Creating Jobs or Making Work?
By Jacob Sullum, Reason Foundation Senior Editor
President Obama says the $787 billion American Recovery and Reinvestment Act, which he signed today, "will create or save 3.5 million jobs." That works out to roughly $225,000 a job, which seems pretty pricey, especially since many of these jobs are temporary. (Let's put aside, for the time being, the question of whether the jobs will materialize during or after the recession.) The 835,000 or so projected jobs in bridge and highway construction, for instance, will last only as long as the projects do. Likewise the 500,000 jobs in energy-related projects such as weatherizing homes and modernizing the electricity grid, and the 375,000 jobs in environmental projects such as installing water systems and cleaning up pollution. (These estimates are all from a New York Times summary.) And the public-sector jobs "saved" by the stimulus package will be funded for just a few years. So unless a lot of these positions are paying six-figure salaries, this does not seem like a very good deal, job-wise.
That's where Obama's secondary justification comes in. The central idea of the stimulus plan, he said last week, is "to put Americans back to work doing the work America needs to be done." These are "not just any jobs"; there are "jobs that meet the needs we've neglected for far too long, jobs that lay the groundwork for long-term economic growth; jobs fixing our schools; computerizing medical records to save costs and save lives; jobs repairing our roads and our bridges and our levees; jobs investing in renewable energy to help us move towards energy independence." In other words, these are jobs that are totally worth doing on their own merits, because they will deliver benefits that exceed their costs. Regardless of the economy's condition, according to Obama, this money would be well spent.
As I noted last week, that position seems to be at odds with Obama's claim that he wouldn't be spending all this money if it weren't for the recession. That's plausible when it comes to temporary relief like unemployment benefits and food stamps, but it does not apply to all the spending he says is necessary to "meet the needs we've neglected for far too long." The beauty of Obama's dual argument is that he can say the stimulus package is all about putting Americans back to work and then, when challenged on the question of whether this is an efficient way to do that, he can say all the work needs to be done anyway. Conversely, when challenged on the question of whether all these projects are really worth the money being spent on them, he can cite the jobs they "create or save" as a backup justification.
If the projects really were cost-effective, of course, there would be no need to cite the jobs they create. And if creating jobs were an end in itself, as Obama often seems to think it is, there would be no need to find projects that are worth doing because of the public benefits they deliver. In fact, it would be better to throw money around willy-nilly so as to maximize job creation, in which case we surely could get more than 3.5 million jobs for $787 billion.
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Government jobs are pricey! I'm sure he needs all the employees he can get, at least the ones that will do as he says!
Doing Necessary Work Markets Fail to Do
An economic stimulus is helpful--even when we throw money at people and trust them to catch it or bend down and pick it up.
If, better than such an exercise, we spend public money to do necessary work markets fail to do, we kill two birds with one silver dollar--we circulate more money to raise aggregate demand; and we accomplish necessary work that private profit-seekers may overlook--like like caring for human beings who have no money of their own.
"If, better than such an exercise, we spend public money to do necessary work markets fail to do,"
Now this is something neither markets nor government should ever do in the first place. (see below)
I think the following caught my attention the most:
"we kill two birds with one silver dollar--we circulate more money to raise aggregate demand;"
Circulating money does not raise aggregate demand if the money you circulate loses value in the process:
http://useconomy.about.com/od/inflationfaq/f/infl_impact.htm
http://mises.org/story/2914
In the end, you'll end up with this:
http://www.cato.org/zimbabwe
...and this:
https://www.cato.org/pub_display.php?pub_id=6406
"and we accomplish necessary work that private profit-seekers may overlook--like like caring for human beings who have no money of their own."
Caring for people who have no money of their own? Exactly how does the stimulus solve this problem?
"Caring for people who have no money of their own? Exactly how does the stimulus solve this problem?"
By destroying any chance such a person has to acquire wealth and thus ending that person's life.
Far and away not an expert on economy, but as far as I understand economy from the little I've read, doesn't it largely come down to the flow of money and goods? If no-one spends then there is no economy. By taxing and spending the US government is forcing money to flow.
I'm not quite naive enough to believe this will save things at a stroke, or that there isn't a balance point where high taxes reduce profitability and jobs are lost, but I think the US economy is a long way from that point and a slight increase in taxation coupled with a government boost of funds I would feel to be a good thing.
Your original premise is mostly accurate: If no one spends then there is no economy.
However, replace "spends" with "produces and trades" to get a more clear picture of how a large-scale economy works. By taxing and spending, the government is not forcing money to flow... it's redistributing it to areas where people have obviously not, of their own free will, spent that money.
There is not a balance point where high taxes reduce profitability and jobs are lost. Any time anything is taxed profits are lost and a ripple effect is sent through the economy. The US economy is not a long way away from that point, either; the US economy has been at that point since the FDR and New Deal days. What Obama proposes is not a slight increase in taxes: it is taking what we have spent on the war in Iraq and multiplying that by 50. Tell me one thing: why would it be a good thing for government to use the money that we can all, as individuals, spend on whatever we want and redistribute it to inefficient, non-productive areas of the economy?
Non productive areas of the economy will always remain that way without an injection of cash. It may be that a hand out does nothing except redistribute some wealth, or it may be that it stimulates an area which did not have the funding to progress but which may, in a few years, be a healthy contributor to the economy.
As for blaming FDR and the new dealers for the hole the US economy is in, I'm sure that particular idea was a response to the great depression? So the US economy has, until recent years, been in better shape because of it? Or perhaps in spite of it?
No sir, you have your economics backwards. "Injection[s] of cash", i.e. cash flow, remain out of non-productive areas of the economy because, simply, those areas are non-productive. Production creates wealth; cash flow does not.
There are enough private investors, motivated by self-interest (greed, as it is called), that would get a potentially productive venture its startup money.
The US has been, since the Great Depression, in a worse shape because of the politics and legislation of the FDR era government.
I actually find the whole idea of econoics quite interesting, but do feel a little out of my depth here. Having read various other posts from yourself on this topic it would seem that you have a very fixed view on economics, and that is that if you do not have a 100% free market, people will suffer. Not knowing enough about the subject I cannot come up woth examples or anything else to refute this, but I do feel that this is not an unbiased view leading to a greater understanding of economics.
For example what markers are you using to argue that the US economy has been in a worse shape since the great depression? ANyone else qualified in the subject want to weigh in?
I'm sorry my view seems "fixed" to the point that you read my posts as being biased. I used to be a supporter of taxation and the whole "balancing point" idea you pointed out in your first post. I do believe we need taxes to fund our government, I just believe that the government has very few specific roles in society . I would love for anyone to give a logical, reasonable argument for how the New Deal helped the economy , but so far all I have heard are Marxisms based on faulty premises.
I have the view of the economy I have now because I have researched history extensively, read into several different philosophies, and taken several college -level economics courses.
It is nearly impossible to argue that the US has been in worse-economic shape because of the New Deal since the depression due to the fact that we only have history of how things ARE, not how they COULD BE. Thus the majority of my arguments would take examples from history of when freer markets were regulated or socialist programs and central banks were implemented.
Again, I would be very happy to hear another opinion or argument for why this "stimulus" plan actually helps the economy. I can't promise I'll hold in a response though haha.
Originally, I thought Obama was trying to create jobs. Somewhere this was modified to "create or save". What's nice about counting all the jobs you "save" is there's absolutely no way to verify that number.
A lot of the problem with these plans is they do not create incentives, just work. You can force jobs into being, but if there was no true need for the job that job will soon die (unless sustained indefinitely by the government, read: your tax dollars). A lot of these bailouts, stimulus bills, etc just ignore economics altogether. If you want to create lasting jobs, allow companies to keep their cash. Even though it's popular to bash "big business", the truth is that big business, when acting in its own self interest, creates jobs. If a business can keep its money, it can invest and grow more. As the business expands, it naturally creates jobs that will stick around as the business continues to grow. (On the other hand, if the business is failing, let it go bankrupt and let other companies take over its customers, expand, and hire the people who were formerly employed by the now-bankrupt companies.) That would do much more for our economy than tax breaks for buying cars, health care subsidies, and school grants.