More Government Equals Fewer Jobs (Schiff:...a nation of government employees)

Safe haven /Europacific Capital ^ | February 05, 2010 | Peter Schiff

Posted on Saturday, February 06, 2010 9:10:48 AM by sickoflibs

With today's unexpected decline in December payrolls, the cry for more job-related stimulus will grow even louder. But the sad truth is that any new stimulus or jobs bills will ultimately swell the ranks of the unemployed, thereby raising calls for an even bigger federal effort. If we are not careful, government regulations, subsidies, and spending, all designed to fight unemployment, could push the labor market into a death spiral.

Regulation acts like a tax on job creation. By subjecting employers to all sorts of extra expenses when they hire people, regulations increase the cost of employment far beyond the wages employers actually pay their workers. In fact, some regulations are specifically tied to the number of workers employed. This provides some employers with a strong incentive to stay small and not hire.

The minimum wage law, which is really just a very visible workplace regulation, actually makes it illegal for employers to hire certain individuals and destroys entire categories of jobs. For instance, faced with high labor costs, some restaurants will avoid hiring dishwashers by switching to plastic utensils and paper plates. On a larger scale, factories may decide to switch to robotic assembly lines if human labor gets too expensive.

Other types of regulations, such as those that prohibit discrimination, create incentives for employers not to hire individuals that fall within the protected class. This is the result of potential litigation costs that may result from wrongful termination lawsuits. In other words, the more expensive government makes it to fire workers, the less likely they are to hire them in the first place.

Subsidies produce the opposite effect of regulation, but sometimes the results can be just as harmful. Government subsidies divert resources towards politically favored activities, resulting in more jobs in areas such as health care and education, but fewer jobs in other sectors such as manufacturing. The net effect of this transfer is to diminish the productive capacity and efficiency of the economy, which lowers real economic growth and diminishes employment opportunities.

Although not as visible as regulations and subsidies, government spending also plays a large role in job destruction. The more money government spends, the more resources it drains from the private sector. The fiscal 2011 budget proposed by President Obama contains $3.8 trillion in federal spending. Think of government as a cancer feeding off the private sector. The larger it grows, the more jobs it kills. Unfortunately, most politicians follow the misguided advice of economist John Maynard Keynes, who advocated government spending as a means of job creation. In reality, government spending merely results in government jobs replacing more efficient private sector jobs.

Some economists point to taxes as the primary job killer, and argue that lower taxes will boost employment. While I have sympathy for this view, it misses the larger issue that the burden of government is not what it taxes but what it spends. The proposed fiscal 2011 federal budget contains "only" 2.4 trillion of taxes. The remaining 1.4 trillion of spending is borrowed (incredibly, for every dollar the government collects in taxes, it now spends almost $1.60). I would argue that a dollar borrowed kills more jobs than a dollar taxed. Therefore, cutting taxes and borrowing the shortfall kills more jobs then it creates. This is true because jobs require capital and government borrowing more directly crowds out private capital investment than taxes do.

In the end, I fully expect the government to directly provide make-work jobs to the armies of the unemployed. This will accelerate the pace of private sector job destruction and make our economy even less productive than it is today. This means that while the government may be able to provide people with jobs, the wages they pay will provide little in the way of purchasing power. In the end, we will become a nation of government employees, with plenty of work but little to show for it.
TOPICS: Business/Economy; Editorial; Government; News/Current Events
KEYWORDS: economy; government; schifflist
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1 posted on Saturday, February 06, 2010 9:10:48 AM by sickoflibs
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To: Harrius Magnus; mojitojoe; Pelham; mom2twinsn2; LongLiveTheRepublic; ConservativeOrBust; ...
The Peter Schiff/Redistribution Watch Ping. (Washington Bankrupting our Nation by Spending your past, present and future money!)
2 posted on Saturday, February 06, 2010 9:12:22 AM by sickoflibs ( "It's not the taxes, the redistribution is spending you demand stupid")
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To: sickoflibs

I have a question for our FReeper financial experts.

We know that Medicare is Socialized Medicine and that there is a tiny death/burial benefit. As of January 2008, that amount was $255.

We know that most Employer benefit plans include Health coverage and GROUP LIFE INSURANCE in amounts much greater than $255.

QUESTION:
If the Federal Government inserts itself into the private sector’s benefit programs. What happens to all those group life insurance reserves.

Incidentally, how many billions of dollars are currently held as Life Insurance reserves and who has control over them? The State Insurance Commissioners or the National Banks?

just curious

3 posted on Saturday, February 06, 2010 9:33:25 AM by sodpoodle (Despair - Man's surrender. Laughter - God's redemption.)
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To: sickoflibs

Why can’t we just ALL work for the federal govt? After all, it worked so well in the USSR....

4 posted on Saturday, February 06, 2010 9:34:46 AM by Travis McGee (---www.EnemiesForeignAndDomestic.com---)
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To: sickoflibs
More Government Equals Fewer Jobs (Schiff:...a nation of government employees)

"Same as it ever was." (Talking Heads, Once in a Liftime.) I wish it was only once in a lifetime. But people are not learning from history or even the world around them right now.

Socialism has always been that way and it's that way now in EVERY SOCIALIST COUNTRY IN THE WORLD. Socialism and its accompanying Marxist/Keynesian/Marxist political/economic systems are theoretical and real live historical disasters that have been utterly refuted. Yet people still run to government for answers.

There has been and always will be a direct relationship between the larger the size of government and two things: 1) Politically: the greater danger it is to its own people and 2) Economically: the more poverty it creates.

1) Politically, millions more have died at the hands of their own government than from any foreign nation. To the degree it continues to grow, our own government is a greater threat to us than our foreign enemies, beginning with the government SANCTIONED (watch out for mandated) slaughter of 50-60 million unborn babies. More American lives are at peril the larger our government grows. History bears this out.

2) Economically, government has never and cannot ever create wealth. All it can do is create poverty. The best anti-poverty program: limited government, laissez-faire free-market economy, and abolish the IRS in favor of a 10% sales tax. The Reagan boon would pale compared to the wealth that would be created.
5 posted on Saturday, February 06, 2010 9:46:21 AM by Jim 0216
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To: sickoflibs
Think of government as a cancer feeding off the private sector. The larger it grows, the more jobs it kills.

Indeed. Schiff 2010!
6 posted on Saturday, February 06, 2010 9:46:35 AM by kara2008
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To: sodpoodle

You are the only one curious about where the insurance reserves end up. They could be 1) grabbed by government, 2) allocated back to the policy holders, 3) left to the shareholders or 4) stolen by management. The odds are on 1 or 4, with 2 coming in last.

7 posted on Saturday, February 06, 2010 10:02:32 AM by slowhandluke (It's hard to be cynical enough in this age.)
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To: sickoflibs
The party is coming to an end for the big spending government we have today. It can't be sustained by the shrinking number of taxpayers. The only thing that can save it is domestic oil and natural gas production. We could keep all those petrol dollars in America and create tens of thousands of high paying jobs. We need something beside debt to drive our economy.
8 posted on Saturday, February 06, 2010 10:09:08 AM by peeps36 (Democrats Don't Need No Stinking Input From You Little People)