Government Spending Doesn’t Create Jobs
Uploaded by catoinstitutevideo on Sep 7, 2011
In the debate of job creation and how best to pursue it as a policy goal, one point is forgotten: Government doesn’t create jobs. Government only diverts resources from one use to another, which doesn’t create new employment.
Video produced by Caleb Brown and Austin Bragg.
It seems that liberals will never wake up. Over and over they have tried stimulus plans but they don’t work. Take a look at this excellent article from the Cato Institute:
by Chris Edwards
Chris Edwards is the director of tax policy studies at the Cato Institute and the editor of Downsizing Government.org.
Added to cato.org on December 2, 2011
This article appeared on U.S. News & World Report Online on December 2, 2011
Lawmakers are considering extending temporary payroll tax cuts. But the policy is based on faulty Keynesian theories and misplaced confidence in the government’s ability to micromanage short-run growth.
In textbook Keynesian terms, federal deficits stimulate growth by goosing “aggregate demand,” or consumer spending. Since the recession began, we’ve had a lot of goosing — deficits were $459 billion in 2008, $1.4 trillion in 2009, $1.3 trillion in 2010, and $1.3 trillion in 2011. Despite that huge supposed stimulus, unemployment remains remarkably high and the recovery has been the slowest since World War II.
Policymakers should ignore the Keynesians and their faulty models, and instead focus on reforms to aid long-run growth…
Yet supporters of extending payroll tax cuts think that adding another $265 billion to the deficit next year will somehow spur growth. That “stimulus” would be on top of the $1 trillion in deficit spending that is already expected in 2012. Far from helping the economy, all this deficit spending is destabilizing financial markets, scaring businesses away from investing, and imposing crushing debt burdens on young people.
For three years, policymakers have tried to manipulate short-run economic growth, and they have failed. They have put too much trust in macroeconomists, who are frankly lousy at modeling the complex workings of the short-run economy. In early 2008, the Congressional Budget Office projected that economic growth would strengthen in subsequent years, and thus completely missed the deep recession that had already begun. And then there was the infamously bad projection by Obama’s macroeconomists that unemployment would peak at 8 percent and then fall steadily if the 2009 stimulus plan was passed.
Some of the same Keynesian macroeconomists who got it wrong on the recession and stimulus are now claiming that a temporary payroll tax break would boost growth. But as Stanford University economist John Taylor has argued, the supposed benefits of government stimulus have been “built in” or predetermined by the underlying assumptions of the Keynesian models.
Policymakers should ignore the Keynesians and their faulty models, and instead focus on reforms to aid long-run growth, which economists know a lot more about. Cutting the corporate tax rate, for example, is an overdue reform with bipartisan support that would enhance America’s long-run productivity and competitiveness.
If Congress is intent on cutting payroll taxes, it should do so within the context of long-run fiscal reforms. One idea is to allow workers to steer a portion of their payroll taxes into personal retirement accounts, as Chile and other nations have done. That reform would feel like a tax cut to workers because they would retain ownership of the funds, and it would begin solving the long-term budget crisis that looms over the economy.
Dan Mitchell discusses the effectiveness of the stimulus Uploaded by catoinstitutevideo on Nov 3, 2009 11-2-09 When I think of all our hard earned money that has been wasted on stimulus programs it makes me sad. It has never worked and will not in the future too. Take a look at a few thoughts from […]
Government Spending Doesn’t Create Jobs Uploaded by catoinstitutevideo on Sep 7, 2011 Share this on Facebook: http://on.fb.me/qnjkn9 Tweet it: http://tiny.cc/o9v9t In the debate of job creation and how best to pursue it as a policy goal, one point is forgotten: Government doesn’t create jobs. Government only diverts resources from one use to another, which doesn’t […]
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