Sunday, January 30, 2011

The Job Myth

The fabric of a culture contains both truths and myths -– falsehoods believed by a large number of people. Many times, truths and myths straddle the same objective reality. For example, a truth about America is that it was created as “one nation, under God.” The myth is that it was designed to be a secular nation with a “wall of separation” between church and state. If you saw the SOTU on Tuesday night, one thing you did not see was the words “In God We Trust” chiseled into the granite behind and above the President. As Denis Prager has noted, that was a deliberate choice of the TV stations in service of their secular-America myth. The God-in-America myth has been profoundly damaging to our culture. It will be a primary subject of these blogs.

Today, however, I’d like to talk about another type of myth, also harmful, dealing with the economy. This very popular myth involves jobs, or more specifically, job creation. (Isn’t it interesting that job and Job – “an upright man whose faith in God survived the test of repeated calamities” -- are the same word.)

Now, Government is able to create jobs, but it involves the force-able transfer of income from one group of people to another. The stimulus package did a lot of that income transfer, but the President has now come to realize that it did not keep the jobless rate below 8%, as he promised, and, with unemployment in the mid 9% range, the people have given up on a government fix. Indeed, “Obama put the business community on notice that they have to deliver on new jobs.” (Timothy Egan, New York Times, 1/26/11)

It is unfortunate that this viewpoint reflects an ignorance of basic economics that seems to be mythological. Even the intellectual elites fall for it. The raison d’etre of private companies is to produce goods and services. Jobs are a means to that end. If sufficient demand for goods and services is lacking, jobs will be lost. The law of supply and demand, the most basic in economics, seems to have evaded the Times writers.

While many believe that the creation of jobs is a universal good, and is the moral responsibility of us all, the Bible puts all such duties below the rights of property. Michael Medved ( described it thus:

While leaders of the religious left portray the Bible as a neo-socialist document that emphasizes sharing resources with the poor, the stone tablets at the core of our tradition tell a different story. In late January, Jewish congregations around the world read the Exodus passage introducing the Ten Commandments, and two of those ten explicitly stress the sanctity of private property. God commands humanity not to steal—seizing wealth belonging to someone else – and not to covet your neighbor’s house, his animals, or “anything that belongs to your neighbor.” The commandment says material goods belong to the individual, not the state, or even to God. We are obliged to help the poor through acts of personal charity, but nothing suggests that government should seize private property against the will of its owners to achieve some higher good.

The history of the past two decades shows that lower government spending as a share of GDP is associated with lower unemployment rates. A much better way to reduce unemployment is to encourage private investment with lower tax rates and reduced regulations. The following graph shows how lower tax rates caused falling unemployment fell when private investment increased as a share of GDP. (John B. Taylor, The Wall Street Journal, 1/29/11)

Economics is a serious business, not the stuff of myths.


Anonymous Norm Imberman said...

Who can deny anything in your article? Government cannot and does not create jobs. Only entrepreneurs can create jobs. Government action by way of regulation, taxation, theft and coercion not only destroys jobs but also prevents the creation of jobs. Another myth is that the law of supply and demand is an artificial construct perpetrated by the wealthy. The LAW OF SUPPLY AND DEMAND is a natural law of human action. Whenever man attempts to disregard a natural law, mother nature strikes back with unintended negative, retrogressive consequences.

8:30 PM  

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