Labor Day: Celebrating The Failure Of The Government's Employment Policies

How appropriate that this Labor day occurs 3 days before the president delivers a speech on jobs and the economy and only 3 days after another dismal employment report was released that shows that 14 million people are still unemployed and the unemployment rate remains at 9.1%. The employment report sent the stock market down 2 1/2% on Friday. For the Chicago area the unemployment rate ticked up to 10.3% in July and employment is back to July 1996 levels as you can see in the graph below. That’s 15 years with no net job growth and the Chicago metro area has lost a total of 320,000 jobs since peak employment in July 2007.
Chicago employment
There is widespread agreement that the economy will not turn around, nor will the housing market turn around, until we see job growth. Furthermore, corporate profits are at risk as the threat of a double dip recession looms, which is why the stock market was down on Friday.
As anyone who has followed this blog for any length of time knows I don’t normally believe that the government should fly in to rescue much of anything. Usually they botch whatever they attempt and so far they have botched their attempts to create jobs. However, this employment problem is one case where I actually believe the government could have made and still might be able to make a difference if they could just get their act together.
You see, the fundamental problem is that the private sector just doesn’t need more workers right now. So we have at least 14 million very capable workers sitting on their asses with many of them getting paid to do so by the government. Meanwhile our entire transportation infrastructure is widely acknowledged to be in a state of disrepair. Roads, bridges, the freight rail system, airports, the air traffic control system, and ports are all clearly in need of an upgrade. Next time you are stuck in traffic on the Dan Ryan take a look at how many 40 foot trailers are on the highway and ask yourself why that freight isn’t traveling by rail at a fraction of the cost. Sure some of it is local delivery but a lot of long distance freight still travels by truck because the rail system is inefficient – especially hubs like Chicago.
So why don’t we put people to work fixing this stuff? These are projects that will actually provide a good return on our investment. At the end of the day we will have something worthwhile to show for all the money – unlike the typical government approach of creating jobs for the sake of creating jobs – e.g. building a high speed rail system that will never pay for itself, producing electricity at twice the cost of current technology, or paying people to buy homes a few months earlier.
Up until now the government has been approaching the problem in the typical fashion – sprinkling lots of money around to various special interest groups. Remember that stimulus package that was supposed to create all those jobs? It obviously didn’t work very well. Let’s review where the stimulus money went and it will become obvious why the program was an epic failure. Check that link and you will see that of the $710.8 B only 8% went to infrastructure programs that will have concrete benefits. The rest of the money went to further politically desirable agendas.
But suppose that $710.8 B had all been spent on putting people to work fixing the nation’s infrastructure? If we assume an average wage of $40 K per year you could have created almost 18 MM jobs for one year. Sure that’s a gross simplification. In reality there aren’t 18 MM workers who could be employed in infrastructure projects and not all the money would go to wages but you get the idea. The numbers are just huge. And if they had put enough people to work, who could then go out and spend their earnings, that would have created more jobs. And if those projects even had a 5% return on investment we would get our money’s worth out of them.
So the nation anxiously awaits another Obama speech on Thursday to see if any real solutions are around the corner. The President has just chosen a new head for the White House Council of Economic Advisers, Alan Krueger,  who is supposedly a strong advocate for infrastructure investment. That’s the good news. The bad news is that this is the same guy that came up with the bright idea of the Cash for Clunkers program which paid people to destroy perfectly good cars so that new jobs would be created making replacements – sort of like hurricane Irene created jobs.

0 thoughts on “Labor Day: Celebrating The Failure Of The Government's Employment Policies

  1. First of all, government doesn’t “create jobs” that are anything but a drag on our economy and our treasury, so you are 100% wrong right in your title. In fact, it would help the country long term to get rid of half of our government “workers” as they are unnecessary (excluding cops, first responders and military, of course).
    Additionally, any sort of works program simply compounds the waste and sends good money after bad.
    So, what’s the real solution? Lower corporate tax rates (we have the highest rates of the civilized world at this point), give a tax holiday to any corp. that repatriates their money (we have billions in U.S. money overseas because it’s too expensive to have it here), and erase thousands of onerous regulations that Washington D.C. has created that is hampering business.
    The most important thing is the regulations. We have the most restrictive business climate of any other western nation. Business is afraid to do anything without expecting the iron boot of government coming down on their necks.
    Government — not just federal, but ALL of them — need to be cut down to size, pruned away, and much of their powers taken away.
    THAT is how to get our country growing again. Not by false “jobs programs” that are just wastes of tax money.
    Works programs have NEVER worked to get our country back in gear. They won’t work now.

  2. Hmmmm …. “Government — not just federal, but ALL of them — need to be cut down to size, pruned away, and much of their powers taken away.” …. welcoming back the dark ages is not really in the cards chum.

  3. Normally I agree with you but not this time. The government actually got a few things right in the past – not often but occasionally. For instance the DARPA initiative that created the Internet and the the Interstate highway system. Both of those projects had a great return to society.
    I’m not talking about government jobs here. I’m talking about private sector jobs funded by government spending. Right now we have 14 MM people who are not producing anything while we have a decaying infrastructure that will eventually need to be fixed anyway. Might as well put them to work on something that will have long lasting benefits.
    The wasteful government spending that you are talking about is stuff like various subsidies to promote economically flawed initiatives and staff up government offices. This is totally different.

  4. I don’t think it is different at all. It is still make work, fake jobs that burden us all. I do agree that government is the only way to do roads and bridges-type work, of course, but the problem is that the type of program you are suggesting would still fail.
    All that you will succeed in doing is stuff money in unions pockets, make costs overrun into the billions and STILL keep most contractors out of work while Obama’s pals in the unions end up with all the make work projects that burden the taxpayer.
    You may think you are offering a real solution but all you’ll get is political payoffs, union waste, and no real succor to the failing Obama economy. We already SAW that with the first so-called stimulus which did nothing to stimulate anything but government.

  5. Fake jobs would be building a high speed rail system. This is stuff that we really need. There is no other way to get these things built except with the government’s support. Now, whether or not the program is executed properly is a totally different question.

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