16 January 2009

One term for Epiphanes?

It will be, if his stimulus plan doesn't work.

If his stimulus plan "doesn’t work out, he may very well be a one-term president,” said Jeff Zeleny, who covered Obama’s campaign. “It’s hard to imagine that he could be reelected if the economy’s in the exact same position four years from now.”
So far nothing the government has done which has resulted in a correction. It could be that government intervention never works. It could be that FDR -- the model for government intervention in the market -- really did not, as some have argued (and as Thomas Sowell mentions) end the Depression with his policies. (On the contrary, FDR's policies amounted to nothing more than a power grab, justified on the grounds that something, anything had to be done. "Exigent circumstances demand it," the tyrant always says.) And on the hypothesis that government action ended the Depression, our government continues to intervene in hopes of repeating FDR's success, meaning, of course, that it hopes to succeed in garnerning ever more power for itself. If, on the other hand, FDR did not end the Depression, that would mean that the government is implementing policies that have never really worked, at least not to solve economic crises.

So often, though, what matters is only what is seen. FDR was in office when the US (arguably) came out of the Depression. And he was busy the whole time doing "something" rather than "nothing" -- unlike Hoover, supposedly. We've seen all the pictures of crews working, put to work by the WPA. So, there you have it. FDR, government involvement, ended the Depression.

That's what was seen. And what is not seen is irrelevant: out of sight, out of mind. What was not seen, as Sowell observes in the afore-linked article is how many people whom FDR put to work were first put out of work by his policies.

As Henry Hazlitt observes again and again in his little book, Economics in One Lesson, what is not seen is more important. For example when the government takes our money and puts it toward some project, what is immediately seen is the project and all the people employed on the project. What is not seen is where those dollars would have gone if left with the taxpayer.

So when His Beatitude takes our money to create the jobs he's going to create, we should wonder: Who created jobs before government decided to do so? We should also wonder: If the money for those jobs is really there, why are those jobs not being created?

Jobs are normally created in the following manner. A man starts a business. For simplicity's sake, let's say it's a one-man operation. At first, the amount of work, including the paper-work, is not so much that he cannot do it all himself. Over time, both his production and his administration labor require him to hire help. He needs one person to help him with the production, the meat of his operation. Thanks to his government, he also needs one person to help him with his paper-work, especially all that paper-work related to taxes. (That second person can clearly thank the government for his job!). Yet some more time goes by and while one person can continue to do his paper-work (with the help of the most recent computer technology), he finds that he must hire two more people to help with his production. He has now employed four people. We might ask: Where did the money come from to employ these people, if not from the government?

We might also ask: How did this entrepreneur know where to invest his capital? How did he know to put his money into this particular business?

Those are important questions because those are questions that a government must ask when it wants to put people to work. In what businesses should government get people to work? We could say that government doesn't really have to ask these questions. The questions can continue to be asked, and answered, by those who've already demonstrated talent for doing so, entrepreneurs. All the government has to do is spur the economy by giving tax breaks, or even tax credits, to entrepreneurs who successfully ask and answer these questions as demonstrated by their putting ever more people to work.

But His Beatitude wants also to give money away. To whom? To what specific industries should this money be given? Obama, as Entrepreneur-in-Chief, must today make judgments about future consumption in order to make decisions about present capital investment. I'm sure he has a lot of practice doing that. But, of course, as Entrepreneur-in-Chief, he does not have to make forecasts about what the future will hold: he can dictate the future and throw money in the appropriate, fore-ordained direction. It's all about creating jobs. Not just any kind of jobs, but good jobs, the kind that can't be shipped overseas, as he explained to employees at a wind turbine plant in Ohio. And that's easy when you have unlimited capital. It's also easy for an Entrepreneur-in-Chief not to ask if anything done by enterprising government may be at all responsible for bringing about the shipping of those jobs overseas. Why do those jobs get shipped? In the end, at some point, our government increases the cost of doing business. Sadly, labor is one of few controllables business has. And that is not saying too awfully much, when one considers the role our government plays in tampering with labor costs.

And that's why the money must be taken out of private hands. Those private hands may create jobs, but those jobs may not be what the state wishes to classify as "good" jobs. And decades from now, those jobs may be shipped overseas.

When government gets involved to create jobs then creating jobs is the business operation. Ford creates automobiles; Uncle Sam creates jobs. Whereas the most important question about a bridge, for the bridge-building entrepreneur, who wants to ensure efficient utilization of limited resources (limited because they cost him everything), might have been, "Where does a bridge need to be built?", the question, for the job-creating entrepreneur, who need not worry about efficient utilization of unlimited resources (unlimited because they cost him nothing), is "Where can a bridge be built?" And when a bridge is built where it can be built, rather than where it needs to be built, the bridge and all the people put to work on it are easily seen. What is not seen is all the people who might have been put to work elsewhere, if only the money which would have put them to work was not taken from people to build a bridge. (But, of course, that doesn't matter, because those jobs might not have been "good", unshippable jobs after all.)

Think of it this way. When you pass the site where the bridge is being built, take note of the fact that the government, in its infinite wisdom and compassion put them to work. But as you pass by other places where you see people work, ask yourself, "Who put these people to work?" Ask yourself that question of the teller at the bank, the cashier at the supermarket, the mechanic who services your car, the cable guy (no, not Carrington). Who put them to work? Did money have to be taken, at gun-point, from taxpayers to put them to work? If not, then where did it come from? Wherever it came from, it wasn't taken at gun-point.

Too many people in this country, no, in the world, are plagued by fear. They fear the unseen hand. The unseen hand of free commerce, even when it puts people to work, is a source of fear precisely because it is unseen. It cannot be predicted; it must be anticipated, or immediately reacted to. Fearful of this unseen hand, they take great comfort in the hand -- the benevolent hand, to be sure -- the seen hand of their governments. They may not know who put the teller, the cashier, the mechanic, or the cable guy to work. But they know who put those bridge-builders to work. It was Uncle Sam. And God bless him for it.

Note: One could argue the stimulus is already failing: Circuit City is closing; Pfizer is laying off 800 researchers worldwide. Don't they know help is on the way? Okay, the stimulus plan wouldn't have helped Pfizer very much anyway. The problem there is patent expiration. On the other hand, if the stimulus plan had included an extension of patent protection, that might have been something. Curious, isn't it, that Epiphanes, in all his beatific wisdom, did not foresee this opportunity to save the jobs of 800 researchers around the world, or at least those researchers here in the USA.

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James Frank Solís
Former soldier (USA). Graduate-level educated. Married 26 years. Texas ex-patriate. Ruling elder in the Presbyterian Church in America.
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