March saw the strongest job growth rate since May 2007, but the White House is warning Americans that we still have a “long way to go” before the unemployment rate gets back down to levels we’ve become accustomed to in the past three decades. According to Fox News:
Obama’s chief economic adviser Lawrence Summers said on a pair of talk shows that a year after the passage of the stimulus bill, the U.S. economy still has “a long way to go.”
Summers said pushing the unemployment rate down from its current 9.7 percent level won’t be easy.
No, it won’t be easy, particularly since the Democrats and the President have absolutely no interest in taking the steps necessary to encourage economic growth.
As the Democrats and President Obama add more and more spending programs, “claw back” the incomes of financial managers, tax more and more productive activity and create more regulations they place a greater financial burden on everybody in the economy. While the Democrats think that they are only taxing corporations and the wealthiest Americans, they are actually taxing everybody. The taxes applied to corporate profits are actually being paid by the owners and employees; and those owners and not merely high-income individuals, but middle-class Americans who own stock through their 401(k), IRA and mutual fund accounts. Employers who might otherwise hire additional workers or give existing employees greater paychecks or bonuses for their labors instead have to pay that money out as tax.
The Democrats are also spending more Federal dollars every day. The intent was to improve the economy, but deficit spending only works when the government is paying out of its cash reserves. Simply borrowing or taxing the money out of the system only to spend it on government programs just adds a layer of bureaucracy and cost, reducing economic efficiencies and destroying wealth. Printing more dollars just to cover government spending is even worse; without real growth in wealth, the new dollars simply depress the value of all dollars, leading to inflation.
Add to this the economic effects of government choosing economic winners and losers: When the government has a centrally directed Command Stimulus as we had last year, it usually puts the money into economic losers: That is, it attempts to “stimulate” companies that have failed or are in the process of failing. We saw this with the takeover of General Motors and prior to that the bailout of AIG. The government does this for the political purpose of “saving” jobs. Unfortunately, the net effect is that the resources that could be going to growing, successful business is instead being thrown down a rabbit hole.
Worse, the successful businesses and their owners paying their taxes are the ones funding the bailouts of the failures. Instead of looking for ways to expand, the successful businesses are left looking for ways to cut costs to offset the cost of the additional taxes and regulations. Labor is a huge component of their costs. Cutting hours and headcount, expecting greater productivity from the remaining workers is an easy way to cut costs.
Instead of picking economic winners and losers based on politics and adding cost and bureaucratic layers to the system, the government must pull back and allow entrepreneurs and private citizens to enjoy the fruits of their labors. We have already allocated $1.5 trillion dollars for bailouts and stimulus, and we are worse of than before. It is time to get the government out of the way and release the free market. Only when businesses have a stronger incentive to grow their business than they have to merely cut their costs will we see the jobs return.
Cross-posted at The Minority Report.