Monday, January 31, 2011

Government 'investment' doesn't create jobs; the private sector does

11 8:05 PM

With unemployment remaining above 9 percent and showing no signs of going down any time soon, there's lots of talk in Washington about job creation. For President Obama and congressional Democrats, unemployment is an opportunity for government "investment" in massive public works projects such as manufacturing solar shingles and building high-speed rail lines. At best, such big-spending projects by the federal government mainly create temporary jobs while building things of dubious consumer value. More often, these government spending projects funnel tax dollars to Democratic political allies like the unions that benefit from Project Labor Agreements. These PLAs bar nonunion workers, thereby driving up costs to taxpayers.

The problem is that big-government public works projects allow Washington politicians in both political parties to claim to be "doing something" about high unemployment. But the reality is that every dollar spent by government is one less that is available for the private sector to invest in new businesses and technologies that spur the creation of permanent jobs. Indeed, if increased government spending were the solution to high unemployment, the U.S. economy would be short of workers. Just since the last two years of the Bush administration, the federal budget has grown 36 percent, from $2.7 trillion to $3.7 trillion annually. Discretionary spending has gone up 25 percent. The Heritage Foundation's Brian Reidl projects that the national debt will grow nearly $20 trillion by 2021, reaching 100 percent of gross domestic product that year. The annual budget deficit will exceed $1 trillion every year for the next decade.

But it's exactly that tidal wave of federal spending, along with the trillions borrowed from China and other overseas creditors and thousands of pages of new federal regulations, that's preventing the economy from creating new jobs and growth. House Speaker John Boehner got it exactly right on "Fox News Sunday" when he said, "There has been a spending spree going on in Washington these last couple of years that is beyond control. ... By running up the debt by spending money we don't have, running up these huge budget deficits, we create more uncertainty in the private sector. This is where cutting spending will create jobs because it is going to bring greater fiscal responsibility here in Washington, D.C." The speaker repeated over and over again during the interview that the American people want government spending reduced so that jobs can be created. After the midterm elections, it's a wonder that the Beltway crowd needs reminding.