Jobs are a hot topic in politics these days. President Barack Obama is pushing his jobs plan; his Republican challengers are wrangling over who can create the most jobs; and Governor Gary Herbert has announced a goal to see 100,000 Utah jobs created in 1,000 days. All this talk about jobs raises a question: Can government create jobs?
[pullquote]Government should create only what it can: a legal and policy framework in which entrepreneurs – the real job creators – can do what they do best without government getting in the way.[/pullquote]The way many presidential candidates talk, you’d think they can simply pull a lever or wave a magic wand, and poof – a new job appears out of thin air. In reality, government can do very little, if anything, to create jobs.
Governor Herbert acknowledges this. While announcing his jobs goal he declared, “In Utah, we recognize it is the private sector – operating in free markets – which produces jobs, opportunity, and prosperity for our citizens.” He understands that government cannot create jobs but can promote policies that allow businesses to expand.
But wait – can’t government create jobs simply by hiring more teachers, firefighters, health experts and other workers? Sure, but creating a government job does not increase the total number of jobs in the economy. Every dollar spent hiring a government employee is one dollar fewer the private sector can use to employ someone, which means jobs simply shift from private businesses to government. And because government typically uses resources less efficiently than entrepreneurs, hiring more tax-funded workers can actually lead to fewer total jobs.
OK, but can’t government “stimulate” job growth by spending more on things like school lunches, “Cash for Clunkers” and construction projects? No! Any increase in government spending encounters the same problem: It takes money from one part of the economy and redistributes it to another – there is no overall increase in jobs or other economic activity.
All government resources ultimately come from taxpayers. They must eventually absorb the costs of any government spending, including loans (and interest). Ignoring this fact is the fatal flaw of Keynesian economics, the tiresome theory of John Maynard Keynes made prominent during the New Deal Era, which has become the basis of much economic policy today.
Russ Roberts, an economics professor at George Mason University, explains the relationship between government spending and job creation in simple terms: “When the economy is healthy, you don’t need to spend money from outside to create more jobs. And when the economy is not healthy, all the spending in the world won’t create jobs.”
Government can encourage job growth by cutting taxes and eliminating burdensome regulations, but in so doing government does not create jobs; it merely gets out of the way so entrepreneurs can create jobs.
Despite government impotency in job creation, many elected officials take credit for “creating” jobs while simply redistributing and shifting jobs and wealth around. Unfortunately, their Keynesian central planning schemes have begun to permeate economic policy nationwide. The good news is that many responsible citizens and public officials like Governor Herbert understand that the private sector alone creates jobs.
Now we all need to acknowledge this fact and let it drive public policy in Utah and across the nation. Government should create only what it can: a legal and policy framework in which entrepreneurs – the real job creators – can do what they do best without government getting in the way.