I wish people would stop saying, “the government needs to do something about this economy.” Government does not create jobs no matter what party is in office.
The only way government can create jobs is by directly employing someone, like teachers, police, firemen, and politicians. So in theory the government could just give everyone who is out of work a job and whalla, the unemployment rate would plummet. The economy would be saved. Right? Of course there is that little issue of how to pay all these new workers. Since the state doesn’t actually produce anything that can be sold in the open market, it has no way of raising revenue other than through taxation, printing money, or borrowing it.
If the revenue required to pay people employed by the government is raised via taxation, then the more people the government hires, the greater the burden will be on the taxpayers. The more business and individuals have to pay in taxes, the less able they are to start new businesses, hire new workers, and produce the items consumers rely on. So it would seem that increasing the number of people employed by the state isn’t a very effective solution to cut unemployment. In fact it will tend to decrease overall employment.
If the revenue required to pay government employees is raised by simply printing more money, we will soon suffer the consequences of inflation. An increase in the money supply causes the value of money to drop, which makes everything we purchase with it more expensive. So again, that doesn’t seem like a good idea either.
If government borrows all the money required to pay state workers, the outcome is quite obvious. The national debt rises. Given the fact that we’re sitting on 16 trillion dollars in debt right now, anything that adds to it and increases the burden of repayment on future generations seem wrong, even immoral. So borrowing definitely isn’t a plausible solution.
So you see that everything the government could do to create jobs actually has very real and negative consequences. It will always decrease the standard of living of its subjects.
But there is one other possibility I have not mentioned. Another way government could help improve unemployment and raise the standard of living for all Americans. It could do nothing. Yup! Nothing!
If government simply stopped trying to produce jobs, there would be no need to raise taxes to fund jobs programs or hire government workers. With lower taxes there would be more capital available in the productive portions of society to expand business and hire more workers.
There would be no reason to print more money or borrow to pay government workers or run government programs aimed at increasing employment. Without inflation, the money in the market would remain strong and the prices of goods and services would tend to remain stable, or even decrease as production increased. Without increasing debt, the capital raised through production could begin to pay down the debt created by years of misguided government spending in the past.
If the government insisted on doing something, I guess it could decrease its spending so that even more capital could remain in the market. Every dollar that isn’t confiscated via taxation remains in the market where it is much more likely to be put towards productive means with the least overhead and waste. I suppose it could also, if it were really serious about employment, release the workers it employs. Every government worker is, in reality, a burden to the market. They produce nothing except what is possible through government’s destruction and reallocation of capital. There is no real reason why all those who are employed by the state who do provide some benefit to society like teachers, police and firemen couldn’t continue to provide those services by way of the market. If there is a demand for safety, or fire protection or education, they will find jobs with no problem. If there is little demand for those services, then the market will simply be telling us that the funds previously put toward them by government were being misused and can now serve more productive ends. All resources are scarce. If any of them are misallocated then all of society is that much worse off.
In every way imaginable, the private market trumps government when it comes to creating jobs. It can create jobs best in the atmosphere of least waste. That is why people who have even the most elementary understanding of common sense economic principles say, GOVERNMENT DOES NOT PRODUCE JOBS.