Saturday, December 19, 2009

Obama Jobs Strategy: "Give Them A Spoon"

Cato Institute's Mark A. Calabria addresses the cause and futility of the Obama administration's job creation strategy. The Obama administration either has a fundamental lack of understanding of how to stimulate jobs or it's socialistic approach to jobs creation is the primary reason for a stalled U.S. jobs market. Mr. Calabria crystallizes the Obama administration's poor record to date on job creation by recounting a famous exchange between Nobel prize-winning economist and grandmaster of free-market economic theory Milton Friedman and a Chinese government official.

Prof. Friedman visited China in the early 1960s and was taken by a government official to see a public works project. Chinese workers were building a canal. Friedman was struck by seeing everyone digging the canal with shovels. Friedman asked the official, "why no heavy earth-moving equipment?" The official said, "oh, this is a jobs program." So Friedman then says to the official, "then why don't you just give them spoons instead of shovels to create even more jobs?"

Dr. Friedman's response was an acerbic jab at the socialist's approach to job creation. He was in fact educating the China official by saying employment doesn’t in and of itself make us wealthy- production does. Building government roads, bridges or canals is not productive and, consequently, does not create economic wealth. Holes in the ground and war do not produce wealth; they destroy wealth. They take valuable resources and convert them into something less valuable.

Mr. Calabria provides insight into the stalled jobs market by attributing the above scenario to the Obama administration's failed jobs strategy. He cites the following reasons for the failure of the Obama administration to stimulate the U.S. new jobs market and create long-term sustainable job growth.
  • Obama's "fake" job strategy: His veiled attempt at jobs creation through his $787 billion stimulus package was actually an orchestrated strategy of disguised income transfer, i.e, "share the wealth" vs. "create wealth". It has and will fail to create jobs simply because it has mostly only redistributed wealth to Obama's trade union supporters through federal and state construction jobs. To Prof. Friedman's point, employment does not in and of itself create wealth, production does.
  • Obama's governmental intervention: His stimulus package does nothing to encourage private sector expansion, production and long-term sustainable economic growth and jobs. His stimulus plan has essentially crowded out private sector expansion and job opportunities for the unemployed. The Obama stimulus plan is not encouraging the private sector to expand and create productive new jobs, re-train the work force and foster wealth and expansion.
  • Obama's hostile business environment: the Obama administration has created a hostile business environment causing business uncertainty as to new and higher taxes, health care costs and "cap and tax" regulations. As long as this uncertainly persists there will not be long-term sustainable economic growth.
  • Obama placating interest groups: Mr. Calabria notes that shortly after Obama convened his "jobs summit" his Labor Secretary, Hilda Solis, said her agency will seek to enact an array of 90 rules and regulations next year aimed at giving more power to workers and unions. Several business executives said they opposed expanding disclosure requirements. The president of a small trucking company in PA responded to this onslaught of new regulations by saying, "If I have to consult a lawyer on how to handle unionization so I'm not making any missteps, I don't see why I have to disclose that". This recent development is indicative of the hostility the Obama administration has toward business owners, i.e., placating his union supporters at the expense of business owners and economic growth and expansion. He speaks to attempting to create jobs in the private sector, but imposes additional punitive hardships on the business environment.
  • Obama's disconnect with private sector: the Obama administration has a fundamental disconnect between his advisers and the private business sector. Mr. Calabria highlights that the Obama administration has the lowest % of senior staff advisers who have actually worked in private industry. His jobs summit adviser make-up was composed of academia, non-profits and trade unions (who have no incentive to create new jobs). Mr. Calabria notes that the extent of academia's experience with creating jobs is that "the government gives them a check and they hire someone". Are we not surprised then by the lack of understanding by the Obama administration as to how to create new jobs?

President Obama, on December 8, 2009, at the Brookings Institution, unveiled his “new, improved” strategy for stimulating jobs. That strategy is essentially using more governmental stimulus spending and to be funded by using portions of the Troubled Asset Relief Program (TARP). Therefore it seems that President Obama has finally taken some advice from Prof. Friedman in order to create jobs. He's giving us more spoons!

Mark A. Calabria, Ph.D. is Director of Financial Regulation Studies at the Cato Institute. Before joining Cato in 2009, he spent six years as a member of the senior professional staff of the U.S. Senate Committee on Banking, Housing and Urban Affairs. In that position, Calabria handled issues related to housing, mortgage finance, economics, banking and insurance for Ranking Member Richard Shelby (R-AL). Prior to his service on Capitol Hill, Calabria served as Deputy Assistant Secretary for Regulatory Affairs at the U.S. Department of Housing and Urban Development, and also held a variety of positions at Harvard University's Joint Center for Housing Studies, the National Association of Home Builders and the National Association of Realtors. He holds a doctorate in economics from George Mason University.


Anonymous said...

Bunk. This is all bunk. The problem with right wing conservative Christian articles like this is that things are always one sided (you never give the counterargument to your own), you never give documentation nor reference facts (instead you take brief passages out of context), and you continue, for whatever bizarre reason, side primarily with one American party, namely the Republican party. Morals can be actions to, and when a party commits actions that are detestable morally, it doesn't matter what they spout on Sunday; they are still immoral. I am a Christian; I am of the Democratic party; and I approve this (meaning "my") message. Can I get an "Amen!"

Dennis Gallagher said...

Awaiting a factual rebuttal from you; all you have written is a sour grapes rant that smacks of "gee you sure got the Obama/dems socialist number allright".

Anonymous said...

I feel a Christian Democrat, is an Oxymoron.

Debrinconcita said...

I agree with the comments on this page except for the one about Christian Democrat not all Christian's Are Created EQUAL. Don't judge us all because some have big heads & won't see or won't read between the lines. I am Christian Democrat who is very different & I listen to all sides before I make a judgment call on anything, OBAMA is doing the best he can with what he has to work with, In MY VIEW.

Dennis Gallagher said...

To the so-called Christian Democrat,. First, to be sure that is an oxymoron given how they booed God at their coven, I mean convention in Charlotte. So much for anyone calling themselves Christian and aligning with that socialist, secularist, atheist, agnostic, Godless, anti-theist party. So if you're a Christian you for all practical purposes cannot be a Christian given that party's platform.

Second, I don't know how you interjected Christianity into your comments when the post's topic was on how Obama ignores the immutable laws of economics of the free market enterprise system.

Obama is not doing the best he can, he is doing the worst he can. As the article clearly says Obama has no understanding of economics or ignores the immutable laws of economics. Prof. Friedman's short example shows how Obama's 'digging ditches' economic policy is a failure.

After Obama is out of office on 1/20/13 one question remains: Was his disastrous presidency done on purpose or was it sheer incompetency all around? Who knows; who cares. As long as he is out of our White House.