The Politician’s Economy

A lot of people think that a politician’s primary function is to create jobs.  People regularly say that the economy is their main concern, and if they feel it is broken, they want their elected officials to fix it.  And many expect the politicians to do that by creating jobs.

The problem is that while politicians can easily create government bureaucracy jobs, they have difficulty creating jobs in the private sector.  This is because the government cannot create such jobs, only businesses can.

Politicians can make the government give money to businesses to create jobs.  They do this by guaranteeing loans, providing grants and subsidies in addition to their favorite tool of tax breaks.  The problem is that the tax money involved in these methods is unbelievably inefficient.  In the famous case of Solyndra, a government sponsored builder of Solar Panels, the government spent about $10 Million (of our tax dollars) per created job.  And those jobs lasted only a couple of years.  It would actually have been better all around to just give those employees a couple of million apiece outright.  We would have saved tax money and they would be set for life.

To grade a politician such as the President by job creation is to mistakenly give them credit or blame.  Bill Clinton is widely credited with creating millions of jobs.  When he was President the economy boomed.  It boomed primarily due to innovations like computers ( along with word processing and spreadsheets) and cell phones while gas prices were falling.  Clinton didn’t invent computers or come up with Microsoft Office.  He didn’t create flip phones or even cause the Middle East to pump too much oil.  He just happened to be President during an opportune time.

The government is actually a brake on the economy.  A brake doesn’t cause a vehicle to move or accelerate.  But, when applied, it slows it down or stops it.  So the only real action a politician can take is to reduce the brake pressure on the economy.

More than almost anything else, businesses want predictability.  They want to know what their tax rates will be in the future.  They want to know what the regulatory conditions will be.  This is because they want to plan for the future.  If they fell they can’t, they become risk averse and hold off doing things.  Like expanding capacity and hiring workers.

Brakes are still important.  We use them to keep moving vehicles from going out of control.  Some regulations are necessary.  We don’t want to go back to the polluted environment of the 1970’s.  We don’t want monopolies and insider deals.  But we all certainly want the economy to move forward quickly and rapidly.  It’s just that politicians aren’t going to accelerate its progress; they can only minimize how much they slow it down.

What to Do

Don’t fall for politicians telling you they are going to create jobs.  Don’t fall for them telling you they are going to save jobs.  By the way, when they try to do this, they only stave off the inevitable for a few months or years at a huge price.

Instead, tell them to create an environment where entrepreneurs can create new businesses.  Tell them to provide existing businesses with a stable environment so they can plan for the future, where they can anticipate the government’s restrictions on them both now and in the future.

Tell the politicians not to stand on the brake while the economy is trying to move forward.  Tell them only to use the brakes when prudent and necessary.

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