Monday, June 18, 2012

Who Will Create the Job Creators?

Here's your jobs.  Would you like a pony with that?
Words.  They're at it again, creating new words and terms, packaging and delivering them fully formed, seeking to define something simplistically as good or evil, all while obscuring any underlying nuance.  Just as anybody who ever put on a uniform is now a "Hero", anybody with a lot of money is now referred to as a "Job Creator".  And while it is far too taxing for anyone in the American political media to actually parse this concept of "Job Creator" and try to understand what it might mean, people from various walks of political life continue to spout the phrase, using it quite flexibly in whatever sense it might contribute to their current economic argument.

But here's the thing.  It really IS a worthwhile exercise to consider what it might mean to have the power to 'create' jobs, what it would entail, and what the alignment of incentives might actually look like.  The first part, which is highly relevant to the current Presidential campaigns, is to cease conflating a government Job Creator with one from the private sector.  This analysis is relevant to American Presidential politics in the sense that, at the core of the debate is the question of whether Willard Romney's rapacious capitalism or Barack Obama's government and community service better suits one or the other for the office in general, and for stewardship of the economy in particular.

The question, and its answer, hinges on the profit motive.  Indeed, private business, for whatever it has historically represented, in the 21st century is entirely about profits.  The quality of a business, the success of its practitioners and the future prospects for all concerned are measured strictly by profits.  These are most often short-term quarterly profits, but however they are presented, a business that does not make money will not be for long a functioning entity.

Government, on the other hand, has no functional interest in profits.  Its job is to deliver services, particularly of the sort that cannot be delivered profitably, and therefore are not likely to be provided by the private sector.  Indeed, if one looks back to the early years of the odious GW Bush administration, the government found itself with an operating surplus - one can easily think of that as a profit, as more revenue had been collected than had been appropriated by Congress - and the key characteristic of the debate over what to do with those funds was its intensity.  But in spite of strongly held opinions, no one ever seriously suggested that the government should just keep it.

The key distinction, when it comes to jobs, is that for a government jobs are an end in themselves.  Increasing economic activity and decreasing unemployment lead to nothing but good things, not only for government but for the party in power.  Tax revenues skyrocket, people are happy and content, corporate profits are up, and a government has a chance to address the more ideological aspects of its agenda rather than battling a struggling economy.  The private sector, on the other hand, is resistant to creating jobs.  Because their overriding concern is profits, it is always preferable to find ways to increase productivity and decrease labor costs.  It is only when demand significantly exceeds production capacity that a company will (reluctantly) add jobs to meet that demand.  So the paradox is, when economic growth is weak, the private sector "Job Creators" will actually actively resist any requests that they increase employment.

The other key factor to consider when you hear people speaking blithely about "Job Creators" is to ask yourself 'what is required to create jobs?'.  The answer, of course, is money.  Jobs are expensive - not just the payroll but the infrastructure and benefits typically required for every one.  This is precisely why the private sector prefers not to add to their headcount - every dollar spent on employees is a dollar that does not return to the shareholders as profits.  This is also the ONLY way anyone can create jobs - by providing the funding to hire the new employees.  Whether directly hiring people at the local, state and national levels, building the large infrastructure projects like airports, schools and railroads that only governments can undertake, or purchasing the vast array of goods and services the thousands of government agencies require to accomplish their mission, in a time of weak demand the government is the 'spender of last resort', putting up the funds that can be used to hire otherwise hopelessly unemployed people.

So the next time you hear Mitt Romney explain that stimulus 'doesn't work', but as the President he'll create jobs, note that he refuses to provide any detail as to how he might do that, and ask yourself what methods will be available to him that are not available to Barack Obama.

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