consequence to address the most critical requirement for long-term growth — job creation in private industry. Long-term, permanent jobs are simply not being created. Already, with construction projects funded by stimulus dollars coming to an end, construction firms are again laying off workers. The U.S. now produces fewer private sector jobs than it did a decade ago. In October, private sector companies employed just over 108 million U.S. workers, a million fewer than in October 1999. The one place where jobs are growing consistently is the government. The Feds have hired 25,000 people in the last six months.
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With more than 65% of the economy dependent on consumer spending, the only real basis for a return to a robust economy is job growth in private industry. The only program being considered that can help with this is the tax credit for employers. Further spending on more bridges, roads, and boots is a stopgap arrangement that does nothing to create private sector jobs. What’s worse is that jobs created by government spending use money that would have otherwise been available to private industry. And private industry is far better at spending it in ways that create jobs than the government is.
No Good Deed Shall Go Unpunished
The incentive to create jobs in private industry is low. Employers create jobs because they expect to see a positive return on the money they spend. Right now all the spending by the government is going to lead to higher taxes, which are already being promised. Throw-in the costs of the healthcare legislation, cap-and-trade, and who knows what else, and higher taxes are guaranteed. Why bother with investing in any activity that creates jobs if the returns are going to be taxed away?
What’s needed is letting business’s creativity flow and eliminate uncertainty caused by burdensome legislation. That doesn’t seem to be what Congress and the White House is supportive of. Their desire is trending toward creating some kind of an industrial policy — favoring some businesses more than others. The push for “green jobs” being the most obvious example, despite the fact that green technology has no potential to create widespread employment for decades. When the government starts picking winners and losers, all sorts of good ideas will be lost, because the choices are made based on political considerations (imagine that).
With all these great ideas floating around I’m surprised Congress didn’t accept Larry Flynt’s proposal for creating jobs by bailing out the adult movie business. Now that would be stimulating.