Wednesday, August 17, 2011


by James Craig Green

Please, Mr. President, stop trying to "help" the economy or create jobs. Your obsolete paradigm of increased government spending, more taxes and creating money instead of wealth only forces valuable resources away from those who make good use of them in favor of those who don't. That paradigm never did work, but those whose careers were nurtured by it will be the last to know.

After attempting to administer the U.S. Ship of State for two-and-a-half years, you continue to blame your predecessor, Europeans, speculators, wealthy Americans, the Tea Party and other Republicans for the fact that the economy is much worse now than when you first took command of it. By previous Bureau of Labor Statistics standards, today's artificially low inflation and unemployment rates hide their true, higher-than-published values because these terms have been conveniently re-defined.

Now you've said you'll unveil a new jobs strategy right after Labor Day. However, if it is anything like your previous failed attempts, it will almost certainly include raising taxes, which of course sounds better when called revenues. One of the most disturbing aspects of your likely plan will perpetuate your one-sided and incorrect assumption that government building more infrastructure will somehow create jobs. For professional politicians who don't have to pay for the wealth redistribution schemes they promote, it's easy to take credit for the flashy and obvious benefits of government spending, while ignoring their costs and tradeoffs. If a business owner intentionally tried to sell a business by promoting revenues while hiding true costs, that person could be sued for fraud.

Apparently you never learned that every dollar government spends has to come from the productive (not subsidized) private sector sooner or later. Dollars spent on public works come from some combination of 1) taxes, 2) "printing" money, whether on rag paper or computer bits, 3) increasing public debt, or 4) by simply commanding valuable resources away from other parts of the economy, combining all three of these costs without admitting them. Therefore, creating government jobs or government-subsidized private sector jobs always comes at the expense of other, existing jobs (think Haliburton). I explained this in June's blog post CONTRASTING GOVERNMENT AND MARKET INCENTIVES and earlier in April's SOLAR JOBS post which refers to my 2009 ARTICLE on the subject published by the INDEPENDENCE INSTITUTE and several Colorado newspapers. In short, over a recent decade, Spain, the world leader in creating "green" jobs, was found to have destroyed more than two existing jobs for every new one created. This is the cruel reality of your policies, which have more to do with politics than economics or sound public policy.

In fairness to you, the economy was already in bad shape when you took office. An estimated 45 to more than 100 TRILLION DOLLARS of future promises (mostly Social Security, Medicare and Medicaid) for which there are no assets to fund them are projected by the Congressional Budget Office, the Office of Management and Budget and several other studies for future planning. But, like all presidents in the last century, you don't know how to command an economy, nor does anyone else. As grand, "progressive" social experiments in the now-defunct Soviet Union, North Korea, the "People's Republic" of China, Cuba, Venezuela, North Vietnam and some South American banana republics have so powerfully demonstrated, an economy simply cannot be commanded over an extended time without bankrupting the country. This always corrupts the morals of its citizens (who learn sloth, irresponsibility and gaming the system instead of producing useful goods and services).

From Woodrow Wilson to Herbert Hoover to Franklin Roosevelt to Lyndon Johnson to Ronald Reagan to Bill Clinton to both Bushes, each of your predecessors over the last century, with one or two possible exceptions, demonstrated an extreme ignorance of economics. One of the best sources to understand this is Lawrence Reed's excellent booklet, GREAT MYTHS OF THE GREAT DEPRESSION, which correctly assigned responsibility for the Great Depression to BOTH Republican President Hoover and Democrat President Roosevelt and their Congresses, while clearly explaining the perverse incentives that preceeded them by the creation of the Federal Reserve in 1913.

Before you, Republicans were responsible for greater increases in government spending than Democrats, but now you seem to be reversing that trend, as shown in my previous blog post HERITAGE ON GOVERNMENT SPENDING AND REVENUE (see Debts and Deficits Chart 5). It is ironic that the conservative Heritage Foundation produced a graph showing that, except for you, Republican presidents have presided over larger deficits (as a percentage of GDP) than Democrat presidents. However, that paradigm no longer works, because the U.S. Government's debt is now well beyond its ability to pay back. This, and not the hobgoblins you blame, is why Standard and Poors belatedly downgraded U.S. Treasury notes and bonds. They should have done it much earlier, as should have the other credit rating agencies which continue to ignore it.

Mr. President, I don't expect you to gain a better understanding of market economics overnight and understand its chronic, ongoing destruction by government. This is because few, if any, of your predecessors understood this either. However, I do hope you will see that commanding real, productive resources toward some politically-desirable sectors can only remove them from other, more productive sectors. If your only concern is your re-election, which any honest and objective citizen must assume, I will understand as you continue on your present destructive path even more aggressively than your predecessors. But, if you really care about America, I respectfully suggest that you stop inhibiting the unbounded creativity, innovation and self-interested private enterprise that sustained America's economy before government started promising everyone everything for free.

Government never furthered any enterprise but by the alacrity with which it got out of the way

-- Henry David Thoreau

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