Government Cannot Create Real Jobs

Government-inspired confidence will neither create nor sustain a recovery. It may inspire some enthusiasm. There may be excitement. But, there is a limit to which words will help energize people. Last week’s State of the Union Address will be a supreme example of just that. It was billed as a pivotal speech. An important speech. Even a critical speech. Heck, let’s just call it the most important speech of his political career. It was time for Barack Obama to stand up and deliver (a very, very important speech.)

Ok, so we get the point. Pundits portrayed this as an opportunity to revive the “Hope and Change” which had mysteriously disappeared. But let’s face facts. All the speeches in the world, no matter how good, or how inspiring, are not going to effect the change that is really needed.

These do-nothings could not even pass the economy-reshaping healthcare bill. What happened there? Did they really want to pass it at all? How could a democratic president, with majorities in both houses of Congress, fail to pass what would have been landmark legislation? A defining moment of the current Presidency and our “dear Aunt Nancy.”

The populace be danged. We have a chance to make history here. Who cares how fired up some know-nothing rednecks might get at town meetings. Here was a chance to do something “for the people” who are obviously too stupid to know how good it would be for them. This is just the kind of power play the Nanny-Statists love! And they had all the “power” to do it. But they let the “moment” slip through their fingers…thank God.

Just as the healthcare plan failed, so is will the presidency. Last week a Wall Street Journal NBC Poll showed that voters held a 61% no confidence view on the president’s plans. Failure. Humiliation. Defeat.

How else can you describe the healthcare flop?

But let’s move on from a review of recent history, to a prediction of the near future.

It has been noted that the president moved from pushing healthcare to creating jobs. Good move, Mr. President. The simple smoke and mirrors approach of Washington Politics…cover a failure with blowing smoke (“Those stinking Republicans thwarted my precious healthcare agenda…”) then shifting the mirrors to reflect what troubles folks most about this economy…jobs.

Several years ago, there was a best selling business book entitled, “Who Moved My Cheese?” I hear they are coming out with a sequel, “What Happened To My Job?” That is going to be enhanced by the Hollywood film blockbuster, “Honey, They Shrunk My Income!”

Now, all tongue in cheek aside (well, at least some tongue in cheek) let’s get to the “issue du jour” on the revamped presidential agenda. Because let’s face it, if the economy doesn’t make a turn for the positive…if there aren’t signs of real success that the media can parlay into a picture of a wise and benevolent administration, we will be looking at the first one term president that the US has had in a very long time.

It has long been a major tenant of this shot drinker at the Whiskey Bar, that the Government does not create jobs. Sure they can give a man a shovel. They can have him dig a hole. They can pay him for that with inflated money. Then they can have him fill in the hole. They can pay him again. And that’s what appears to happen time and again.

The problem with government jobs is generally two-fold. First, we know that they are expensive. Second they are not productive. Thus, the very nature of government work, is to funnel money from the private sector to pay for these jobs, and then to see that little or nothing is produced. Where nothing is produced, nothing is sold. Where nothing is sold, no income is created. Where no income is created, there is a fiscal loss.

But not for the government. They have no bottom line. They have no “mandate” from the masses to produce a profit. The current “mandate” from the electorate has been “Give me a job.” Or “Subsidize my healthcare.” Or, “Give me a cheap mortgage.” Ignoring all the basics of economics…scratch that…ignoring the ONE basic of economics, government is not required by the “masses” to produce a profit.

Sheesh…they haven’t even been required to BREAK EVEN!

Certainly we can see that the speech last week did not highlight this point…Balancing the National Budget. We will just continue to spend our way to prosperity. And nobody will care, just so long as in our spending, we are creating jobs…

The President, in his acknowledgement that government should do something to help “create jobs”, also stated that 70% of all jobs in the US are created by the private sector. To that end, the Admin introduced a tax break for small businesses who hire people this year…$3,000.00. Whoa! “Hey there, Big Spender!”

What kind of economic sense does that make? How in the world is a business going to benefit from a $3,000 tax break, when his cost of hiring a worker is likely in excess of $25,000? It is true, if his business is expanding and he needs to hire workers, this benefit will help him. But no business is just going to go out and hire workers at a $22,000 per annum loss. In short for this to work, we need businesses that are e-x-p-a-n-d-i-n-g. Unfortunately, should Obama be lucky enough to preside over an expanding economy, he won’t be looking to tax cuts, but tax increases. Does the term bass ackwards ring a bell around here?

Nevertheless, the prevailing theory is that “…the government can create circumstances which create jobs”—this was actually stated in the speech last week. And I suppose that this tax incentive is what they deem as creating the circumstances that create jobs. But the truth is, the circumstances for creating jobs already exist on their own.

They exist without government help.

They exist without government subsidy.

They exist without government entitlement.

The work of business is an arena completely outside the sphere of government altogether and has nothing to do with it. Interference by trying to “improve” such circumstances only backfires in the end.

For example, the “Cash for Clunkers” program which was supposed to stimulate sales and keep auto jobs alive here in the US, provided a spike in sales temporarily. It was deemed a Government/Business success. But what is rarely reported is how it nearly destroyed the used car sales business in certain portions of the country. In my own area here in the mid-Atlantic, my car dealer contacts have been forced to close their lots, because they cannot get inventory (since the infinite wisdom of the “C4C” programs’ designers was to destroy the old trade-ins). I have good friends, who have been in the business for years, now being forced to leave their line of work, and go job hunting. Thank you, Barack the Beneficent.

The best thing the government can do for job creation, is to get out of the job creation business entirely. Do not offer tax incentives, just stop taxing altogether. The income tax reaches everyone, so leave it at that! The less the government does to “help” business, the better off every one is.

Just ask our friends in American Samoa. On a remote island in the South Pacific, far west of the Hawaiian Chain, we have attempted to extend our omniscient and all kind influence once again. Here on this happy island, where the average income is just $4,000.00 per year, 80% of the economic activity was provided by two separate tuna canneries.

In their infinite wisdom, Congress decided to “help” the Samoans by instituting the minimum wage policy. Happy Day! They’ll all be rich in no time. And the dirty, filthy, stinking canneries will that have kept these fine people so long in virtual slavery and penury will finally get their come-uppance!

Oh how well this has worked in our own land, sacrificing jobs and creating unemployment! Only the most obstinent and ill informed still maintain that the minimum wage increases the standard of living.

The effect on American Samoa?

One of the tuna canneries has already left, and the remaining one is looking to other shores. Great job, Congress. The average annual income should drop below $1,000.00 per year thanks to your creating better circumstances.

Here is a prime example of what happens when the Nanny-State attempts its improvements. In such a simple economy as you would find on this tiny island, with very few other factors to wrestle with, and no other influences to calculate, the soft glove of the State covers an iron fist. Not content destroying lives on our own shores, we have to spread our infectious foolishness to the destruction of others.

Let the prayer of our Revolutionary Forefathers ascend loud and long from the bar, “Good LORD, deliver us!”

Bill Jenkins

February 2, 2010

The Daily Reckoning