Last week, President Obama shifted gears from a push for national healthcare to an all-out job-creation blitz. In between justifying his decision for a troop increase in Afghanistan and pushing the Senate to act on a healthcare bill, Obama managed to squeeze in a “Jobs Summit” on Thursday and a speech in Allentown, PA on Friday.
But he has every reason to want to address unemployment. A new report released by Democracy Corp, a Democratic polling firm, shows that pessimism among Americans about the unemployment rate is at an all-time high for the Obama presidency. Not only that, but more Americans than ever feel the country is on the wrong track.
This isn’t welcome news for the Democrats in D.C. As George W. Bush becomes more and more of a memory, Americans are looking to place the blame on the party that is in power; that means Democrats running for reelection in 2010 will be facing uphill battles. But why shouldn’t Democrats accept at least partial responsibility for the disturbingly high unemployment rate? It has, after all, increased under Obama’s watch from 7.6 to 10.2 percent.
But to limited government and free-market onlookers, this has come as no surprise. Why? Because as job creation has always been fundamentally an undertaking of private enterprise, the federal government has, or at least should have, no role in it. Moreover, the Democrats use of the government as a means to the end of creating jobs only makes matters worse.
When President Obama first assumed office, he announced his intention to “create or save” 2.5 million jobs by 2011 with a stimulus package. Based on the Keynesian theory of economics, the Obama administration planned to use said stimulus package to invest in the economy. The purpose was two-fold: To give employers the money needed to hire workers and thus reduce unemployment, and put more money in the hands of the people to encourage spending. This in turn, would fuel an economic recovery.
But as is now well-known, the stimulus package has been implemented, but the results have been found wanting. The reasons for this are simple, and they all have to do with the very nature of a government-funded stimulus. For starters, government “investment” is only a code word for government “spending,” and with the tax payers’ money, no less. The chief way for the government to stimulate the economy is take money from the tax payers and redistribute it, which is exactly what Obama did. But, to resurrect an old metaphor, this doesn’t increase the size of the pie; it just cuts it in different slices.
In other words, taking money from the taxpayers and redistributing it does not increase the amount of money in the economy. It only puts it in different places. Thus, while jobs may be added, the consumer is left with less money. As a result, demand does not meet the increased supply, profit will not be realized, and eventually, businesses will have to make cuts all over again.
The other way the government came up with to fund the stimulus- printing more money at the Treasury- has proven to be just as harmless. There is a sound argument to be made for printing more money in the short term to encourage spending; even the libertarian economist Milton Friedman recognized that an increase in the money supply is necessary during tough economic times. The trick is just knowing when to stop. Printing too much money reduces the purchasing power of the dollar, which causes inflation. This does nothing but hurt those looking for employment.
President Obama has used nothing but government intervention to solve the economic crisis. But of course, in the words of the Wall Street Journal’s, Evan Newmark, “That’s not the way capitalism works. It doesn’t take a village to create a new job. It takes a businessman trying to make a new buck.” But the only way that will happen is if economic conditions are favorable and the businessman has the freedom to allocate his resources the way he sees fit.
Whether it’s one of Obama’s speeches, or a group discussion by CEO’s, talk will do nothing to spur job creation. The only thing American businessmen need is the freedom to act; for the government, that means cutting taxes and regulations, then getting out of the way. The best thing President Obama can do is to start relying on that “invisible hand” the economist and philosopher Adam Smith wrote about so long ago. His assessment of the market is just as true today as it was then, and stimulus packages and government job creation had no part in it.
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Amanda Carey is the Editor of The Tiger Town Observer at Clemson University. She has previously worked for Robert Novak and has been published in Reason Magazine and The American Spectator.
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