Obama Jobs?

President Barack Obama’s economic agenda mainly consists of historic increases in government spending. More government supposedly leads to recovery, more robust economic growth, and increased job creation.

These are the strange economic ideas being peddled by politicians these days. Unfortunately, they often get backing by a good number of misguided economists who apparently accepted the silly notions of Keynesian economics in school.

Of course, these politicians and economists like to provide fictional numbers to back up their fictional economics. One of the big numbers served up by the Obama administration is that government-led stimulus will create or save 3.5 million jobs.

A May 11 USA Today article noted: “Rep. Paul Brown, R-Ga., said at a hearing last week that it may not be possible to accurately determine whether the stimulus hits its job creation target. ‘Very probably, these numbers are just picked out of the clear blue sky and are not authenticated or authenticatable,’ he said.”

The White House Council of Economic Advisers responded, with USA Today reporting: “The new report by the White House Council of Economic Advisers offers more details about the projected impact of the $787 billion stimulus package, which Obama signed into law in February. The figure of 3.5 million jobs saved or created, the report says, is the difference between the projected number of jobs during the last three months of 2010 with the stimulus and the projected number of jobs without if there had been no stimulus plan.”

If this sounds fishy, it is.

The USA Today story closed out: “The administration's practice of discussing jobs saved as well as created is ‘a very clever device for providing future political cover,’ said University of Chicago economics professor Steven Davis. ‘The “jobs saved” part was a way for them to say, ‘The economy is still shrinking, but it would have shrunk faster but for the good things that we did.’”

Rep. Brown and Chicago economist Steven Davis are both absolutely correct.

This is shady economics, allowing the Administration to say its agenda worked even if it did not.

What’s the main problem? The underlying assumption that more government spending creates jobs ignores the fact that resources are being diverted away from the private sector to the government. Government creates nothing. Government can destroy businesses and jobs. And at its best, it can protect life, limb and property, enforce the law and contracts, and dispense justice. But when it comes to more government spending, resources are taken from the private sector – whether through taxes or borrowing – where prices, profits, losses, competition and consumers call the shots, and then doled out by politicians and their appointees according to politics.

Once you grasp how the economy works, it becomes clear that all of this government spending will not make the economy better than it otherwise would have been, but instead worse.

The Obama stimulus plan is not about net job creation. Instead, it’s about shifting from market-driven jobs to government-driven jobs, with the overall number of jobs being less than what would have been accomplished if government spending were not cranked up in the first place.

Raymond J. Keating
Chief Economist
Small Business & Entrepreneurship Council