I watched a segment on tv today with Dick Blumenthal, the democrat running for Connecticut Senator, stumbling all over himself badly when asked during a debate, “how do you create a job”. The dude was clueless and clearly caught off-guard. Laughable stuff when you see these elites cringe and be made to look foolish. Also worthy of crying as these same fools are at the helm guiding the ship.
Unfortunately, it’s a true dilemma. Many of our elected representatives at all levels of government don’t understand this basic concept. They buy into the idea that this is government’s role. Some advocate stimulus type projects as the way to create jobs. Some believe it’s tax incentives. Both are wrong. Yes, even the tax break crowd.
First, we must make the distinction between the type of job. The type of job that government can ‘create’ is only one designed to keep people occupied and/or redistribute money around the economy. An infrastructure type project would be an example. Repairing roads and bridges. Even jobs like public safety. Obviously, many of these jobs are quite necessary. However, you must keep in mind that they are all funded by the taxpayer. Again, usually willingly so as we all demand a certain level of public services to maintain our civilized society.
The type of job that we need today to boost the economy is a real job. In other words, a job that creates wealth. This is the key. It must be created in the private sector. It must be a product of ‘true’ demand. This is where stimulus comes in. Stimulus serves to artificially create demand. It’s only a short-term gap filling exercise that doesn’t last.
You can think of our economy as a pie. Stimulus and other government assisted jobs only serve to move things around inside that pie. The pie can’t grow larger. You must have ‘true’ demand for more pie to ever make it larger. Boring old supply and demand. This requires a new job and one that actually creates wealth by injecting new money from some exterior source. It could be investment money from an entrepreneur. It could be foreign money. But it must be money that wasn’t already part of the pie to ever make it grow larger. This is the basic premise for growing our economy.
Our population is always growing. This creates new demand automatically as these people need products and services. When you spend taxpayer money to finance stimulus and other government projects, this acts as a draw on the economy. You are actually shrinking the pie by removing available capital for the private sector. This is why it is said that stimulus cannot work and is a failed concept right out of the box. Only new demand creating new supply can create new wealth. Obama has no concept of this whatsoever. Thus we will see the continued failure of his policies and high unemployment.
The idea of using a temporary, stimulus package to artificially create demand during an economic downturn is a key concept of Keynesian economics. I won’t even argue the merit of it. It likely would work if it were executed as advertised. The problem is that most of the funding is used to create permanent government programs which will always require future funding thus defeating the theory of being temporary. If you took out a loan and used that money as a stimulus to create demand and then returned the money in full once the supply and demand cycle returned to normal, this would be fine. It never works that way. And the only reason we have these cyclical cycles creating recessions is due to government intervention into the markets and manipulation of the money supply by the fed. but that’s a subject for another day.
So, it’s really quite simple. True, real, new demand creates true, real, new supply requirements which in turn creates real jobs that actually create wealth. This is how an economy grows. Anything else is just smoke and mirrors and attempts to manipulate it. Our economy won’t recover until our policies reflect this logic. Also keep in mind that GDP growth in the order of just a couple of percent is not actually growth. It meets the requirement technically to say we aren’t in recession anymore, but it doesn’t keep pace with the nations growth rate or the ‘draws’ placed on the economy by utilizing stimulus type packages. We need several percent growth each quarter, the specific amount is debatable, just to break even and keep pace. Just like we need over 100,000 new, real jobs each month merely to keep up with the growth of our population. Any way you measure it, Obama is failing.