Among the issues most commonly discussed are individuality, the rights of the individual, the limits of legitimate government, morality, history, economics, government policy, science, business, education, health care, energy, and man-made global warming evaluations. My posts are aimed at thinking, intelligent individuals, whose comments are very welcome.

"No matter how vast your knowledge or how modest, it is your own mind that has to acquire it." Ayn Rand

07 October 2011

Obama Jobs Bill Will Kill Jobs

The Obama Jobs Bill is supposed to cost $447 billion, create as many as 1.9 million jobs according to economists who have already proven they have no clue, and increase the GDP by 2%, again according to those same clueless economists.  Let us examine the effects of the Obama Jobs Bill in a simple and rational manner.

The GDP in 2011 is estimated to be $15.012 trillion.  Obama's clueless economists say that his jobs bill will increase the GDP by 2% because simply printing money you do not have always increases the size of the economy.  Hmmm....., no wonder many of them keep saying we just need bigger stimulus packages and with an outpouring of enough newly printed dollars, the economy will grow and we will all have dream jobs.  If this effect works, then the government should print up $15.012 trillion and the economy will take a Great Leap Forward!  Apparently some us are just too timid to do this.  But Paul Krugman would be happy to push us into it.  OK, so yes, I do not believe this is the way the economy works for a minute, or even a second.  But still, it is interesting to examine whether the Obama Jobs Bill makes some kind of sense even on the numbers given by the clueless Obama economists.

First, we need to note that the cost of the bill, $447 billion, is 2.98% of the GDP.  That is more than the 2% growth of GDP claimed to result from this expenditure!  In fact, we can calculate from these numbers that for every dollar spent by the government in this Obama Jobs Bill $0.33 simply vanishes into thin air.  The Obama economists are claiming that this government expenditure is only 2/3 as effective as other money in the economy, which already includes huge inefficiencies due to the cost of overblown governments with their over-compensated employees and all of the mandates and regulations they impose without regard to cost upon the much more efficient private sector.

But, it gets worse.  Assuming that, most unbelievably, Obama's Job Bill does create the wishful 1.9 million jobs, each job costs $235,263.  This comes from dividing $447 billion by 1.9 million jobs.  We can compare this number with the cost of the jobs we presently have.  Of course the cost of those jobs is already grossly cranked skyward by the many prior costs of government, so we should remember that real private sector jobs cost less than the amount we are about to calculate because we are including all jobs and that includes all of those very expensive government jobs.  At present, each job costs ($15.012 trillion)/(140,335,000 jobs) = $106,973, where the present number of jobs comes from the Bureau of Labor Statistics Unemployment Report for September 2011.  So a new Obama job will cost 2.2 times as much as the composite of private sector and government jobs presently costs.  Surely, taking 2.2 times as much money out of the private sector as it takes to create a job there and giving it to Obama to create a job is not a good idea.  It is a great way to bankrupt America and many of its families.

Now, some economists believe in magic and they will disagree with me on what I am about to point out.  When you remove 2.2 times as much from the private sector as it takes for the private sector to create a job, you actually destroy 2.2 jobs for every job you create.  Yes, Obama will create jobs with his $447 billion expenditure of our money, but he will kill more than 2.2 jobs in the private sector for every job he will create for his campaign contributors.  He will create some union jobs to build and repair infrastructure.  He will maintain some teaching positions for the teachers unions in public schools.  He will create some temporary green energy jobs, but the collapse of those businesses will still occur soon, as it did with Solyndra and numerous other green jobs companies producing expensive and unreliable energy products.  Obama will try to point out the jobs created, so this is what will be seen.  What will not be seen, except partially in the rising unemployment statistics, will be the 2.2 minimum number of jobs destroyed in the private sector.  Obama is counting on our failing to see those jobs die.

What I am saying is based on recognizing that if government spends money, it is taken out of the private sector one way or another.  Generally, it is either taken out in taxes, by borrowing it with the payment of interest paid with future taxes, by simply printing it and diluting the value of all other money and assets, and by imposing mandates upon the private sector that cost them time and money.  In this case, Obama wants to raise taxes on the "rich" or companies which will remove money from the private sector in a simple and straightforward way to pay for this turkey bill.

Now I do not believe the Obama Jobs Bill will create 1.9 million jobs at all, even if we do not subtract the jobs killed by Obama.  We can easily calculate the number of jobs that will be killed.  These jobs are jobs that might well have been jobs long sustained by the private sector and they will be replaced by a smaller number of jobs that will not make economic sense once the immediate government expenditure runs out.  The private sector jobs killed will be about $447,000,000,000 / $106,973 = 4,178,625 jobs, or more than 4 million jobs, to be replaced with maybe 1 million jobs for Obama's cronies.

As I said, it gets worse.  Creating about 1 million temporary jobs while killing more than 4 million longer term jobs cannot be the act of rational men and women.  But it is the way the wrongheaded Obama wants badly to drag the country.  It is Obama who will throw most of us off the cliff.

Someone should make an ad of a jackbooted Obama marching shackled American workers to a cliff and then pushing them over the edge, one by one, with the calculations above overprinted on the images of a fascist Obama.  This would only be justice to pay back the injustice done to Paul Ryan.


Anonymous said...

I'm with you and I'm not doubting you but can you be a little more specific about how jobs will be lost? It's probably just me but that part seemed a little vague.

Charles R. Anderson, Ph.D. said...

Of course if I could demonstrate this in great detail for all the specifics of Obama's proposed jobs bill, then I would be capable of being that mythical central planner the progressive elitists always assume is possible. I am not that and that is why we need the very tireless and clever free market to figure out the details, while no one knows most of the details.

In a way, you have asked me the equivalent of proving that if 447 billion kilojoules of energy were dumped in many locations in the US to prove that that energy was all conserved. We can do such experiments in a closed system in a lab, but how difficult that would be in the general real world. We have to make the assumption that if it happens in the controlled lab case, then it is going to happen in general in the real world.

There actually is one caveat to what I said. I treated the situation as one of one job or no job. I did not allow for the possibility that for every job created in Obama's bill, 20 private sector employees would simply be paid 5% less in real income. This latter effect is actually a very real and important effect. It has been happening, which is why real wages have fallen over the last several years. So for the purposes of this discussion, let us assume that 20 workers being paid 5% less is the equivalent of one lost job.

It seems simple to me that if $235,000 is now sustaining 2.2 jobs and you take that money in taxes and convert it into 1 job, you lost 2.2 jobs for a net loss of 1.2 jobs. I do not see the magic which would make this otherwise. If someone can see it, please explain that to me. In addition, some of the jobs Obama wants to create are government jobs, which are not commonly the most productive of jobs. Others may be the equivalent of green jobs or infrastructure jobs which may take 50 years to make a return on investment for the funded projects. These are then not the most productive way to put our money to work. This is just more mal-investment to add to the many bad loans that have caused so much damage in our economy already.