Jobless Recoveries and Other Oxymorons
What would the soup lines look like if people had to line up for food like they did in the last depression? They would be 47 million long since that is how many food stamp recipients we have today. Why are so many people more dependent on government than ever before? Where are the Jobs?
Someone once said, its the economy stupid, but I say”Its the job market stupid.. Jobs–our college students need them, our families need them. We just dont have a recovery without them.
We know that even the government is concerned about jobs now, since that was the excuse given for QE 3 several weeks ago. This last round of QE amounts to 40 Billion dollars per month and targets mortgages, which is a way to try to breath life into the housing market. This round of QE is also open ended, which means there are no limits to its extent. They intend to buy as much as it takes until they see improvement in the job market.
Historically, printing money and using it to buy your own debt has always been a last-ditch desperate attempt by bankrupt governments to avoid both cutting spending and going through economic hardship. It has never worked out well in the long run. It can temporarily boost the economy but it robs those who hold your debt, and usually those who are being robbed figure it out, dont like it and stop lending to you.
Lets look at a little history. We have had two supposed recoveries in the last ten years or so. One was after the 2000 to 2001 recession. The Feds response to the recession was to set interest rates super low, actually lower than the rate of inflation. What economists call”real interest rates which are adjusted for inflation, were actually negative. In other words, people were being paid to borrow, and borrow they did. Real estate took off and the low interest rates lit a fire under the price of houses. Employment went up in real estate, finance, and construction. Everything was good until the bubble burst and employment cratered in all three of the areas it had just boomed. When it was all said and done, more damage had been done than good. The recovery itself had proven to be a farce and we entered another more serious phase of economic trouble.
The response by government this time was drastic. Since the federal government had always been able to buy itself a recovery by simply borrowing and spending more, we did exactly that. It bailed out monopoly sized businesses and turned up the printing presses. All this did was paint a growing Gross Domestic Product chart, but thats it. And a recovery that is funded by borrowing or printing is no recovery at all, and that is where we find ourselves today.
Today nation-wide we have virtual soup lines, known as food stamp recipients, 47 million long. Around 1 in 6 people get help from the government for food. We also have an all time record number of people on disability payments right now. When adjusted for inflation, during this last”recovery median household incomes have fallen more than they did during the 2008″recession. And jobs, jobs are so scarce that even CNBC recently wrote an article admitting the jobless rate is probably double the official rate. We need to remember one thing about all these discouraging statistics. They have all occurred in spite of massive deficit spending and stimulus. This fiscal year government is spending over 50% more than tax revenue, and it has run out of places to borrow.
It all comes around to my first two points. The economy is the job market. And, government cant create jobs that arent dependent on continued government spending. Perhaps a third important point we should remember is that there is also an opportunity cost to government taxation and spending. When the government takes money out of the private sector and spends a job into existence the opportunity cost of that action is the ability of the private sector to create a job. The difference between the job created by the private sector and the government is that when the private sector creates them they fund themselves and produce sustainable economic growth.
I hope I have demonstrated that government cannot create recoveries, it can only prevent them. Recoveries always come from small business growth and hiring. They come from people pursuing their hopes and dreams, taking risk and seeking the rewards of profitable ownership. For growth to occur we need simpler regulations and lower taxes. We need a lighter burden of government on our individuals, families and businesses. And every business is vital. We need every logger, miner, rancher, farmer, manufacturer and whatever other business there is out there. Neither government nor the service industry have any future if our wealth producers do not grow and recover. The old service based economy is an oxymoron. To have a strong economy you must produce things that people want.
Whatever happened to the Idaho where our grandparents could come and work, buy and sell without needing permission for every detail? Governments job is to simply act as referee, keeping the game honest. It should protect everyones rights, but thats it. When it instead gets into the business of creating winners and losers, of pulling levers and spinning dials, and controlling every detail of everything we do, it just mucks things up. GE and GM are examples of what happens when government intervenes. The insiders do great, but you and I pay for it.
While we cannot stop the trouble coming at us from the national level, we can make Idaho a place that is still open for honest business. We can continue to utilize our natural resources responsibly. We can protect clean water and air and still allow businesses and therefor people to thrive. The bottom line is that for genuine recoveries to occur, more than anything else, you need the economic freedom that comes when government plays a very limited roll. We will only have a strong and free Idaho if its people remain strong and free. Lets make sure Idaho stands for freedom, and as it does so we will discover one of freedoms side benefits is genuine, sustainable economic growth. If our founding fathers were correct, then governments job is to protect our unalienable or God-given rights. Im afraid the dog thats supposed to be guarding the chicken coop is eating the flock. Lets get it back on its proper job.