Sunday, June 12, 2011

Government wastes money on 'creating jobs'

A shortened version was published in The Tennessean, Sunday, June 12, 2011

by Richard J. Grant

Whenever a president or governor announces that he is going to focus on “creating jobs,” we have reason to worry. Our state and federal governments have grown way beyond the size where any additional government job is likely to contribute more to society than it costs.

It is not an insult to President Barack Obama to say that he cannot create jobs. He can't and we shouldn't expect him to. He can, however, “make work.” Unfortunately, that is what he has done by driving up regulatory and tax-compliance costs, and creating much uncertainty about future policy. That is why the unemployment rate has remained so high for so long and has risen in the past two months to 9.1 percent.

The political need for government office-holders to seem important to voters is sufficient to explain the growth of government intervention. An ideological bent toward bigger government simply makes this worse.

We don't need government to create jobs; there is already plenty of work to do. A job is created whenever a least one of us takes action in an attempt to satisfy a need or desire. We have an endless supply of desires, so we really do have an endless supply of work.

The more thoughtful and quick we are in our work, the more needs we can satisfy each day. If we can reduce the amount of resources we use to satisfy a particular need, then we have more resources to achieve other goals and to improve quality. We can produce more, provide better products, and serve more people.

Politicians who make work for us get all this backwards. This is why government job-creation programs invariably, if not obviously, fail. They lose sight of the real objectives and the real costs.

When Senate majority leader Harry Reid succeeded in diverting taxpayer dollars to fund “cowboy poetry” festivals in Nevada, he also succeeded in taking from you dollars that you devoted part of your life to earn, and that you might have used to invest in your business, or to pay for college, or to pay for a car or gas. Even when the government expenditures are less-obviously wasteful, they are more often than not expenditures on something that you would not have used those dollars to buy. Because of this, part of your work is wasted. To get what you want you have to work longer.

These past few years, our governments have spent or lent trillions of dollars in the hope of saving or creating jobs. In the face of this, the unemployment rate continued to rise, fell slightly, and is now rising again. Whatever number of jobs has been created, it has not kept up with population growth. The amount of government dollars spent per “job created” has been greater than the salary or value of each of these jobs. This means that the government has been wasting people’s time and resources.

Real job creation is a product of thoughtful investment and voluntary cooperation. Government is helpful when it respects private property, protects individuals from real coercion, and assists in the enforcement of contracts. But government destroys jobs when it taxes away capital, subsidizes unprofitable companies, imposes labor law that raises the cost of hiring, and then prevents the company from moving to a better location.


Richard J. Grant is a professor of finance and economics at Lipscomb University and a senior fellow at the Tennessee Center for Policy Research. His column appears on Sundays. E-mail: rjg@richardjgrant.com

Copyright © Richard J Grant 2011