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The Recession Spectator
The Job-Killing Effect of the ‘Do Something’ Mentality
Watch out for fiscal conservatives wanting to out-Obama Obama.
The big news last week was the dismal economy, with zero job creation in August. As surely as day follows the night, the president will use this evening’s address to Congress to call for a “bold” and “innovative” counter-offensive on the jobs front. If I am wrong about that, I will do more than eat my words. To quote the late great Arthur Ashe, I will “eat my racquets.”
Here in my home state of Missouri, our lawmakers have stolen a march on the president. On Tuesday they began a special session of the legislature to consider a big new job creation scheme of their own. As you may know, Missouri is supposed to be a highly conservative state — populated, if you believe the state motto, by people of a skeptical mindset. Republicans have large majorities in both houses.
Nevertheless, a good number of legislators who describe themselves as fiscal conservatives have thrown their support behind proposed legislation that would provide $360 million in tax credits for the creation of a “Midwest China hub” or “Aerotropolis” at Lambert-St. Louis International Airport.
This would be the largest tax credit in Missouri history. No one denies that the tax credits are anything other than a subsidy. The tax credits themselves are readily transferable or saleable to other parties having nothing to do with the proposed cargo hub.
How realistic is it to suppose that a few hundred million dollars in tax credits for construction of refrigerated warehouses and other facilities will lead to the creation of an aerial Silk Road linking China, the second largest economy in the world, and the American Midwest? Can under-utilized Lambert-St. Louis hope to compete with the likes of O’Hare, DFW and other much larger and well-established airport?
Based on their previous comments, many supporters admit to having grave doubts about the whole idea, but they still say they are willing to take a shot at making it happen — given claims of a huge potential payoff in jobs and increased economic activity.
In short, supporters have bought into the old “we’ve-got-to-do-something” argument. To reprise some of President Obama’s words from the speeches he was making a year ago, a number of them have decided that they don’t want to be seen to be “sipping Slurpees” and doing nothing while someone else is down in the mud spinning his wheels.
But there is nothing in the history of my state or our nation that suggests government intervention in the marketplace is an effective tool for job creation. To the contrary, when governments use taxpayers’ money in trying to pick economic winners and losers, they almost invariably pick losers and compound failure. As Milton Friedman noted, free-spending politicians have a special aptitude for making the wrong choices.
When people buy groceries or go shopping for themselves, Friedman observed, they have every incentive to economize and get as much value as they can for every dollar they spend. But when they are spending someone else’s money for the benefit of some third party, they are much more likely to be careless and wasteful. This is the case when you use an expense account to pay for someone else’s lunch.
It is also the case when politicians or lawmakers channel a large sum of money to selected businesses or industries on the theory that these politically favored and politically dependent enterprises, shielded from the risk of losing their own money, will do a bang-up job of promoting the public good.
Politicians often argue that even one job created though tax credits or subsidies is better than none. But this ignores the opportunity cost of expending large amounts of taxpayers’ money for little economic benefit. If the government takes a million dollars to create one job, that’s a million dollars that could have gone to more efficient and productive use in the private sector — in creating stronger and better jobs for more people.
If Missouri lawmakers have some $360 million to spare and want to put it to good use, they should return the money at once to all citizens in the state through tax cuts or refunds. As Friedman pointed out, they will have a better idea of how to get the most bang for the buck.
The federal government should heed the same advice when it comes to making a choice between expanded public works or reducing taxes and leaving people free to choose how to spend a greater share of their own income.
About the Author
Andrew B. Wilson, a frequent contributor to The American Spectator, writes from St. Louis.
Letter to the Editor View all comments (39) | Leave a comment
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Bill Hussein O'Stalin| 9.8.11 @ 6:39AM
My central planners are better than your central planners who have never engaged in successful central planning which stated central planning never works.
Have you considered| 9.8.11 @ 11:11AM
BHO'S, very funny.
I'm curious to know if they have studied the result from the Indianapolis airport, where they did basically the same the for United Airlines for a new maintenance hub. They touted all the jobs that United and the ancillary businesses would bring to the West side of Indy as the reasoning.
In 1991 the city created a TIF (Tax Increment Financing) district to collateralize the public bonds (borrowing) to fund the development,
The repayment was to come from United and the surrounding area through the payment of increased property taxes.
After project completion in the 90's, United declared bankruptcy in 2002, and moved back to O'Hare, leaving Indy high and dry. I did read that the city was going to initiate a lawsuit against United, but I don' know if that occurred, and what impact the bankruptcy had, if any.
Additionally, after the original United deal was inked, the West side developed at an incredibly rapid pace.
Homes were built, and infrastructure was placed to accommodate United. This created a huge burden on area's citizens via increased property taxes.
After United fled, the West side was almost wiped out because the layoffs brought market saturation of available homes for sale, and property taxes were so high that nobody wanted to buy there.
Bottom line, it was an ostensibly good plan gone bad, and the taxpayers were left holding the bag.
Michael Tomlinson| 9.8.11 @ 6:42AM
"If Missouri lawmakers have some $360 million to spare and want to put it to good use, they should return the money at once to all citizens in the state through tax cuts or refunds."
AMEN!
StephenF| 9.8.11 @ 12:14PM
What!? What kind of crazy talk is that!? That's "revenue" for the ruling class to spend.
POST American| 9.8.11 @ 7:06AM
ANYONE seriously interested in getting
to the core of what's wrong (in a word
TREASON) --need only review that now
declassiified State Dept. memo #200 from
1975.
Watch then RED China ambassador Bush Sr.
lay out the takedown of America and the
US taxpayer funded economic handover
to the most awesomely genocidal, and unrepentant,
regime history's EVER seen.
AGAIN kiddies, time to man
up to the reality
-----THIS IS TREASON.
-----IT REALLY IS----
--------REALLY--------
Lullabys, Legends and Lies| 9.8.11 @ 8:24AM
Post-A: You nailed it once again!!-----REALLY!!___
They’re right, we do have to “do something”, and that is, Do Not Watch President Obama’s speech tonight. Don’t watch it!! I know this is an easy request to a lot of you here, but I’m not talking to you, I’m talking to the ones that were thinking about it!! Don’t do it!! Don’t give him the ratings he so desperately craves!! Do “anything else”, like go down to you local 7-Eleven, and get yourselves a few Slurpees for the big game afterwards (you can watch the highlights of his speech tomorrow, if you must). It’s going to be the same old-same old that’s not going to work, for the same old reasons it didn’t work the last time it was tried. The Government doesn’t create jobs, the Government steals money from the economy, money that could’ve been used to create jobs if it hadn’t been stolen by the Government in the first place. The Democrats will never get this----REALLY-----!!
So put down that remote, open up a book, go for a walk, play with the Dog, talk to the Wife, go smell the roses, take a nap, go buy yourself a slurpee, but don’t listen to this man lie to you again, it’ll just ruin the Football game for you if you do!! Trust me-----REALLY-----!!
Mike D.| 9.8.11 @ 9:14AM
I totally agree, whats the point of listening to this boof spew the same crap out. As one poster said yesterday, if they took the teleprompters away from this poser I would pay to listen to him talk for 45 minutes on his own and see how many gaffs per minute this supposedly genius of a speaker could crank out. It would be better than a Staurday Night Live opening monologue. How about a scorecard of cliques used. How many "folks", "let me be clears", "shared", "I's", "me", "uh's" and the rest of them if anybody wants to add any here. As it stands I would gouge out my eardrums with pencils before I would listen to him say a word. Looking at this Mussolini poser stand in front of the camera should warrant a Pepto-Bismal commercial break for those who have to watch and listen.
Mike D.| 9.8.11 @ 11:25AM
Heres the actual situation in a nutshell. Tonight we are supposed to watch a person who intentionally blew the damn, flooded the valley with the intent to destroy it and then is going to pontificate about how he's going to keep us from drowning in what he created and blame the whole thing on the townspeople in the valley and we are supposed to sit and watch this debacle with a straight face! Thats quite a situation as a nation to be in, thats how far we have run off the road. THIS is what people voted upon themselves. My God, we are truly lost in the wilderness.
Pecos Pete| 9.8.11 @ 7:15AM
Hey now. Whoa.
I want my farm subsidies. Come to think of it, my friends need their subsidies. And I like the interstate road system for hauling stuff that I want to my stores. I want cleaner air. I want really cheap electricity and gasoline. I want the kids to have a really good education. I want to own a castle, smallish will do. I want vacations to neat foreign places, and some even neater domestic places. I want postal delivery directly to my home. I want quality health care for low cost, or better yet for free.
I want...I want...I want.
Now, you give it to me. If not you, then the government will do it because I vote for them that gives it to me.
Intelligent Design| 9.8.11 @ 7:38AM
Obama and his Demo-Socialist comrades in the administration and congress continue to think, insanely, that another government program is the solution. With every increase in government there is a decrease in freedom, initiative, innovation, progress, productivity, private property, real jobs, prosperity, health, and happiness.
Mike D.| 9.8.11 @ 7:49AM
Its the only thing they know. Government is the answer to everything, if it don't work the first time, add more government. Here we sit, in whats left of a free market economy debating what government can do to create jobs. The concept of what goverment can do is lunacy to begin with and yet here we are. The epitath this country will write into the history books about its end will be epic reading for the future. I hope somebody in the ages to come will learn something from it. I have never seen idiocy raised to such stratospheric levels anywhere else in history as it has in this country.
russel| 9.8.11 @ 10:50AM
Yes . Our Founders would be in apoplectic seizure at the size of the federal government . It was almost an afterthot that we needed it for defense . If the " idiocy raised to such stratospheric levels " were in the dictionary , there'd be Pelosi's photo . I understand the Constitution had to allow for ammendments because no one had a crystal ball , but all the changes to it sure made for the mess we have now .
Tom Osterman| 9.8.11 @ 8:48AM
The President, his administration and his party are wedded to the notion that the government, I.e. them, should run things. The fortunes of the private sector in the short term aren' t an issue.
Socialists have always called for "public ownership of the means of production." Do you see a role for the private sector in this scheme? Do you even see a private sector in this scheme? Their goal has always been absolute control over everything. After they get that, they have all the time in the world to get it right.
If ever.
Pat| 9.8.11 @ 2:40PM
Detroit to Obama: "Spare change? A little help here?". Obama to China: "Say buddy, can you spare me another $500 billion?".
Old Soldier| 9.8.11 @ 8:08AM
The Harding-Coolidge recovery plan was the most successful in history and the only one we should be talking about.
Walking Horse| 9.8.11 @ 10:26AM
Bingo! It is quite a commentary that Obama has done yeoman work in rehabilitating the reputation of Warren Harding.
Al Adab| 9.8.11 @ 3:12PM
Old Soldier is correct. The policy those gentlemen pursued involved:
1. cut spending
2. lower taxes
3. allowing wages to seek their own level
4. encouraging business growth
It worked and the crises quickly passed. When Hoover faced a similar economic crisis he responded with Keynesian actions. FDR replaced him and we know the rest.
Intelligent Design| 9.8.11 @ 6:16PM
A good book to read is: Coolidge - An American Enigma - by Robert Sobel. No wonder Reagan admired Coolidge!
Timothy L. Pennell| 9.8.11 @ 8:34AM
I love that Friedman example. I do the same thing, and, in a way, we all do.
When I can only spend what's in my pocket? I only spend what's in my pocket. Especially, in the Grocery Store. My shopping prowess is reigned in by the FINITE supply of Currency, on hand. I am pretty much restricted, to purchasing the things I NEED. The things I WANT, will have to wait.
HOWEVER.......If I have a TAB (not the soda) or my Bank Card? It's LOTTO time. I'm buying the Cherries, the Pistachios, the Little neck Clams. Oh, those Shrimp look nice. They will definitely go good with that Sirloin Tip.
In for a penny, in for a pound.
It's the same with these Politicians. Only worse.
At least, when I'm running up my tab (not the soda) or hammering the old Bank Card, it's my money. When they do it, it's NOT their money. It's ours.
My wife is always telling me that I think that the Checking Account and the ATM cars are FREE MONEY. Indeed.
It's time that WE THE PEOPLE lay down the LAW to these Shopaholic Politicians.
I can see November 2012 from the checkout line.
Dan Hirsch| 9.8.11 @ 9:47AM
Ever think about what happens when you get cash back with a purchase on a debit card. You get stuff and money and all you ever did was hand the clerk a little plastic card...
Think what that looks like to a five year old!
Pay in green money that you earned at your profit making job. You'll live longer and happier, and have to carry a lot less garbage to the curb....
Don't tread on me.
PS Aren't "green jobs" the ones where you get paid?
Denver Todd| 9.8.11 @ 9:39AM
If you build it, they will come, just like in that huge mall in China that sits nearly empty.
Al Adab| 9.8.11 @ 2:25PM
They have just recently finished a ten course gold resort on Hainan Island. Apparently the Chinese, unlike our administration, understands the international nature of trade and travel. Interesting is it not that the ideological Marxists are the better students of Capitalism?
Al Adab| 9.8.11 @ 2:32PM
Golf resort, sorry, fat fingers.
Radioman777| 9.8.11 @ 10:00AM
Sometimes doing nothing is exactly what's warranted. Unfortunately, most Americans are so impatient that they expect something, even if it's wrong. That flaw, coupled with unscrupulous politicians seeking ever more power, often leads to disaster.
kurt| 9.8.11 @ 10:15AM
I watched freedom watch last night and the judge had Oren Hatch as a guest and he talked a good talk until the end when he threw a plug in that the president has several free trade agreements that he should implement that would create 250,000 jobs in the US. This is another one of these free trade traitors that are bought and paid for by the globalists that want to turn americans into serfs! The free trade treason that is being pushed on both sides of the isle must be stopped if America is ever going to recover!
Dan Hirsch| 9.8.11 @ 11:47AM
kurt,
Free trade means we compete with everybody on a tariff free basis. Yes, it means we have to compete to sell our products. But it also means that we have to be more productive. You don't become more productive by swinging the shovel faster, you become more competitive by getting a backhoe. If you are only qualified to swing a shovel, you will have a problem, until you learn to run a backhoe. Which would you rather do, swing a shovel your entire life or run a backhoe?
And if you are afraid to compete from the strongest, richest, most competitive country on the planet, what kind of little sissy are you, anyway?
Sheesh.
Dan Hirsch| 9.8.11 @ 11:54AM
And another thing - it takes a lot more jobs to make a backhoe than a shovel. And if we're smart, we make a lot of backhoes and export them, so guys with shovels everywhere will end up with a problem.
What you end up with is more stuff for everybody!
Lead, follow, or get the hell out of the way. But progress will not be stopped - that's why the Chinese are working to get past us...if it's not them, it'll be the Indians (from India, not the American aboriginal descendents.), maybe the Brazilians, who knows, there will always be somebody.
skip| 9.8.11 @ 12:21PM
Careful Dan, you are sounding like one of those MBAs taking a beating in another thread today. Excellent comments. Don't you just love intelligence and honesty?
kurt| 9.8.11 @ 3:00PM
Keep drinking the kool-aid...IDIOT!!!
skip| 9.9.11 @ 12:25AM
Take, and try extra hard to pass, a basic principles of economics 101 class from any local community college, and then come back and try again.
Have you considered| 9.8.11 @ 12:24PM
Your backhoe analogy is interesting in that CAT manufacturing is expanding in China, while contracting here in the US. Pretty soon, we will be importing backhoes.
The US is simply employer and capital unfriendly. With the EPA, NLRB, HHS, DHS, Justice, etc.. it is not unreasonable to expect that capital will seek the greatest return on investment.
I think free trade is a very good thing, but I would like to see the US be truly competitive.
Unfortunately, I don't see this happening soon, even if we get Republicans elected.
LiveFreeOrDie| 9.9.11 @ 12:39AM
Good point. While we have "evolved" into a non-production, service based economy the rest of the world is still manufacturing goods, which we buy. Free trade I would agree was a good idea 25+ years ago but less attractive in current years. I guess I just don't see the upside, feel free to enlighten me.
PattyMor| 9.8.11 @ 12:42PM
I am fed up with free trade agreements. All Bill Clinton did with China is sign away our factories. Now we are left buying crummy Chinese products at WalMart. A lot of the good manufacturing jobs are gone. This is nothing but a giant sell out to the Chinese. How about taking the money and LOWER TAXES for everyone. This selective favortism is just Soviet Union style central planning.
I"m for fair trade. You buy from me and I'll buy from you. The Chinese have NO intention of buying our products; they'll either steal them (intellectual property) or reverse engineer them.
Pat| 9.8.11 @ 1:24PM
Michigan, Missouri, California – identical dilemmas and no solution in sight. State legislatures are now the Little League teams of government earnestly attempting to imitate the major league players in Washington D. C. - only lacking the ability to borrow money on a trillion dollar scale. Obama will propose another $300 billion stimulus bill, desperately taking a last shot at enriching his supporters before he is forced out, but individual states, unlike the feds, can’t reach across their borders to confiscate additional funds in other jurisdictions. And we, a practical nation of formerly frugal Yankees, are currently borrowing 40 cents of every dollar our government spends. Insane, ridiculous but a harsh reality all the same.
As we’re forced to support the amateur comedy clubs which constitute both our Big and Little League governmental systems, more and more Americans are coming to the conclusion our government and, most especially, those embedded politicians who orchestrate these constant failures can no longer provide the direction our nation so desperately needs. It’s a government motor pool car in the breakdown lane with the hood up and steam pouring from the radiator, a Congressional intersection where the traffic lights are all flashing red or a regulatory John Deere stuck in the mud with its driver pounding the steering wheel in frustration.
Our system no longer functions as a rational government of the people and voting in this next election won’t alter that fact. We intuitively sense this is true but can’t bring ourselves to consciously admit it. Different leaders will miraculously turn this situation around we confidently remind each other but, in our hearts, we know that isn’t the case - the S.S. America is slowly sinking and promoting a Bosun’s Mate to Captain won’t alter that fact.
With the growing suspicion we are going under for a third time or firmly caught in an endless downward spiral, individual Americans will spawn additional Tea Party movements. Some of these future citizens’ movements will try to remain within the bounds of civility and work for change within the law. But our laws were carefully written to prevent citizens from wresting control from the politicians so other Tea Party type movements will evolve along more militant and much less tolerant lines. Borrowing 40 cents out of every dollar our government currently spends – incredibly irresponsible and something which cannot be rectified during a brief time spent within the voting booth.
Al Adab| 9.8.11 @ 2:23PM
Strange how no one mentioned the Federal government suing Boeing to prevent them from expanding employment in America by building a plant in Carolina. Interference in the marketplace is never a good idea and should be limited to simple steps which foster business exapansion and growth.
Gary B| 9.8.11 @ 6:10PM
"Midwest China hub" is the reason that sounds good. The real reason is crony capitalism. Follow the dinero. Who's sleeping with contractors?
POST American| 9.8.11 @ 10:34PM
---------------------FINAL WORD-----------------------
America will NOT get jobs, or even its self-respect
back, until David Rockefellow's BUSH---Clinton---BUSH Jr ------Obama Globalist TREASON OP is retro-actively IMPEACHED and facing life in prison.
--------NUREMBERG/HUAC -----A.S.A.P.
LiveFreeOrDie| 9.9.11 @ 12:42AM
"FINAL WORD"
You promise?
Dixiedrifter| 9.12.11 @ 11:43PM
Most politicians think differently than your average citizen. Our elected representatives, as you stated, feel they have a "duty" to make something happen - there in itself lies the problem. Most businessmen have a keen sense as to what liabilities impede their effort to succeed. The story you have shared here is a prime example of how government intervention takes an active role in the private domain, to a point, where private enterprise is all but excluded from participation. What does reconfiguring Lambert Field have to do with creating an environment in Missouri, where job growth can be accomplished across a wide spectrum? The approximate four-hundred million in tax incentives will never equate to a meaningful number of jobs created in the state. This is another effort by a long list of well intended "legislators" attempting to create "targeted" job growth with an end result almost certain to miss its target. The grandiose aura surrounding these "public works" type projects dulls the senses to a point where intelligent minds act as if they are suffering from myopia. The rest of us wonder - who's been serving up the Kool Aid!