Post by the Scribe on Mar 10, 2020 10:21:32 GMT
GOP TALKING POINT: THE GOVERNMENT DOES NOT CREATE JOBS
Of Course the Government Can Create Jobs!
John T. Harvey , Contributor
I want to explain how things work, not what you should believe. Opinions expressed by Forbes Contributors are their own.
A recurring theme in the Presidential Debates has been the role of the government in the economy. There are obviously many complex issues involved and a number of tradeoffs and caveats exist with any policy. That said, however, the assertion that the government cannot create jobs is ridiculous. It is a function of a biased definition of “job” designed to decide the question even before it has been asked.
To show this, start with a relatively neutral definition of job: any routine activity for which we earn income. This covers a wide range of pursuits, from managing a grocery store to selling financial derivatives. It does not include cutting your lawn (it’s routine but you don’t earn income) or selling that pool table you were positive you were going to use (you earn income but it’s not routine). As for myself, Texas Christian University contracts with me to teach, research, and perform service activities on a regular basis, and in exchange they direct deposit money into my account every month. I don’t think anyone would deny that what I do qualifies as a job.
But, those who say that the government cannot create employment are adding another element to the definition. To them, a job is any routine activity for which we earn income paid by an entity required to earn a profit. There is no compelling reason for this addendum and it arbitrarily excludes people like James Galbraith, who is an economist just like me, but at the University of Texas, and Jeffrey Halstead, Chief of Police in Fort Worth, Texas. By the qualified definition, they don’t have “jobs” because their income is derived from tax revenue and not private-sector sales. Ditto every single fireman, public school teacher, Marine, sailor, airman, soldier, national park ranger, defense industry employee, NASA scientist, social worker, librarian, etc., etc. None of them has a job.
Why would someone would embrace such a questionable characterization? Because their true goal isn’t to generate a scientific understanding of the manner in which the macroeconomy operates, but to make a moral statement. Specifically, their contention is that only those routine activities financed by profit are truly of value. Everything the government does is unnecessary because if people really wanted it, they would have bought it in the private sector: that which is useful is profitable. Furthermore, they say, were it not for my taxes, those in the public sector would not have a job. Firemen earn a salary only because some of mine was taken away (under threat of imprisonment).
It is not surprising that those who espouse this view are almost always in the private sector themselves. It says, "I deserve my income because I work hard creating something of value. Meanwhile, government employees are just handed a portion of my salary for doing something no one really wants. Therefore, not only am I morally superior, but my taxes should be cut!" It’s a very convenient philosophy, but it’s not economic analysis. (From time to time, you also hear this from some in the public sector, but they either conveniently ignore the contradiction or believe that where they work is one of the few exceptions.)
What this ignores is something I was arguing in my last post: not everything that is profitable is truly of social value and not everything of social value is profitable. If we defined a job as any routine activity for which we earn income paid by an entity whose activities are socially valuable, then we would most certainly be excluding things done by BOTH the private and public sectors. How much do private sector activities like pornography, reality TV, and cigarette smoking add to our well being? Meanwhile, if we depended solely on profit for motivation, we would not have national defense, child protective services, or education (or police protection or fire protection) for the poor.
Furthermore, the means by which public sector activity is financed is more complex than implied above. Not only do your taxes go to pay the salary of the fireman, but, when he spends it, his salary contributes to your wages. So who is supporting whom–is the government dependent on taxation of private sector salaries, or are private sector salaries dependent on sales to government institutions and employees? Obviously, they are largely interdependent and rely on the continuation of the flow between them. Largely, however, but not completely, for if one of the two can act with autonomy, it is the government. At the federal level, we can spend in deficit indefinitely and without fear of default (see It is Impossible for the US to Default), meaning that the government can spend even without tax revenue, and its spending can create private sector sales–and jobs. Therefore, in a world where we have a difficult time generating sufficient demand to hire all those willing to work, the private sector is actually more dependent on the government to boost its sales than the government is on the private sector for tax revenues (see Why the Private Sector NEEDS the Government to Spend Money). Now who is the parasite?!
This is not to argue that all government spending is socially useful. Of course it isn’t, any more than all private sector is. It is our responsibility to complain loudly when we think the public sector is wasting resources (something we will all have an opportunity to do on November 6). But, one thing is clear: the government creates jobs, and lots of them. In fact, the private sector needs them to do so. Don’t forget, the rules of accounting tell us that if the government is in deficit, then the private sector must be in surplus (see Why You Should Love Government Deficits www.forbes.com/sites/johntharvey/2012/07/18/why-you-should-love-government-deficits/#38c9be11570a )!
www.forbes.com/sites/johntharvey/2012/10/22/government-creates-jobs/#1104ea707a12
www.forbes.com/sites/johntharvey/2011/07/02/learn-to-love-the-deficit/#281bd3f6723d
Of Course the Government Can Create Jobs!
John T. Harvey , Contributor
I want to explain how things work, not what you should believe. Opinions expressed by Forbes Contributors are their own.
A recurring theme in the Presidential Debates has been the role of the government in the economy. There are obviously many complex issues involved and a number of tradeoffs and caveats exist with any policy. That said, however, the assertion that the government cannot create jobs is ridiculous. It is a function of a biased definition of “job” designed to decide the question even before it has been asked.
To show this, start with a relatively neutral definition of job: any routine activity for which we earn income. This covers a wide range of pursuits, from managing a grocery store to selling financial derivatives. It does not include cutting your lawn (it’s routine but you don’t earn income) or selling that pool table you were positive you were going to use (you earn income but it’s not routine). As for myself, Texas Christian University contracts with me to teach, research, and perform service activities on a regular basis, and in exchange they direct deposit money into my account every month. I don’t think anyone would deny that what I do qualifies as a job.
But, those who say that the government cannot create employment are adding another element to the definition. To them, a job is any routine activity for which we earn income paid by an entity required to earn a profit. There is no compelling reason for this addendum and it arbitrarily excludes people like James Galbraith, who is an economist just like me, but at the University of Texas, and Jeffrey Halstead, Chief of Police in Fort Worth, Texas. By the qualified definition, they don’t have “jobs” because their income is derived from tax revenue and not private-sector sales. Ditto every single fireman, public school teacher, Marine, sailor, airman, soldier, national park ranger, defense industry employee, NASA scientist, social worker, librarian, etc., etc. None of them has a job.
Why would someone would embrace such a questionable characterization? Because their true goal isn’t to generate a scientific understanding of the manner in which the macroeconomy operates, but to make a moral statement. Specifically, their contention is that only those routine activities financed by profit are truly of value. Everything the government does is unnecessary because if people really wanted it, they would have bought it in the private sector: that which is useful is profitable. Furthermore, they say, were it not for my taxes, those in the public sector would not have a job. Firemen earn a salary only because some of mine was taken away (under threat of imprisonment).
It is not surprising that those who espouse this view are almost always in the private sector themselves. It says, "I deserve my income because I work hard creating something of value. Meanwhile, government employees are just handed a portion of my salary for doing something no one really wants. Therefore, not only am I morally superior, but my taxes should be cut!" It’s a very convenient philosophy, but it’s not economic analysis. (From time to time, you also hear this from some in the public sector, but they either conveniently ignore the contradiction or believe that where they work is one of the few exceptions.)
What this ignores is something I was arguing in my last post: not everything that is profitable is truly of social value and not everything of social value is profitable. If we defined a job as any routine activity for which we earn income paid by an entity whose activities are socially valuable, then we would most certainly be excluding things done by BOTH the private and public sectors. How much do private sector activities like pornography, reality TV, and cigarette smoking add to our well being? Meanwhile, if we depended solely on profit for motivation, we would not have national defense, child protective services, or education (or police protection or fire protection) for the poor.
Furthermore, the means by which public sector activity is financed is more complex than implied above. Not only do your taxes go to pay the salary of the fireman, but, when he spends it, his salary contributes to your wages. So who is supporting whom–is the government dependent on taxation of private sector salaries, or are private sector salaries dependent on sales to government institutions and employees? Obviously, they are largely interdependent and rely on the continuation of the flow between them. Largely, however, but not completely, for if one of the two can act with autonomy, it is the government. At the federal level, we can spend in deficit indefinitely and without fear of default (see It is Impossible for the US to Default), meaning that the government can spend even without tax revenue, and its spending can create private sector sales–and jobs. Therefore, in a world where we have a difficult time generating sufficient demand to hire all those willing to work, the private sector is actually more dependent on the government to boost its sales than the government is on the private sector for tax revenues (see Why the Private Sector NEEDS the Government to Spend Money). Now who is the parasite?!
This is not to argue that all government spending is socially useful. Of course it isn’t, any more than all private sector is. It is our responsibility to complain loudly when we think the public sector is wasting resources (something we will all have an opportunity to do on November 6). But, one thing is clear: the government creates jobs, and lots of them. In fact, the private sector needs them to do so. Don’t forget, the rules of accounting tell us that if the government is in deficit, then the private sector must be in surplus (see Why You Should Love Government Deficits www.forbes.com/sites/johntharvey/2012/07/18/why-you-should-love-government-deficits/#38c9be11570a )!
www.forbes.com/sites/johntharvey/2012/10/22/government-creates-jobs/#1104ea707a12
www.forbes.com/sites/johntharvey/2011/07/02/learn-to-love-the-deficit/#281bd3f6723d