In January 2008, the United States economy employed 138.1 million people and the unemployment rate stood at 4.9%. But the powers in Washington thought deficit spending could boost a slowing economy, so Speaker Nancy Pelosi (D-CA) passed and President George Bush signed a $168 billion economic stimulus bill made up of temporary tax cuts and increased mortgage grantees for Fannie Mae and Freddie Mac. By January 2009 that economic stimulus worked so well that the U.S. economy had lost 3.5 million jobs and the unemployment rate stood at 7.6%. Again the powers in Washington thought deficit spending was the answer, so Speaker Nancy Pelosi and newly minted President Barack Obama dialed up $787 billion in temporary tax cuts and permanent spending increases. Ten months later, the U.S. economy has now shed another 3.59 million jobs and the unemployment rate stand at 10%.
Undeterred by the complete failure of their past job creation efforts, leading leftist luminaries are again calling on the liberal majorities in Congress and President Obama to approve billions more in government spending for a third stimulus. Yesterday, President Obama hosted a “jobs summit” where academics, union leaders, and select big business leaders made their pitch for government largess. Among the ideas reported: Teamsters leader James Hoffa called for higher barriers to trade, President Obama insisted that all future aid to states go to preserving government jobs and not tax cuts, and others pushed to bring the “success” of Cash for Clunkers to a new Cash for Caulkers program.
These “new” ideas will fail for the same reason the past two government stimulus plans failed: governments do not create jobs. Only the private sector in pursuit of opportunity can create jobs on net. The best we can hope from government is that it keeps to a minimum the jobs it prevents and the income and wealth it destroys. President Obama does not understand this. At yesterday’s summit, Obama lamented the lack of job creation: “There’s a lot of money on the sidelines in the private sector. They are still nervous about whether they want to go ahead and take the risks that are inherent in a free market system.”
Wrong. Businesses aren’t nervous about “the risks that are inherent in a free market system,” they are nervous about the risks inherent in a government regulation dominated economy. Fred P. Lampropoulos, founder and chief of Merit Medical Systems Inc., told the President that businesses were uncertain about investment because “there’s such an aggressive legislative agenda that businesspeople don’t really know what they ought to do.” That uncertainty, he added, “is really what’s holding back the jobs.”
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