Job Creation Problems

An editorial in the New York Times shows the problems caused by depending on the government for job creation. It starts out with an inaccurate figure:

The economy added 162,000 jobs in March, a welcome gain after more than two years of nearly uninterrupted losses.

In fact, the economy added less than 110,000 jobs. The rest are temporary census jobs created by the government.

The editorial included the standard caution against fiscal sanity:

Make no mistake, the deficit is a serious problem that must be addressed in the medium term. The economy needs to be bolstered now.

The problem is how to use the government to bolster the economy without having long-term consequences. Predictably, the Times suggested several fixes that involve large sums of government money. The long-term problem is that this money has to come from somewhere. There are only three possibilities and none of these are desirable:

1) Raise taxes. The economy needs more people spending and investing money. The more money the government taxes, the less is available for the rest of the economy. The Times acknowledges this on the state level if not the federal level:

As states try to close their deficits with tax increases, consumers cut back on their spending, which harms businesses and hiring.

2) Borrow more money. This is the most likely answer, at least in the short term. This means raising the deficit and adding to the national debt. The higher the debt the more money is needed every year just to pay off interest. Since the principle is not being reduced, the amount of money needed to make interest payments keeps rising forever. The Times tries to minimize the effects of the deficit by accusing the Republicans of "grandstanding" on it but this is a real problem with long-term consequences. Under current projections, the national debt will grow so large that the deficit will have to be eliminated. This will be horribly painful.

3) Print new money. At some point in the near future this will begin to look attractive. If the government puts enough extra money into circulation it can pay off the debt. This will lead to runaway inflation. This may not sound so bad to anyone under 45. For those of us who remember the 1970s, this is a disaster. It has the same overall effect as raising taxes but it affects savings the most.

The bottom line is that any money the government spends on stimulating the economy, eventually has to come from somewhere. The hope is that a short-term stimulus will lead to long-term growth which will cushion the eventual drag of paying for the stimulus. While this might work sometimes, it will not work now. We have spent too freely, already.

So what can the government do to stimulate job creation? There are several options available that do not require new spending. These involve reducing the cost of hiring. The government could roll back the minimum wage increases or some parts of the ADA. It could repeal the recently-passed health care mandates. It could postpone new environmental standards. All of these cost jobs. There is also the issue of illegal immigration. For years this has been excused since the illegal immigrants were "taking jobs that Americans would not do." I suspect that many Americans have reordered their priorities and would be glad to clean hotel rooms or do gardening rather than being unemployed.

Sadly, none of these actions will even occur to the Democrats or the New York Times. They are inordinately proud of these measures and the idea of rolling back any of their "progress" in order to create new jobs would not occur to them.