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Obama Omits Jobs Killed or Thwarted from his Tally
Can you believe they’re still touting that silly metric? When I heard last week that the White House would be announcing the number of “jobs created or saved” as a result of the 2009 American Reinvestment and Recovery Act, my first reaction was embarrassment.
Imagine how Christina Romer must feel. The chairman of the President’s Council of Economic Advisors was dressed in a cheery, salmon-colored jacket, a complement to the upbeat news she had to deliver on July 14. The $787 billion stimulus enacted in February 2009, which subsequently grew to $862 billion, increased gross domestic product by 2.7 percent to 3.4 percent relative to where it would have been, and added anywhere from 2.5 million to 3.6 million jobs compared with an ex-stimulus baseline.
“By this estimate, the Recovery Act has met the president’s goal of saving or creating 3.5 million jobs -- two quarters earlier than anticipated,” Romer said with a straight face. (More than 2.5 million non-farm jobs have been lost since ARRA was enacted in February 2009, all of them in the private sector, according to the Bureau of Labor Statistics.)
How does the CEA arrive at these numbers? It uses two methods, Romer said. The first is a standard macroeconomic forecasting model that estimates the multiplier effect of fiscal policy. (The government’s spending is someone else’s income.) The second method is statistical, using previous relationships between GDP and employment to project future behavior.
Model Imperfection
These numbers might just as well have been pulled out of a hat. Recall that it was the same model and method the administration used in January 2009 to predict an unemployment rate of 7 percent in the fourth quarter of 2010 with the enactment of the fiscal stimulus and 8.8 percent without. The unemployment rate now stands at 9.5 percent.
This same model convinced policy makers that the subprime crisis was contained, encouraged the rating companies to slap AAA ratings on collateralized garbage, and led banks to believe they had adequately managed their risks and reserved for potential losses.
Econometric models rely on the assumption that $1 of government spending generates more than $1 of GDP, the so-called multiplier effect. There is no allowance for the negative multiplier on the other side.
Sure the government can spend money and generate GDP growth in the short run: Government spending is a component of GDP!
What it giveth it taketh away from the private sector via taxation or borrowing. Every dollar the government spends is a dollar the private sector doesn’t spend, an investment it doesn’t make, a job it doesn’t create. This is what is unseen, as Frederic Bastiat explained in an 1850 essay.
Hiring Disincentives
“If the administration wants to take credit for ‘jobs created or saved,’ it should also accept responsibility for ’jobs destroyed or prevented,’” said Bill Dunkelberg, chief economist at the National Federation of Independent Business.
Ignoring the flaws in the stimulus for the moment, Congress raised the hurdle for hiring entry-level workers when it refused to delay the third step in a three-stage minimum wage increase last year. And the Department of Labor cracked down on unpaid internships, outlining six criteria that businesses had to satisfy in order to hire someone willing and able to work for nothing to get the experience.
For example, the employer must derive “no immediate advantage from the activities of the trainees, and on occasion the employer’s operations may actually be impeded.” You can’t make this stuff up.
Recession’s Advantage
At the White House briefing last week, Romer touted the leveraging of public investment with private funds, with $1 of Recovery Act funds partnering with $3 of outside spending. Romer said this public spending “saved or created 800,000 jobs” in the second quarter alone.
Once again, what would have happened in the absence of the government’s targeted intervention?
According to a June 2009 study by the Kauffman Foundation in Kansas City, Missouri, well over half of the companies on the Fortune 500 list, and almost half of the fastest growing companies in America, were started during a recession or bear market. Dunkelberg calls this phenomenon “negative push starts.” People might not be willing to quit their jobs, but if they get laid off during a recession and were thinking about starting a business, they might seize the day, he said.
“When people ask me when the best time to start a company is, I tell them the day before the recession ends,” Dunkelberg said. “They can do it on the cheap, and the next day you get cash flow." Model That!
What’s more, firms less than five years old are responsible for all of the net new jobs created in the U.S., the Kauffman study found. Job creation by start-ups is more stable, less sensitive to the business cycle.
So, if the goal is to create more jobs, and start-ups are the ones that create them, why is the Obama administration partnering up with existing firms?
“Job-creation policies aimed at luring larger, established employers will inevitably fail,” said Tim Kane, Kauffman Foundation senior fellow in research and policy and author of a follow-up study released this month.
Not to worry. The White House has a model that turns failure into success.
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The scariest unemployment graph I’ve seen yet
The median duration of unemployment is higher today than any time in the last 50 years. That's an understatement. It is more than twice as high today than any time in the last 50 years.
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Obama's Anti-Business Policies Are Our Economic Katrina
His gratuitous and overstated demonization of business is exactly the wrong approach
The growing divide and tension between the Obama administration and the business world is a cause for national concern. As Clive Crook wrote in the Financial Times, Obama is "a president under business attack." He is certainly under sharp criticism and for good reason: He has lost the confidence of much of the business community, whose worries over taxes, the dramatically increased costs of new regulation, and a general perception that the administration is hostile toward them and may take yet harsher steps, are holding back investment and growth. In the midst of a weak economy accompanied by levels of unemployment unprecedented since the Great Depression, it is critical that the government in Washington appreciate that confidence is an imperative if the business community is to invest, take risks with start-ups, and altogether get the economy going again to put the millions of unemployed back to productive work.
Click here to find out more!
This is what businessmen do when they are free to conduct business. For example, in the two decades of the 1980s and 1990s, the United States created 73 million new private sector jobs—while simultaneously losing some 44 million jobs in the process of adjusting its economy to international competition. That was a net gain of some 29 million jobs. A stunning 55 percent of the total workforce at the end of these two decades was in a new job, some two-thirds of them in industries that paid more than the average wage. By contrast, continental Europe, with a larger economy and workforce, created an estimated 4 million jobs in the same period, most of which were in the public sector (and the cost of which they are beginning to regret).
How could America achieve this? It is because of the get-up-and-go culture that reflects individualism, courageous entrepreneurialism, pragmatism, adaptability, and innovation. This adventurous spirit outlived the passing of the frontier and still inspires and nourishes millions, including our young and our newcomers. No other country has a population so habituated to self-help, self-improvement, and even self-renovation in a manner that carries over into business life.
The unique historical conditions of America encouraged a remarkable management culture. The anthropologist, Lionel Tiger, showed that the style of American corporate management was a response to the opportunities of a huge internal market, but also the obstacles presented by vast distances and diverse populations. We created a monetized market economy inspired by a belief in technology and scientific management, governed not by kinship and custom but by contracts freely agreed upon and law passed by assent.
Over the years, the transformation of American industry has been nothing short of phenomenal. U.S. companies replaced large, mass-produced consumer products with sophisticated goods derived from intellectual output and knowledge-based interests, the fastest-growing segment of the world's economy. Management was assisted by a level of labor flexibility that is the envy of both Europe and Asia. Europe struggles with the legacy of the steam age in the form of craft, union, and management demarcations that limit management's role. In Asia, management is often stifled by large, oligopolistic networks and government mandates.
American managers consistently led the world in investing in new technologies and providing high-tech training to exploit them. We were the first to realize the importance of computers and information technologies and invested massively in them, spending twice as much per capita on info-tech as Western European firms and more than six times the global average. In fact, U.S. companies are the major suppliers of the information age's silicon, brains, and sinews.
No other country has met the requirements of an emerging economic system that needed people to be mobile both physically and psychologically. No other country shares America's belief in numbers and statistics as a basis for rational decision-making. No other country invests so much in business training and the retraining of its people—on top of having the world's best graduate and undergraduate business schools. No other country forms as many small companies year after year that compete with flexibility, rapid response, openness, innovation, and the ability to attract the best people. And as new products and services are developed, American businesses' unique marketing and advertising skills establish their success at home and abroad. Our system, in which ideas freely percolate at all levels, is tantamount to a giant information-processing machine. It enhances our capacity to absorb, adapt, and manage ongoing revolutions in technology, information, and logistics, which are too dynamic and complex to be handled by a top-down system.
The energy in business is matched by a unique and remarkable world of finance capital that over decades has identified the multiple sources of entrepreneurial funding. For example, our IPO process provides capital to service a merit-based, diversified financial environment and to fund young talent, new ideas, and the risks associated with high-tech, high-growth, high-concept companies.
More HERE
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ELSEWHERE
Poll: Faith in Social Security is tanking: "Middle Tennessee residents, struggling to put the recession behind them, worry they won’t have much of a future if they rely on Social Security benefits to finance their senior years. A USA TODAY/Gallup Poll finds that a majority of retirees expect their current benefits to be cut, a dramatic increase in the number holding that view. And a record six of 10 non-retirees predict Social Security won’t be able to pay them benefits when they stop working. ‘I’ll be working until I’m 70,’ said East Nashville resident Kenya Stevens. ‘I’m not counting on getting anything. I was raised to be self-sufficient, so even before there were problems with Social Security, I never looked forward to getting any benefits.’”
In support of speculation: "A recent World Development Movement report blames financial speculation and banks for increases in certain food prices and subsequently worsening world hunger. The report adamantly supports banking reform towards heavy regulation similar to the recent US Wall Street legislation. Prices of basic crops and food processing have indeed increased over the passed decade. The culprits however, are not speculators.”
Obamacare’s broken promises: "Does President Obama have any idea what’s in his own health-care reform law? Since he signed the Patient Protection and Affordable Care Act a bit more than 100 days ago, the president has given a number of speeches and interviews in which he continues to say things that, well, just aren’t so.”
The boundless beneficence of Big Brother: "Officially, the Republicans do not oppose extending unemployment benefits yet again. Rather, they merely want to observe the rules Obama championed last fall. In other words, Democrats should pay for the spending by finding cuts elsewhere in the budget. What is ‘fiscally responsible’ when Obama is for it, is rank partisanship when he’s against it. But enough with the point scoring. I want to get back to Mr. Chukalas, a father of two and a diligent, decent man for all I know. Again, he says, ‘If your brother or your sister needed something, you wouldn’t say, ‘When are you going to pay me back?’’ I don’t know about the Chukalas clan, but in my family and my wife’s family, and in most families I know, asking, ‘When are you going to pay me back?’ isn’t so unimaginable."
Voters Overwhelming Oppose New Taxes on Oil and Natural Gas Industry: "Voters in 10 key states oppose higher taxes on America’s oil and natural gas industry by a 2-to-1 margin, according to a new poll released today. Both the administration and some members of Congress have recently proposed billions of dollars in new taxes on the industry. “Voters know raising taxes on an industry that provides most of their energy and supports more than 9.2 million jobs would hurt them and damage the economy,” said API President and CEO Jack Gerard."
My Twitter.com identity: jonjayray. My Facebook page is also accessible as jonjayray (In full: http://www.facebook.com/jonjayray). For more blog postings from me, see TONGUE-TIED, EDUCATION WATCH INTERNATIONAL, GREENIE WATCH, POLITICAL CORRECTNESS WATCH, GUN WATCH, FOOD & HEALTH SKEPTIC, AUSTRALIAN POLITICS, IMMIGRATION WATCH INTERNATIONAL, EYE ON BRITAIN and Paralipomena
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The Big Lie of the late 20th century was that Nazism was Rightist. It was in fact typical of the Leftism of its day. It was only to the Right of Stalin's Communism. The very word "Nazi" is a German abbreviation for "National Socialist" (Nationalsozialist) and the full name of Hitler's political party (translated) was "The National Socialist German Workers' Party" (In German: Nationalsozialistische Deutsche Arbeiterpartei)
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