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  • Jobs or Economic Growth?

    In the currently battered U.S. economy, with high unemployment and bleak growth prospects, politics has become a contest of dueling jobs plans: politicians of every stripe have them. Their motivation may be sincere, but their concept is wrong – and they are just perpetuating the myth that government can create jobs. It can’t. It can only maintain conditions that are conducive to economic growth. That is the real engine of job creation, and it’s where policymakers should place their focus.

    Job creation is a function of producers meeting the demands of consumers for greater well-being (economists call this “utility”), resulting in business growth, such as new capital and labor. This is economic growth. But “jobs bills” are generally counterproductive to economic growth.

    Consider how government “creates jobs.” It moves capital and labor produced by the private economy to activities it determines are worthwhile. Indeed if politicians “created jobs” for everyone, the economy would produce nothing.

    Common in many jobs bills, for instance, is the idea of infrastructure jobs, or “shovel-ready jobs.” Yet, they are only beneficial to the economy to the extent that they increase economic productivity. For example, hiring people to build a bridge that will stand unused benefits no one. It would be equally as effective to hire people to watch paint dry. However, if a bridge is constructed that is genuinely needed, enabling people to commute more quickly to and from work, economic productivity will increase. People will spend more time working and less time commuting.

    So the policy concern should be: how can the government encourage more work and economic productivity?

    Rather than looking for elixirs and silver bullets, policymakers should look at incentives. Incentives drive productivity. Productivity drives economic growth. Bad policy aimed at “creating jobs” derails economic growth and thus prolongs and even worsens the unemployment the policy is aimed to combat. First emphasize growth. Job creation is its product.

    Posted in Featured [slideshow_deploy]

    14 Responses to Jobs or Economic Growth?

    1. plumberswife says:

      This battle is over so much more than jobs…we need every American to be in this battle to save the Constitution, Freedom, Indepedence and Liberty. It is more than obvious that we are in the midst of an attempted statist take over of our country and it's time to choose sides.

    2. John Jameson says:

      Since the recession ended technically 3rd quarter 2009, there has not been a quarter where the economy has slid back, and the stock market has gained back all of its losses. So you could say we have had growth for two years, yet unemployment remains around 10 percent. Economic growth has been weak, but under your theory job growth should be weak as well, but it is non-existent instead. The notion that relaxing regulations and lowering taxes would give incentives for business to hire has been shown in the last decade to not work. Record profits made by some of our biggest corporations have not been invested into the labor force, but put aside to use when a no-risk opportunity comes along. Wealth is earning their income through their wealth rather than through the labor of others. This type of growth will not be conducive to creating jobs. The attitude of those in position to act on their investment capabilities to create real job growth, is that job growth makes no difference because they are making profits without. Under this type of self-centered reasoning, job growth will not occur until unemployment gets high enough to reduce profits because there are very few left to consume the goods or services. This attitude is unpatriotic, and should be considered treasonous.

      John Jameson, Richmond VA

    3. Bobbie says:

      government "can only maintain conditions that are conducive to economic growth." Excellent Mr. Weinberger. the only reason the president's intelligence is unwilling to grasp this concept of his actual duty is because his agenda doesn't require any of the following he's expected to. Because he fooled the country by guilt to vote him in the position he is in he's going to take more than advantage of it by continuing his corrupting of that position. Who's in position to stop him? He refuses the people! Unless they're his "unknown" select…

    4. John Jameson says:

      Since the recession ended technically 3rd quarter 2009, there has not been a quarter where the economy has slid back, and the stock market has gained back all of its losses. So you could say we have had growth for two years, yet unemployment remains around 10 percent. Economic growth has been weak, but under your theory job growth should be weak as well, but it is non-existent instead. The notion that relaxing regulations and lowering taxes would give incentives for business to hire has been shown in the last decade to not work. Record profits made by some of our biggest corporations have not been invested into the labor force, but put aside to use when a no-risk opportunity comes along. Wealth is earning their income through their wealth rather than through the labor of others. This type of growth will not be conducive to creating jobs. The attitude of those in position to act on their investment capabilities to create real job growth, is that job growth makes no difference because they are making profits without. Under this type of self-centered reasoning, job growth will not occur until unemployment gets high enough to reduce profits because there are very few left to consume the goods or services. This attitude is unpatriotic, and should be considered treasonous.

      • lights on says:

        Really? has shown not to work? I used to be employed! The more government, the more government costs the more government costs the less of our earnings we get. The bigger the government the more government controls, the more government controls, the less free Americans are. Government dependency reveals "small," "soft" Americans. Defined words from the President, himself.

      • GDP Growth is measured in dollars. If the 'official' value of the dollar is inflated, say by under reporting inflation, you can create the illusion of growth where there is no growth. That, I believe, is what has been happening.

    5. Lindsey says:

      "Job creation is a function of producers meeting the demand of consumers" means that without consumer demand job creation doesn't occur. The primary driver of demand is profit expressed as wages and when you use (low) wages as a significant element in calculating productivity and profit you undermine job creation. The incentive that policymakers should look at is redefining wages as the primary driver of demand and then iinstitute policies that support that model.

    6. Paul says:

      A key part of your argument consists of insisting that somehow government spending is bad while private spending is good. That somehow the spending on materials and labor by the lawn service company to spray chemicals on your lawn is productive use of money, while spending on materials and labor by the local government to fix the pothole in the street in front of your lawn is money that would have been better spent elsewhere. But from the economy's point of view, those two forms of spending are identical.

      Then you just assert that government creating jobs is a "myth." I guess the thousands of school teachers laid off last month can at least take comfort that they didn't have "real" jobs, and that the elimination of their jobs means that private sector job growth will take off. Oh, wait, funny how all the public sector layoffs hasn't spurred job growth.

    7. Paul says:

      What is really curious is that you seem to agree that if the government built a bridge that went somewhere, that would be a good thing. OK, so have the government build just that kind of infrastructure. All those construction workers would have jobs that they and their families, and the stores in which they were now able to shop, at least would think were "real," even if you regard their jobs as mere myths. And we'd have more productivity to boot. Win/win.

      Your solution is "incentives," which I'm guessing is code for "yet more tax cuts." We've had ten years of tax cuts (yes, even Obama has put forth a bunch of tax cuts, and is proposing even more tax cuts in his jobs bill). So we've had a decade-long experiment in seeing how well your solution would work.

      Not so much, it seems.

    8. Paul says:

      We'll try splitting this into three comments.

      It is a shame that conservatism has been hijacked by rich old white men, whose only goal in life seems to be to die with the most money. They have bought organizations like Heritage so that they can come up with arguments for why having their taxes cut is somehow good for everyone else. They've succeeeded in changing the framing and the dialogue, and not surprisingly, only they have benefited in this economy so far in this millenium.

      How about working on conservative economic policies that actually help those of us who are not rich old white men? Oh, and get rid of the "crowding out" argument. It just is not in the least squaring with the facts on the ground during the current (post) recession.

    9. Al from Fl says:

      I'm not an economist but the type of jobs created by government are viable only so long as the gov't funding is there to sustain it. Thus it is a net loss to the government and funded by the borrowing of the money to create that job. This does not create long term growth nor does it help the debt or deficit situation but it sounds good – put the teacher (fireman etc) to work. That might make sense in an economy that will grow sufficiently in the next year to pick up that gov't funded teacher job but the present policies won't let that happen. So the State puts off a layoff for one more year and the politician gets elected – all to the benefit of the taxpayer who must pay for all this (as well as his grandchildren). And what do we get for this if we buy into it? The destruction of America as we know it with a replacement of a socialist/marixist european style gov't – one that will fare no better than one like Greece.

    10. Lloyd Scallan says:

      What is assumed is that Obama actually wants to create jobs. Look at any of Obama's ploicies or plans. When we do, we realize that job groth is NOT his intentions. This latest distortion is nothing more that another vehicle to increase taxes on the very rich, which will take those dollars, that would have otherwise been invested in job creating projects, to be taken out of the system that produces jobs. In short, Obama's intentions are to force the citizens of this nation to reach a state of desperation that they grasp at total government control of every aspect of their lives. Socialism!

    11. c adli says:

      I believe increasing ;Production; should be ahead of;Job increase;That is the only way the job increase can be maintained.Therefore two of them together should be ;The goal; That is my take.

    12. sam says:

      This is a good example of an attempt to make Ideas clear, Thank You David

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