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Busting Myths Around Spending and Jobs

This article was written by Francis Cianfroccaof The New Ledger.
Federal deficit spending in a recession is supposed to create jobs, but it never does. At best, it provides some stopgap demand until the private-sector economy rebounds on its own. Don't let Paul Krugman, channeling Keynes, tell you that the public demand itself is what actually produces the recovery.

Stimulus spending is used to heavily expand "automatic stabilizer" programs, which include unemployment compensation, welfare, food stamps, etc. Keynesians tell you this is the best kind of stimulus because it directly feeds incremental consumption. But temporary income boosts for low-income people don't create sustained demand that can fuel business investment and hiring.

And where does the bulk of stimulus spending go? Mostly to government workers and public-sector spending. But government is one of only two sectors in the economy that are still experiencing boom times, with no recession at all. (The other one, of course, is finance. Healthcare and education are doing quite well too. But education is government, and half of healthcare is government too.)

Our borrowed stimulus dollars that we'll have to pay back someday, and will likely have to start paying much higher interest rates on much sooner than someday, are going to sectors that don't need the help anyway. You might as well take the world's investors's money and plow it into overvalued US housing. Oh wait, we're doing that too, thanks to taxpayer-supported Fannie Mae and Freddie Mac.

So now the New York Times considers it newsworthy that 21 states, including Mississippi, are doing something shocking with some of their stimulus money: they're directly supporting the creation of private sector jobs.

Republican governor Haley Barbour did this by creatively reinterpreting a tiny sliver of Mississippi's stimulus grant that was intended to support welfare payments. This is different from Obama's genius idea of giving tax credits for hiring people. (Just like Cash for Clunkers, that idea doesn't change the economics of hiring, and the credits are mostly awarded for people that would have been hired anyway.)

Rather, the Mississippi program directly pays the salaries of qualifying new hires, on a steadily decreasing scale from 100% upfront to zero after nearly a year. I'm a business manager, and so far everything Washington has proposed, including expansions of SBA loans, has left me cold. For the first time, I found myself saying "YES. If I had that program, I'd hire people tomorrow."

Don't you think this ought to be the FIRST thing we should do with stimulus money, rather than the last?

Of course, only a tiny fraction of Mississippi's federal money can be used this way. The rest has to be used, of course, to bolster the salaries and benefits of government workers, and to build bike paths and greenways that no one needs.

We're talking about very small numbers here, maybe 3500 jobs to be created before the program ends. Still, these are real, value-producing private sector jobs, and we should be thrilled to get every one of them.

I can't neglect to mention a key restriction in Mississippi's program: companies that have recently experienced strikes, organizing drives, or other value-destroying union activity need not apply. Thank you, Governor Barbour, for understanding the simple reality that in a global economy, unions destroy jobs by overpricing labor.

So what is the NY Times's reaction? They say: "Mississippi's decision to pay for jobs in the private sector means that the public is paying to create jobs that will provide little public benefit."

Thanks, you morons, for finally giving the game away. Now we know that when Obama talks about creating new jobs, what he really means is new GOVERNMENT jobs. That's not value creation at all. That's value destruction.

To hear liberals say that private-sector employment doesn't amount to a public benefit, proves what we've long suspected: since they don't value private sector work, we can't expect them to implement policies to encourage it. And their argument isn't even logical on its own terms, since increasing private employment cuts down on how much we need to spend on "automatic stabilizers."

We really have to face facts: this country needs to take the gloves off American business, and particularly small business. As I've said so many times now, that means eliminating capital gains and business-income taxes, export restrictions, regulations, and private-sector unions. The government needs to get out of our way and let us create some value.

Is any of that going to find its way into a federal jobs-creation package, as long as our government is dominated by Democrats? I don't think so.

By Francis Cianfrocca:
Reprinted with permission from The New Ledger.