Tuesday, September 13, 2011

Government Job Creation Is An Oxymoron

The title makes for a good sound byte. The title comes from a CNBC interview with William Dunkelberg,Chief Economist of the National Federation of Independent Business (NFIB). In that interview Mr. Dunkelberg makes it plain that our economic malaise is a debt problem. In the course of the interview (Unknown person at the 6:53 mark), the statement is made that "... this is not a traditional recession. this is a recession caused by too much debt. Debt went from 120% of GDP in the '50s to 360% of GDP now."

Since the consumer is busy paying down debt, they are not buying. Consequently, the stimulus programs being proposed by Obama will not work because businesses will not hire unless there is a demand for new employees in order to increase production. One could even make the case that the recent bankruptcy of Obama's showcase green energy company, Solyndra is a precursor pointing to the stimulus programs eventually failing.

The interview gets to the point at the 3:40 mark. At the 4:40 mark Steve Liesman asks Mr. Dunkelberg if reducing the marginal cost of hiring will help. The answer was essentially no. Mr.  Dunkelberg says that what he needs is customers and they are not buying.  Mr. Dunkelberg does go on to state that businesses would not be interested in hiring since it would not significantly improve the ability of companies to make a profit. Following Mr. Dunkelberg interview, in an unrelated interview Representative Jeb Hensarling (R,TX) made the complimentary statement that temporary tax relief would only bring temporary jobs.

Stimulus programs that provide amorphous "incentives" and "tax breaks" to businesses will not resolve our economic malaise. Government job creation in this manner is an oxymoron.

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