High and/or rising unemployment is always a political liability for a president, and so Barack Obama has taken the offensive in trying to persuade the American people that his team can get Americans back to work.
In November, Obama took credit for having created 640,000 jobs. That audacious assertion was less than persuasive, coming as it did near the end of a year during which the number of employed Americans declined by over four million while the unemployment rate rose from eight percent to 10 percent.
Team Obama’s credibility came into question again when alert reporters pointed out an embarrassingly large number of “inaccuracies” in the Obama administration’s claims of jobs “saved” and “created” by the stimulus plan he pushed through Congress last winter. This included isolated stories about things like more than 900 jobs being saved in a Georgia business with only 500 employees. Then it quickly snowballed when researchers examined Obama’s recovery.gov website and tabulated official claims of tens of thousands of phantom jobs in nonexistent congressional districts.
This unseemly episode raised issues of competence and trust in terms of whether Team Obama had what it took to help the unemployment situation (and never mind whether these are the people you want redesigning the country’s healthcare and energy industries). In fact, it proved to be an advantageous diversion for Team Obama, because it deflected attention away from the administration’s actual record of adopting policies that have increased the number of unemployed Americans.
In June, the minimum wage rate increased 75 cents. This government intervention priced many young Americans out of jobs, with the unemployment rate for black teens rising from an already-too-high 39 percent to an abominable 50 percent.
Team Obama’s aggressive attempts to raise taxes on businesses and employees to pay for his health-care plan would significantly increase the costs of employing people, making businesses afraid to hire. And the cap-and-trade scheme would increase energy costs dramatically, further adding to business worries. (Incidentally, economic studies have shown that Obama’s cap-and-trade program would reduce American employment by between one to two million jobs per year.)
Another factor that has aggravated unemployment this year is that Uncle Sam’s enormous budget deficit has consumed virtually all the available credit, crippling the ability of private businesses to hire new workers.
Obama’s fundamental problem regarding jobs is that he believes all that baloney about government having quasi-deific powers as an alleged “creator” and “savior” of jobs. Yes, government can put people on its payroll or prop up certain jobs, but only by redirecting scarce capital and resources from elsewhere in the economy, thereby reducing employment in the private sector.
What about the Obama hype about creating new “green” jobs? Lots of luck! Germany’s government tried this, and every “green” job cost $240,000 and raised the overall unemployment rate. Each solar energy job in sunny Spain resulted in the loss of 2.2 other jobs.
Even in our own nation’s history, it is no coincidence that unemployment stubbornly remained at atrocious levels for all the years that FDR’s jobs programs were in place.
As history shows, governments are not creators and saviors of jobs on a net basis, but effective destroyers of jobs.
A little economic knowledge explains why this happens.
When a job exists only because of a government subsidy (whether in the form of a grant, a tax credit, or any other policy device), then what the job produces is worth less than the worker is being paid. Society as a whole is made poorer by the difference between the value of what the worker produces and what the government pays him, and that wealth is withdrawn from the private sector. Even if government could miraculously hire workers to do exactly the work that citizens want most and pay them true market wages (and no government planners ever have sufficient specific knowledge to make these decisions, which is why centrally planned economies always stagnate), such a program would make society poorer and therefore reduce overall employment. Why? Because of the overhead costs of administering the program: the armies of bureaucrats (with their cars and offices) needed to study, administer, and keep records on the government-employed “non-governmental” workers.
The Obama/Pelosi/Reid axis rushed to defuse the fake jobs scandal of November by holding a “jobs summit” in December. The outcome of that summit was more of the same failed policies of government spending and government subsidies that will finance uneconomical jobs at the expense of economically rational jobs in the private sector. As a result, high unemployment will persist throughout 2010.
One of the tragedies of Barack Obama’s presidency is that the more he tries to use government to improve the job market, the more he throttles that market. Let go, Mr. President. You’re making things worse.