From Washington DC to my little prairie hamlet (Sioux Falls, actually a thriving small city of 160k, give or take), politicians are talking about using the government to "create jobs." Obama has a plan, of sorts, and so does Sioux Falls's esteemed mayor, Mike Huether, who thinks that a new "event center" he has been pushing will create 1,100 construction jobs.
Can the government really create jobs? I'm often asked. Absolutely, I respond, but should it? Aren't we really interested in prosperity, not jobs?
The government can create jobs directly by employing people or contracting with businesses and it can do so indirectly through its policies. Huether has the former in mind, Obama some of both. But neither will deliver what Americans really want, which is prosperity. The JOBS mantra is a load of bunk: American economic history is about working fewer hours at easier work for more and better stuff, not about employment. (And claims by the New York Times to the contrary, we are working less for more compensation and more and better stuff. More technically, real hourly compensation has increased markedly in both business and manufacturing.)
The federal government, for example, could ensure that every American would have work to do 18 hours a day, 7 days a week, 365 days a year by simply outlawing farm machinery and food imports. We could all work picking and shucking corn, milking cows by hand, etc. We'd be impoverished, but we would all have jobs. No politician would dare implement such a policy, of course, but tens of thousands of rules and regs have the same cumulative effect: creating work that need not be done. Reversing such policies would eliminate jobs but actually be good for the economy, especially after the workers freed from the bondage of un- or counterproductive work find value-producing work. I'm not saying that ALL regulations should be eliminated, just pointing out that they come with costs that are rarely understood or directly measured.
What about when governments hire employees or contract with private construction companies or other businesses that then make hires? Most people seem to have the sense that expanding government employment probably isn't a very good thing, at least not the way such employment is currently constituted (high pay and benes based on seniority rather than productivity). Surely the latter type, though, is beneficial? Only, I respond, if one forgets about Bastiat's window, or "that which is seen, and that which is not seen." What is seen are the burly men fixing a bridge or building an events center. What is not seen are the costs, the income that is diverted (through taxation) from one purpose to another. It isn't clear how such reallocation can add to the total number of jobs (unless they are lower paying than the ones they replace), but it is clear that it creates very salient jobs that politicians up for re-election can point to proudly and that it makes it difficult for their opponents and critics to point to the jobs lost due to the taxes. But we know that they were lost: the $1,000 or $10,000 that you paid in taxes did not go to the corner coffee shop, to the auto or boat manufacturer, etc.
If a government can somehow increase wages more than it decreases it, its ability to create prosperity with those wages must be limited in scope because communist nations like the former USSR that had nothing but government employment stagnated economically. They created plenty of jobs, in other words, but little prosperity. Why do the Obamas and Huethers believe that they can do any better?
How, then, can government promote prosperity? The quick and easy answer is by protecting life, liberty, and property because that will enhance incentives for improving productivity, for making more with less. What is meant by life, liberty, and property, and how government can best protect them, afford no easy answers but we can't even begin to have that conversation if politicians fixate discussion on "jobs.
