A Jobloss Recovery

About this time last year & up to the inauguration BO was seen everywhere with his sign "Office Of The President-Elect."  Now of course there is no such office - it was just something BO made up. 

 

More recently BO claimed that the Stimulus "saved or created" over 1 million jobs.  Now there is no such term "saved jobs" in any economics book so once again this is a term BO made up.  With re to "creating jobs" - please refer to what Stuart Meyers used to define as a job to his students - "A job is an opportunity to create more present or future value for an employer than it costs to maintain the worker in the job" - otherwise the job disappears.  These are not the types of sustainable wealth creating jobs the Stimulus produces.  Schramm, Litan, & Strangler report that it is new businesses less than five years old that have created nearly all net jobs since 1980 - without new businesses job creation in the American economy would have been negative for many years. 

 

The truth is that BO claimed that unemployment would not go higher than 8% if the Stimulus was enacted & that his economic staff predicted that the unemployment rate would be 7.7% by October with the Stimulus & 8.7% if the Stimulus was not enacted.  We all know that these figures have been far exceeded - the unemployment rate of the labor force in October is 10.2%. not 7.7%.  Since the Stimulus was enacted unemployment has increased in every state except North Dakota.  Counting discouraged workers (who are not considered part of the labor force) & part time workers who really want full time work results in an unemployment rate of 17.5%.

 

Despite these terrible unemployment figures the quarter ending September 30 recorded an initial 3.5% GDP seasonally adjusted annual rate expansion.  These initial GDP figures are regularly adjusted up or down.  Also much of the growth was due to the "cash for clunkers program," "the first time home buyers tax credit", & government purchases so it is surprising that many economists believe that the recession ended in June - of course the National Bureau of Economic Research, the official determiner of recession starting & ending points won't make that call for many months to come. 

 

Employment is considered a lagging indicator & yet until the recession that ended in November 1991 that lag was really only a few months.  If June was the end of the recession we don't have a jobless recovery like most economists are saying but rather a jobloss recovery - this is the third such jobloss recovery in a row where unemployment continued to grow long after the respective recession ended. 

 

For an explanation of why & what role the Stimulus plays please refer to the following excerpt from Henry Hazlitt's 1946 Book entitled "Economics In One Lesson" (thanks to Mark Levin & Carpe Diem I have posted the work in its entirety on ReturnToExcellence.net).  

 

Hazlitt's book was first published at a time of rampant statism at home and abroad - much like today.  To get the most out of the following excerpt please read it with the definition of a real American job defined above in mind. 

 

"There is no more persistent and influential faith in the world today than the faith in government spending.  Everywhere government spending is presented as a panacea for all our economic ills.  An enormous literature is based on this fallacy, and, as so often happens with doctrines of this sort, it has become part of an intricate network of fallacies that mutually support each other.

A certain amount of public spending is necessary to perform essential government functions.  A certain amount of public works — of streets and roads and bridges and tunnels, of armories and navy yards, of buildings to house legislatures, police and fire departments—is necessary to supply essential public services.  With such public works, necessary for their own sake, and defended on that ground alone, I am not here concerned.  I am here concerned with public works considered as a means of "providing employment" or of adding wealth to the community that it would not otherwise have had.

A bridge is built. If it is built to meet an insistent public demand, if it solves a traffic problem or a transportation problem otherwise insoluble, if, in short, it is even more necessary to the taxpayers collectively than the things for which they would have individually spent their money had it not been taxed away from them, there can be no objection.  But a bridge built primarily "to provide employment" is a different kind of bridge.

The bridge has to be paid for out of taxes.  For every dollar that is spent on the bridge a dollar will be taken away from taxpayers.  If the bridge costs $10 million the taxpayers will lose $10 million.  They will have that much taken away from them which they would otherwise have spent on the things they needed most.

Therefore, for every public job created by the bridge project a private job has been destroyed somewhere else.  We can see the men employed on the bridge. We can watch them at work. The employment argument of the government spenders becomes vivid, and probably for most people convincing.  But there are other things that we do not see, because, alas, they have never been permitted to come into existence.  They are the jobs destroyed by the $10 million taken from the taxpayers.  All that has happened, at best, is that there has been a diversion of jobs because of the project. More bridge builders; fewer automobile workers, television technicians, clothing workers, farmers."