First Conservative Blog

Author’s Note:

Conservative Blog readers seek out columns with conservative humor.  Unfortunately, there isn’t any way to make the Stimulus funny.  Still, these are important arguments, so I hope that this can give readers some ammunition to use against liberal neighbors who can’t understand why people are angry and upset at the Obama Recession.

Thanks for reading!

MAS

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Why The Stimulus Creates No Jobs

President Obama rolled out His new employment plan this week, promising to utilize unspent TARP money to stimulate job growth.  Like the health care disaster being debated in Congress, the President was light on details of His jobs program.  And when confronted with the fact that TARP dollars were loans to banks and when repaid to the taxpayers, the President fell back on the tried and true “we have to do something” excuse previously used to justify horrible decisions.

So Christmas appears to have arrived early for the Obama administration – a couple hundred billion dollars that they didn’t have to raise through taxation.  Of course none of the other spending has been paid for via taxation either, but Congress is fairly sure to go along with the President’s request to use these funds to further destroy the economy.

On the plus side, there were a couple curious inclusions in the President’s plan, such as Capital Gains reduction.  The obvious follow up question that the lefties in the press ignored:  “If reducing taxes creates jobs in small business, why would it not work for the overall economy in general?”  Of course Reagan proved that tax reductions are the only way a government can successfully improve gross employment.

How does Obama get away with this?  The answer of course lies with the media lapdogs assigned to cover this President’s every move.  To make their own jobs easier, those in the media refuse to ask any difficult questions.  This enables Obama to get away with absurd and sure-to-fail strategies.  Count on CNN to cover for Him.  There are several fundamental economic reasons though, that the Stimulus and its ugly step children fail to create jobs and in fact, restrict job growth.

Let’s start with the concept of ‘growth.’  Think about it.  Some of the best paid jobs in America surround economic and business growth. Project Managers, Architects and Engineers all require a customer base that has access to capital and is willing to accept some degree of risk to invest in new projects.  New projects of course require new workers.  The absence of new project work causes the massive layoffs witnessed over the past year.  Without new projects, America is reduced to a service-based economy where the only jobs are low-level service sector positions.  Democrats used to rail against an economy where citizens just ‘flipped each other’s burgers’ for employment.  Curious that the Stimulus has created just the situation for which they demonized Regan and conservatives.  Leave it to liberals to make a disaster real.

Currently, Architects have very little to design and Engineers have nothing to build.  Until general ‘growth’ is established, this situation won’t change and any recovery is certain to be relatively ‘jobless.’  But what drives growth?  Three elements contribute to a growth economy, without which growth is impossible.  These are:

• Reasonably Priced Capital
• Steady (low) Taxation
• Confidence

Reasonably Priced Capital:

Government borrowing for abominations such as the Stimulus and yes, Health Care, only drives up the cost of capital needed for a free economy.   This is a factor of simple supply and demand.  As the federal government competes for money on world financial markets to cover the shortfall between revenues and expenditures, the price of capital is driven upwards.  This also limits the amount of capital available to private industry and small business.  And as we all learned before we went to college, scarcity causes rising prices.

Investors with good ideas and plans requiring capital are then priced out of the market for new development, construction and expansion – leaving the Architects and Engineers without work.  Even if private capital can be found to drive larger projects, most industries are rightfully reluctant to take on that level of risk because the people they expect to be future customers may require financing to purchase their machines, condos and buildings.  Potential investors are wise to hang onto their money.

Taxation:
Tax policy impacts the pool of capital available for investment.  Where in the world do Democrats and liberals think that capital comes from?  Capital comes from private sources and if the Federal government intervenes to extort large sums of it from wealthier citizens, the pool of capital shrinks.  A shrinking capital pool creates additional scarcity and only adds to the upward pressure on interest rates which exacerbates the growth and job creation problem.  With Democrats firmly in control of the government, investors are moving significant sums to offshore investments and depleting the pool of resources available for American growth.

Confidence:
Businesses are wise to hold their funds owing to great uncertainty as to whether Obama and the Democrats will use their current governmental authority to extort their wealth via taxation.  With Health Care – which can only result in exceptionally increased taxation or inflation, Cap and Trade – which will drastically elevate energy and production costs, just two of the major concerns.  Any businessperson investing her or his own money is smart to hang on to it or move it overseas until there is some degree of certainty that they will be able to keep anything they earn in the US.  Again, as wealthy investors withhold capital and invest instead in speculative enterprises – such as land, gold etc., the pool of capital is reduced.

Won’t Stimulus Spending Spur Growth?
The government and liberal argument that Stimulus spending will improve the economy by injecting cash and credit into the system, fails in one crucial and critical way.  Stimulus spending is primarily done by state government and other governmental entities.  This only exacerbates the jobs problem because state and local governments – although offering some temporary relief to the contractor that has the political connections to get one of the ‘shovel ready’ projects – uses the Stimulus funds to pay for workers that don’t produce anything.

Government Produces no Wealth:
After a bridge is built or a road is constructed, the population has collective use of that asset.  That is important.  However after construction is compete, the contractor is now without work.   When the government project is over, the jobs value is essentially finished.

Private enterprise uses capital to create ‘Leverageable’ Assets.  In other words, if a builder constructs a building, he must hire an architect and engineer and all the construction personnel to build it.  When the building is complete, the developer can then borrow against the value of his newly created asset (provided there is reasonably priced capital available) and hire the engineers and architects to build additional buildings and employing more contractors than before.  This is job growth.

Government spending produces no ‘Leverageable’ Assets.  Additionally, government incurs the collective debt that must eventually be paid for.  In other words, government spending may keep teachers and government workers employed, but these employees don’t build anything that can be used to keep the growth and employment cycle moving.  Sure, teachers go to the grocery store and spend like everyone else, but the consumer economy doesn’t produce the kind of good paying growth jobs that were available not so long ago – they produce the ‘burger flipper’ positions Democrats love to hate.  Government workers will also buy cars, but not on the scale that can save General Motors.   And eventually, the federal funding runs out and the bill comes due; a huge bill that Team Obama unceremoniously dumped in the laps of our children.

This is all a long way of saying that the jobs lost in the Obama Recession are directly due to Democrat policies.  They are not coming back any time soon and it will take a courageous Republican Congress and administration to undo the horrific damage done to the free world economy.   Even then it will take years.