Sunday, October 19, 2014

The Job Creators: Santa Claus Government or Private Business?

A recent letter appearing in the NJ Star-Ledger was titled Government, private sector create jobs together.

Actually, the content of the letter is even worse than the title suggests. Walt Lukasik opens with:

Republicans abound in their assertion that the private sector produces jobs in America, not the government. However, the U.S. government is the largest consumer of private-sector goods and services. If our government decided to halve its budget, is there any doubt that businesses would close and millions of Americans would be jobless?

Any guesses on what Lukasik's solution to job creation is? I left these comments:

And just where does the funding for government consumption and "investment" come from? Lukasic apparently believes that the government is Santa Claus; that government creates wealth out of thin air (or in some Polar fantasy land).

But, there is no free lunch. The government gets its money by forcibly seizing it from productive private citizens through direct taxes, future taxes (borrowing), or hidden taxes (printing press money, which is a tax on private purchasing power). Every dollar government spends is one dollar less that private citizens have to spend or invest. The only difference between public and private spending is that government officials, rather than the people who earned it, spend it as they please. Not only is this fundamentally immoral, it is economically destructive, because most government spending is driven by political calculations, rather than economic self-interest.

The source of government revenue is the private initiative of free individuals pursuing their life's goals. The only role of the government, to the extent it "consumes" and "invests," is to transfer money from some individuals to other individuals—and nothing more. Beyond its fundamental job to protect individual rights, the government can only harm the economy. Without the productive private economy, the strength of which depends on economic and political freedom, there could be no government consumption, investment, or jobs. The leaders of the private economy are those extraordinaire individuals whose intellectual energy exceeds his physical capacity to realize his productive vision—and whose ambition leads to action. The result is the businessman, who takes the risks, identifies the markets, organizes the factors of production—including the creation of jobs—and provides the vision and direction of the enterprise toward the creation of products and services that consumers are willing to voluntarily spend their money on.

But in Lukasic's fantasy land, "improving the standing of middle-class America" entails turning productive Americans into a giant welfare class, where every day is Christmas and people wait greedily for prosperity to shower down from Santa Claus government.

This would be hilarious if it weren't so serious. Many powerful people buy into this gunk; or worse, know it's gunk but exploit those who buy it to buy votes and expand their own power. A giant chunk of government policies, called Consumption Economics or Keynesianism, is built on this fantasy, and productive taxpayers foot the bill. 

There is no question that jobs are created under government-funded economic activity, but only at the expense of even more job creation under private spending. Government can only help the job creation process by interfering less—lower taxes and regulations—or hinder it, by higher taxes, higher government spending, or more regulations.

In the past 15 years, government has hindered rather than helped. The results are clear for all to see; the housing bubble and bust and related Great Recession; the slowest recovery ever; a semi-permanent underclass of unemployed; record levels of official poverty; slow wage growth; restrained private business (i.e., real) investment; all within the context of what, according to the Santa Claus theory, should have produced economic nirvana— record spending, record debt, and record monetary expansion.

Related Reading:

Mazzucato’s Fantasy: The “Courageous, Entrepreneurial State”
What is the "Key" to Job Creation?

"Government Help" Leads to Totalitarian Socialism

1 comment:

Anonymous said...

My simple little friend... When capitalism hurts more people than it helps, it is time to sunset capitalism and time for socialism to rise. Right wing crackpots like you have brought this on and now you don't know how to stop it.

Walt Lukasik