Wednesday, December 03, 2008

Spending our way to Prosperity

Lying or Stupid
Government Created Jobs

“…every $ 1 billion invested in transportation infrastructure creates 42,000 jobs.”
Corrine Brown, (D-FL)

The above quote came from a press release by Corrine Brown when talking about the need to spend money on infrastructure and transportation projects. She is against the idea of working people keeping their own money to stimulate the economy and instead feels it would be better if the Federal Government spent the money. If you haven’t heard of the idea floating around Congress this week, listen to this. Basically, instead of the feds spending money on a stimulus package, the government would declare a tax holiday (income tax, FICA, Medicare / Medicaid) for the first two months of 2009. Every working person in the country would get a 2 month “raise” in income. The cost would be the same as the 300 billion stimulus package without as much red tape and bureaucracy. For more information, check here.

According to the esteemed Ms. Brown, we need to have the federal government spend that money in order to create jobs. She says “42,000 jobs for every 1 Billion spent”. Let me, if I may, poke two big holes in her argument.

1. If indeed, the Government could “create” 42,000 jobs by spending $1 billion, then why do we have any unemployment? I’m no math major, but according to the Bureau of Labor Statistics, we had 10.1 million people unemployed in the United States in the month of October, 2008. If $1 billion will create 42,000 jobs, we only need to spend 240 billion (and some change) to reach full employment! How come no one else has ever thought of this? We never have to have unemployment again in this country!
Except for point number 2….

2. The simple fact is that government is incapable of creating a single job. Sorry, not one. Ask yourself what it takes to create a job? It takes capital. It takes capital to pay the worker, to train the worker, to provide the work environment. Simply put, it takes money. What money does the government have? None, remember that the government cannot create capital. The government cannot create anything. The government must take from its citizens to have money to work with. This is done by taxation. That money taken by taxation would have been spent. Maybe the money would have been invested in a business allowing it to expand. Maybe the money would have been saved allowing a bank to loan it out for business expansion. Maybe the money would have been blown on a lavish, opulent party thus helping to expand a catering business or a rental hall or a small liquor store. In effect, the government must seize money from a job creating public, in order to spend money to create jobs. The sad part is that it’s not even a one for one proposition. The very cost of government to implement these “jobs” programs or the bureaucracy used to distribute the money reduces the effectiveness of so-called jobs creation. Let’s not even get into how much is wasted once the government gets its hands on it. For every job the government “creates”, probably 1.5 jobs must be destroyed in the private sector.

The solution is simple. DO NOTHING! Economies expand and contract, it’s natural and necessary. We will recover and we will recover faster if the government stops spending money. If our Imperial Federal Government feels they must DO something, then implement the tax holiday. At least the money would go to every working person instead of just to the politically chosen or to a bunch of failing companies.

When Corrine Brown says that government spending the money is better than letting people keep the money they earn, I understand. Most big government fans do not like a solution that keeps the power in the hands of the great unwashed. They want the power. If any politician tells you that they can create jobs and save the country by taking money out of your pocket, you have to decide if they are lying or stupid

Little Duke