Tuesday, September 06, 2011

I can do math

On the day after Labor Day, I feel the need to write a short piece about what strikes me as the most important social issue for us in the US right now - jobs. There simply aren't enough of them. Far too many people have been out of work for far too long. Safety net programs are both inadequate and losing their efficacy and more and more folk are falling through the cracks. All of the politicians are marching out their plans to create jobs and frankly all of them fail to consider the long term. That is fine and indeed, that is appropriate at this time when we are in such a crisis. The question then is, do the programs work.

 Here's where the math comes in. Laying off government workers makes more people unemployed. Immediately. Unemployed people don't spend money which causes businesses to lay off people which causes spending to go down which causes businesses to lay of more people and the spiral goes down. Take away jobs... and the number of jobs goes down... in a spiral. Cutting government contracts makes people unemployed. Similar but more complicated arguments could be made regarding infrastructure and education although both are more long term issues and so probably don't fit in this discussion. 

Some folk will come out with plans that advocate lowering taxes on businesses or lessening environmental regulations and safety regulations. Again, I think in the short term, that might be fine as a stop gap to get things moving.  Here's the problem. Neither works. Businesses already have money, what they don't have is customers. Cutting taxes on businesses doesn't create customers. Lowering safety standards and environmental protections doesn't create customers. Even cutting taxes on individuals doesn't help that much because it only impacts the folk who have jobs. What we need are jobs... and they will follow customers... but without jobs, we get no customers.

So what can the government do? Spend more money. Yes, I know that would raise the deficit and it certainly isn't a good strategy for the long term, but in our immediate crisis, it is what we need. Jobs are the presenting problem. If your house is on fire you don't stop the firefighters from hosing down the house because you're worried about water damage. You deal with that after the fire is out. The deficit is like water damage while the job situation is clearly a fire. Government should be hiring more people, not laying them off. Government should be passing money out to the states for every program that can be kick started with an infusion of cash not cutting back. Government should be hiring folk to go in and clean up after Irene. Government should be investing in research, supporting new technologies and strategies to make us more competitive. Government should be spending more, not less. If it means borrowing money. Borrow it. Interest rates are lower than they have ever been. Take advantage of that. Spend. Spend. Spend. And do it in a way that the money ends up in the pockets of real people and puts real people back to work so that businesses can begin to see customers and so need to hire more workers... and the spiral begins to go back up again. Then, when the population are more stable financially, the government can begin to wrestle with dealing with the long term problems.


Michael Mahoney said...

I wonder what your opinion is on expanding the oil industry in this country as it relates to this.

API says that by allowing expanded drilling off the east coast and in shale oil deposits, they can create 1.4 million new jobs and inject $1.8 billion into the economy. To me that seems more viable than having the government create jobs by fiat.

Government should never be the primary catalyst of job creation. Government's job is to create a sound environment for growth so that the private sector can create jobs. Being in small-to medium business all my adult life, I can tell you that lower taxes absolutely creates jobs. The first thing that any business looks to cut when things are lean is personnel. The second is expansion. By freeing up capital, we allow business the freedom to grow and expand, and more importantly, hire. Customers follow services and products, not the other way around.

Government has proven time and time again that it is a lousy, inefficient employer. Many government workers are overpaid with unsustainable benefits and little or no expectations of being held to any kind of performance standard. The USPS is hemmoraging money at an astonishing rate, mostly in HR costs, while military families are on food stamps.

Yeah, those are the guys I want creating jobs...

roy said...

I have mixed feelings about drilling. Every day, I pass multiple oil rigs out in the Santa Barbara channel. I know it can work. I also know what happens when it goes wrong. And I believe that vast, vast, vast majority of climate scientists who say that climate change is happening as a result of carbon emissions. The damage is rarely short term and may be irreparable. One thing I do feel strongly about is that the company should be held absolutely responsible for any damage it does. If the profits are private, the risks should be the same.

"Government should never be the primary catalyst of job creation." Never is a long time, Michael.

"Customers follow service and products, not the other way around" just doesn't make sense, especially now. No business produces inventory when there is no obvious customer. Ditto for services. Second, all of the reporting (and I have no reason not to believe it) tells us that the business community is sitting on trillions of dollars.

As for government jobs, I'm not advocating that the government be the direct employer of all of those jobs. Rebuilding infrastructure involves contracting out... etc.

True, there have been many contracts with government employees that were/are just silly. That likewise happens in private industry where we see golden parachute for CEO's that are obscene.

As for the USPS, it isn't quite fair to hold them to normal business metrics. They deliver everywhere in a very timely fashion. (UPS, Fedex, DHS, all have places they will not deliver as it is not financially feasible and all use the USPS for some deliveries). They are told by politicians where they must open retail outlets. And they are struggling with technological changes while at the same time, providing a service that is crucial for a civil society. Clearly there are issues with the union contract and likely that has as much to do with politicians trying to "buy" votes as anything else. That is no worse than pols bing in the pockets of big industries.

Don't forget, the military are government employees, as are firefighters, police, social workers, librarians, teachers... I've known and worked with lots of public employees and the inept or unproductive ones were as rare as hen's teeth.