Thursday, February 05, 2009

Real Jobs and Government Jobs

In the middle of the argument over the stimulus bill a new sub-argument has erupted - can the government create jobs?

To many, there is no question. Newsweek dismisses any argument to the contrary.

These claims are so peculiar that it's hard to know where to begin. Contrary to Steele's assertion, in the history of mankind, the government has in fact created many, many jobs (including the one he held for a few years: lieutenant governor of Maryland). Today, government accounts for 22.5 million of the nation's 135.5 million payroll jobs, or 16.6 percent. Those numbers include people who work for the federal, state, and local governments—doctors and nurses in public hospitals and teachers at elementary schools and public universities. Government also has created—and continues to create—all sorts of private-sector jobs, for defense contractors, the aerospace industry, medical-device makers, real estate companies, and construction firms. The economy of the Washington, D.C., area has boomed in recent decades not so much because the federal government has expanded its payrolls massively but because private government contractors have been thriving. As the Bureau of Labor Statistics notes, in January, "the large areas with the lowest jobless rates in December were Oklahoma City, Okla., and Washington-Arlington-Alexandria, D.C.-Va.-Md.-W.Va."—a capital city, and the capital city.

Time similarly dismisses the argument.

Again, there has been an Alice in Wonderland quality to much of the criticism, as if Keynes were a fraud and government spending couldn't possibly create jobs — especially spending on biomedical research or education about STDs or any other programs that sound vaguely liberal and exotic. But biomedical research jobs are real jobs. So are jobs beautifying the Mall and warning teenagers about herpes. So are jobs building and engineering rail lines for Amtrak, regardless of the company's current profitability.

Obviously the government does employ people and it gives money to others who employ people. The thing is, this is only half of the equation. The problem is that the government does not create any wealth. It just redistributes it.

I'll offer my own job as an example since I work for local government. My job is paid for by a 2% income tax. That means that 1 of every $50 that a taxpayer earns go to pay for the city government. If we oversimplify, then, for every 50 workers, one of them works for the city. We have subtracted a worker from the private workforce and added him back in as a government worker.

This is why Republicans are saying that the government does not create jobs. The government redistributes jobs. You can make the case that this is an acceptable trade-off since the government does many things that private industry will or cannot do but you cannot escape the fact that these jobs eliminate other jobs elsewhere in the economy.

Obama and the Democrats are trying to hide this fact by borrowing the money to create the jobs. They are planning on either borrowing a trillion dollars (which will have to be paid back) or printing a trillion dollars in new money (which will eventually cause inflation until the current money supply is worth a trillion fewer dollars than before). Either way, we will have to pay for the stimulus in the future and any jobs created by the spending bill will only exist as long as the government pays for them.

This article in the Washington Times quotes a CBO report that indicates that the stimulus will be harmful over the long run.

CBO, the official scorekeepers for legislation, said the House and Senate bills will help in the short term but result in so much government debt that within a few years they would crowd out private investment, actually leading to a lower Gross Domestic Product over the next 10 years than if the government had done nothing.
A lower GDP means fewer jobs. That's why Republicans say that the government cannot create jobs.

No comments: