GOVERNMENT CANNOT CREATE JOBS
The U.S. Federal Government cannot create jobs. On balance, even government spending for so called “job creating” programs actually results in fewer jobs. Spending that goes beyond reasonable amounts allocated for fundamental purposes—defense, roads, law enforcement, etc.—takes resources (and jobs) away from the private sector and does not add comparable numbers of jobs in the public sector. The fundamental reason for the net loss in jobs is that productive resources are being misallocated and, therefore, are not being optimally utilized.
Resources are finite and they are scarce. The government must acquire all of its resources from the private sector. It does so through the police power of taxation. In this manner, massive amounts of resources are diverted from the private sector where they would be used for productive purposes, to the government sector where they are used in a less productive manner (with respect to jobs). In the private sector, intense competition for scarce resources dictates that they be utilized in a highly efficient manner, with minimal waste. If not used in this way, the resources will be bid away by another entity that can afford to pay a higher price because they use them more productively. This process is at work 24/7, and it plays out through millions of individual decisions that are made by employers and employees each and every day. There are no analogous refining processes in the government sector.
So how much government spending might be the right amount? Several highly regarded economic studies have been conducted with the specific purpose of answering this question. Many of these studies have been published in prestigious economic and public policy journals, and a few have even been presented to the Congressional Joint Economic Committee. As a group, the studies produced surprisingly similar findings: that the optimum scale of government spending (federal, state, and local) is roughly 20 percent of total economic output (i.e., Gross Domestic Product, or GDP). The last year that U.S. government spending was that low was in 1951. In 2010, U.S. government spending totaled over 40 percent of GDP. According to usgovernmentspending.com, since 2000, government spending has risen from 33 percent to 42 percent of GDP.
For those who may be interested, possibly the most widely publicized and easily understood presentation of the relationship between the size of government and the health of the economy is found in the Rahn Curve. Formulated by the highly-respected economist Richard Rahn, the analysis shows that as government grows beyond the optimum size, economic activity diminishes. Information about the Rahn Curve is plentiful on the internet.
As for the most job-inhibiting types of government expenditures, several studies have found that outlays for Social Security and welfare programs are the most harmful to the economy. This is not to say that social programs do not have significant worth, they do. Among U.S. Citizens today, few would argue that maximizing or nation’s economic health and, thus our nation’s collective standard of living, is the only important function of government. However, I expect that relatively few have been exposed to the evidence presented herein, and so their understanding of government spending may have been incomplete.
In a nation that purportedly considers self-reliance a virtue, is there not significant social value in fostering plentiful job opportunities with the result of minimizing the need for anti-poverty programs? Regardless, it is counterproductive for our government to be conscripting resources (and jobs) from the private sector for the purpose of establishing so-called “job-creating” programs.
And finally, a closely related issue is that of the deficit. At the present rate of government spending, it is a virtual certainty that we are mortgaging the quality of life for future generations for no other purpose than to enrich ourselves today.