Can Governments Really Create Jobs or Wealth?
With the current economic downturn, and President-elect Barack Obama (D) promising that his administration will create three million jobs, it is worth considering the following portion of this op-ed by Peter Schiff posted this weekend at the Wall Street Journal’s Opinion Journal.
“Governments cannot create but merely redirect. When the government spends, the money has to come from somewhere. If the government doesn't have a surplus, then it must come from taxes. If taxes don't go up, then it must come from increased borrowing. If lenders won't lend, then it must come from the printing press, which is where all (of) these bailouts are headed. But each additional dollar printed diminishes the value those already in circulation. Something cannot be effortlessly created from nothing.”
“Similarly, any jobs or other economic activity created by public-sector expansion merely comes at the expense of jobs lost in the private sector. And if the government chooses to save inefficient jobs in select private industries, more efficient jobs will be lost in others. As more factors of production come under government control, the more inefficient our entire economy becomes. Inefficiency lowers productivity, stifles competitiveness and lowers living standards.
HT Mark Perry at Carpe Diem.
UPDATE (12/30/08). Don’t believe the wisdom in that Peter Schiff quote? Try the following:
- In John Tamny’s latest Forbes column, he argues, “(T)he Fed cannot create economic growth . . . some lessons from the Nixon days.”
- And in this You Tube video, produced by the Center for Freedom and Prosperity, Dan Mitchell explains why Keynesian economics is wrong, and bigger government will not stimulate the economy.
- Here, Jim Powell, a senior fellow at the Cato Institute writes in a Washington Times op-ed: "There are at least three reasons why Mr. Obama's proposed spending spree probably won't stimulate the economy as hoped, and why permanent and aggressive tax cuts might.”
- Finally, with more industries lining up for bailouts, Investor’s Business Daily said last Friday that it’s “time to shuck corn,” writing:“The heavily subsidized ethanol industry is the latest to seek a federal bailout. If there is any industry that deserves to go bankrupt, it's this one. Time has come to stop putting food in our gas tanks.”