How NOT To Create Jobs: Spend More Money

Word is that President Obama will focus on jobs in his State of the Union speech on Tuesday. No surprise there: jobs are the American people’s top public policy concern. Obama reportedly will propose new and expanded federal spending programs as the means of job creation. No surprise there either: what else do liberals have to offer?
Yet if there is one thing we know with an empirical certainty, it is that increasing federal spending will not, on balance, create more jobs. Of course, whenever the government spends money someone is employed, or, at least, gets to cash a check. This is what Obama had in mind when he said–in a moment of supreme cluelessness–”spending equals stimulus.” What Obama apparently does not understand is that government spending consumes resources, often inefficiently, that could better be used elsewhere. Whenever the government wastes resources, the country grows poorer and job growth is suppressed. This, in crude terms, is why the ballooning public expenditures of recent years have not caused a boom in the job market.
To illustrate this point, I created this simple chart. It plots federal spending from 1998 through FY 2011, on a scale of $1 trillion to $4 trillion, against the total number of non-farm jobs in January of each year, in thousands, as reported by the Bureau of Labor Statistics. Click to enlarge:
Jobs:Spending Comparison.001.jpg
It is blindingly obvious that spending does not equal stimulus, and increasing federal spending will not create jobs. There are two possibilities here. One is that Obama is one of the last people in America who have not figured this out. The other is that Obama knows his proposals are dumb, from an economic standpoint, but doesn’t care. The one thing that more government spending will accomplish is to slide more money to Barack Obama’s cronies and to various constituencies of the Democratic Party. Maybe that is all Obama ever wanted.

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