I guess when you have this misplaced faith in the power of big and growing government to create jobs, combined with a cabinet with the lowest levels of private sector experience, the end result is what we have today. As the author points out, Obama may have “inherited a mess” but it was a mess that he contributed to by his support of TARP and substantial hikes in the minimum wage. If you are an employee of state or local government – you benefited from the “stimulus” package and are part of the “jobs saved” statistic that Joe “Plugs” Biden loves to throw around.
by Daniel J. Mitchell
The White House last year released a supposedly scientific analysis that claimed to show that adopting the “stimulus” bill would cut unemployment. Indeed, the report specifically estimated that the unemployment rate today would be down to 7.5 percent.
Something obviously went wrong. The actual unemployment rate is 9.5 percent, a statistic that doesn’t include the millions who’ve given up looking for work or can only find part-time jobs. What were President Obama’s biggest mistakes?
Part of the problem was a misplaced faith in Keynesian economics — that is, in the discredited notion that politicians can borrow money from the economy’s right pocket and increase prosperity by dumping money in the economy’s left pocket.
But the bigger stumbling block is the folks in the White House seem to have no clue how the real-world economy works. Critics have noted that the Obama Cabinet sets the record for the lowest-ever level of private-sector experience. That doesn’t necessarily mean people who don’t understand how and why jobs are created — but that seems to be the case with this administration.
Profit and Investment Are Necessary For Job Creation
LET’S start with two common- sense observations. First, businesses are not charities. They only create jobs when they think that the total revenue generated by new workers will exceed the total cost of employing those workers. In other words, if it’s not profitable to hire workers, it’s not going to happen.
Second, it takes money to create jobs. More specifically, labor isn’t very useful or productive unless investors are providing capital. Truck drivers won’t get jobs unless someone has invested to buy trucks. Software programmers aren’t worth much if their employer doesn’t buy computers for them to work on. Even the green-energy companies the White House favors can’t hire workers unless somebody (ideally venture capitalists rather than taxpayers) provides seed money.
The problem is not a lack of capital. Businesses have plenty of extra cash — with the Federal Reserve reporting this month, for example, that nonfinancial firms are sitting on $1.8 trillion, about a quarter more cash-on-hand than when the recession started.
[…….]
* The new bailout legislation, though labeled “financial reform,” raises costs for financial firms, meaning loans will be more expensive. That is, investing in that truck or computer for that new hire will cost you more.
TO be fair to President Obama, the problem began before his inauguration. President George W. Bush signed a big minimum-wage hike that has hit hard at less-experienced and lower-skilled workers. If a worker is only worth $6.50 per hour, then a required wage of $7.15 is a one-way ticket to the unemployment line.
And Bush was responsible for the TARP (Troubled Asset Relief Program) bailout, which has squandered precious capital by steering it to such inefficient firms as Citigroup and General Motors, which are unlikely to create jobs over the long run.
Of course, Obama supported these and other Bush economic policies, so the “mess he inherited” is also a mess he helped to make. All that matters from a jobs perspective, though, is that government has made it more expensive to hire workers and more expensive to provide the capital needed to make workers productive. This is a bad combination — whether politicians call themselves Democrats or Republicans.
Read the rest: O’s jobs errors
Tags: The Obama Economic Boom
