For years, I have said that the answer to this question is no. The only way the government can add a job is by creating a civil service position, or paying some private entity to do some work that requires new workers. But what is the cost (all things have hidden costs!) of this transfer of wealth? Does it come from a tax increase? In which case, a business can no longer hire a worker due to the higher burden? Or does it come from printing more money? In which case inflation makes savings worth less, and again, businesses can hire less people.
Now, the Times vindicates me!
Even with all the attention on hiring, the government’s ability to create jobs is pretty dispiriting, no matter who is in charge. The most popular types of jobs programs involve state tax breaks or subsidies that seek to seduce a company from one state to another. While this can mean good news for “business-friendly” states like Texas, such policies don’t add to overall employment so much as they just shuffle jobs around. This helps explain Rick Perry’s claim that more than one million jobs were created under his watch in Texas while the rest of the country lost more than two million.
The federal government does something similar when it decides, for instance, to regulate oil drillers and subsidize windmill makers. Such a policy might help the environment but it just moves jobs from one sector to another without adding any. And while both Perry and Mitt Romney propose that further oil and gas drilling in the U.S. will transform the jobs picture, only 30,000 Americans work in oil and gas extraction, and about another 125,000 in support occupations. With more than 25 million Americans unemployed or underemployed, it’s unlikely that any changes in that part of the energy sector would make a real dent.
The TImes actually discusses the Keynesian v. Hayekian debate!
Many Republicans follow the more fiscally conservative University of Chicago School, which argues that Keynesian stimulus can’t heal a sick economy — only time can. Chicagoans believe that economies can only truly recover on their own and that policy interventions only slow the recovery. It’s a puzzle of modern politics that Republicans have had electoral success with a policy that fundamentally asserts there is nothing the government can do to create jobs any time soon.
Keynesians and Chicagoans, however, do agree on two important points. First, in economics, unlike politics, there’s no middle ground: You can’t simultaneously cut and increase government budgets. The only shot we have at truly transforming our economy is a one-party sweep in the 2012 elections that would lead to radical legislative changes. Still, either path — lots more debt or lots of fired government workers — will only inflame more Americans.
The second area of agreement is the most important: an economy is truly healthy only when its people know how to make and do things that others will pay them a decent amount for. Jobs, in other words, are not the cause of a healthy economy; they’re the byproduct. And that’s another thing most national politicians know but will never say.