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All Da King's Men

Does The Government Create Jobs ?

By Da King Published: October 19, 2010

There is an editorial in today's Akron Beacon Journal written by Mark K. Cassell, an associate professor of political science at Kent State University, titled 'Guess what? Government really does create jobs, millions of them'. Cassell takes issue with statements made by several Republicans that the government does not create jobs. Here's the professor's first point:

During the past several weeks we've heard Republican candidates like Tom Ganley, John Boehner and Jim Renacci echo a similar refrain: ''Government does not create jobs.'' Leaving aside the irony that the persons making such a claim are in fact hoping for a government job, the truth is that government is the most important job creator we have in this economy. How so?

First, there are the public sector jobs created directly by government spending like the ones Republican candidates are applying for. Where would our economy be without the 3.1 million public school teachers who educate our children or the 2.6 million servicemen and women deployed around the world to protect us or the 13 million local government employees who make sure our neighborhoods are safe, our streets are taken care of and our infrastructure works.

To claim government does not create jobs is not only factually wrong it denigrates the contribution our teachers, soldiers and other public officials make to this great country.

On the face of it, Professor Cassell would seem to be correct. The government DOES seem to create the jobs he mentions here, but that's only how things appear. One must delve a little deeper by asking, where does the money for all those government jobs come from ? After all, someone has to pay the salaries of all those government workers. They don't work for free. The answer is, the salaries of ALL government workers, from the President down to the clerk at the Bureau Of Motor Vehicles, come from taxes levied on the citizens of this country. The American people pay for all those government jobs. The government doesn't "create" those jobs. The American people do, via taxation. Going a bit deeper, we must ask, where do the American people get the money to pay the taxes to create these government jobs ? The answer there is, the American people get their money by working in the private sector, which is where American wealth is really created. Now, some of you may be saying, "wait a minute King, government workers also pay taxes, so they are providing some of that tax revenue to the government as well." I'm sorry, but that is incorrect. Because the entire salaries of government workers are paid for by the American citizens in the first place, the portion of those salaries that government workers pay back to the government in taxes does not contribute anything to government revenue. For example, if a government worker makes $50,000 per year and then pays $15,000 in taxes back to the government, all that really happened is, the private sector paid a net $35,000 in taxes ($50,000 less $15,000) for that government worker's job. Government workers are always a COST rather than a REVENUE. We may as well exempt government workers from paying income taxes and pay them the lower net salary figure. It would be cleaner and require less paperwork and bureaucracy.

Here is Professor Cassell's second point:

Second, tens of millions of jobs created in the private sector occur as a result of public investment. In other words, government creates private sector jobs indirectly. Consider two of our most famous American companies: Google and Microsoft. Where would either of them be without the Internet, which was itself created in 1969 by the Department of Defense?

The Professor used a very bad example by citing the internet as a government job creator. While it is technically true that the first internet apparatus was created by the government, it is not at all true that the government was necessary to create it. It's not like the private sector couldn't figure out how to hook computers together and share information. The explosion of the internet was done almost entirely via the private sector, via the very companies like Google and Microsoft that Professor Cassell seems to mistakenly believe were brought into being by the government. The Professor would have had a better argument had he cited government involvement in getting telephone lines up around the country to facilitate the internet.

Professor Cassell did cite some better examples of government job creation, as follows:

Here in Ohio our public and private universities receive state and federal grants to conduct research that directly create jobs in the private sector such as the Liquid Crystal Institute at Kent State University or the medical school at Case Western University. Or consider the enormous benefits to the private sector that derive from our public infrastructure that enables goods to be shipped or our judicial system that ensures contracts are honored. Without government employees and government investment many private sector jobs would simply not exist.

It is true that our universities receive government grant money (which is really private sector money, as I showed previously), and the research from those grants can lead to breakthroughs which create jobs and economic growth. This is valuable, obviously. What the Professor is actually describing here is known as investment, and it is critical in moving our society forward. While the government can be the mechanism of investment, as can the private sector, the FUNDING for the investment still always comes from private sources. Remember, ALL government funds come from the private sector. There is one exception to this, and I'll get to that in a moment.

Professor Cassell continues:

But the importance of government is not just that it creates jobs it is also the timing of when government plays a role that matters. When unemployment is high and the economy suffers from a recession, private companies are reluctant to invest because demand is down. People are out of work and low on cash so they are not buying goods. It's at these moments when government's role in creating job has shownto be the most important.

It was essential in the 1930s when government civilian and military jobs got us out of the Great Depression, and it's crucial today as we struggle out of the Great Recession. Without public investment and government jobs, private firms would be even more reluctant to invest than they are now. Since the 1930s Democrats and Republicans have understood that a successful capitalist system requires a healthy and effective public sector.

In short, our history suggests that recognizing the importance of government in creating jobs not only honors those who serve this country, but it also makes sound economic sense. To suggest otherwise is, well, un-American.

I wish I could ignore that "un-American" remark, because it's just dumb. Disagreeing with Obama's nearly trillion dollar stimulus failure, which was completely unpaid for, put us nearly a trillion deeper in debt, didn't result in any net job creation or a drop in unemployment, and served only as a temporary patch in the best case, is far from being un-American, unless misguided fiscal irresponsibility is now somehow patriotic.

But this last part from the Professor does bring up the exception I mentioned earlier, which I must break into two parts. First, the government can borrow money to spend, and secondly, the government can print money out of thin air. These are two ways it might seem like the money doesn't come from the private sector, but once again, these are false appearances.

If our government borrows money from, say, China, as we've been doing a lot, that money has to be repaid. Who repays it ? Again, it's Uncle Sam's best friend, the taxpayers, who, again, all come from the private sector.

If the government just prints money out of thin air, backed by nothing (which is known as fiat currency), then surely the taxpayers don't pay for THAT money, right ? No, wrong. If the government arbitrarily puts more dollars into circulation, then ALL dollars are worth less. This is known as inflation, and it largely explains why what you paid $20 for in 1970 costs $100 today. If the government flooded the market with trillions of dollars of newly printed money right now, inflation would occur eventually, thereby robbing the citizens of their savings and raising the prices of consumer goods. All citizens would pay for it.

This brings me to my final point, the skyrocketing federal debt, which is the result of all those government interventions, stimuluses, and good works the Professor described prevously as being so very patriotic. It stands now at around $13.6 trillion. It's rising so fast it's hard to keep up with it. Thanks, Obama. Thanks, Bush. You two are some REAL patriots, alright, or at least Professor Cassell must think so. How are we going to deal with this mountain of debt ? Are we going to increase taxes on the private sector by a couple trillion a year to pay it off ? That's what it would take, if not more, seeing as how our future unfunded entitlements are exploding along with the debt. Are there ANY politicians in Washington D.C. willing to stand up and be "patriotic" enough to call for a yearly two trillion dollar tax increase on the citizenry ????????? I haven't seen any yet, and if any do show up, I guaran-darn-tee you they won't be in office very long. The citizens will throw them out quicker than you can say "un-American."

Unless there's a virtual political revolution in this country, which is showing some budding signs of happening, there is only ONE way the government can pay off the debt, and that is to monetize the debt, which the Federal Reserve calls 'quantitative easing.' The government will impoverish us all by by making our dollars worth a whole lot less, which in turn will make our debt worth a whole lot less. Our debtors like China will be furious, and the American citizens will also be furious, but we'll be out of debt. Thanks, big government. Thanks for nothing.

Oh, and by the way, thanks for all those jobs too, which all came from the private sector in the first place.



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