Obama recognized the need for jobs, but didn’t propose a real solution
Last night President Obama made the creation of jobs the priority in his speech, but he did not offer any real solutions. When a government “creates jobs,” it does so by redistribution of economic resources, not by growing the economy. Somebody who is working or running a business has to pay for those government jobs. This can work reasonably well if the government is redistributing a small portion of the spillover of a strong economy.
We have hit a critical point where the private economy cannot support the government and health care
However, you cannot create an entire economy, or make an economy more healthy by increasing redistribution after the critical mass has been hit. At that point adding a government job begins to exponentially and negatively impact jobs in the economic sector. Today over 55% of all full-time jobs in the U.S. are government jobs, government contracts with private employers, jobs in the medical industry, or jobs in the pharmaceutical industry. We have hit that critical mass.
The Republican Idea for the Government to Do Nothing is Wrong
Large businesses whose lobbies control the Republican Party, and apparently the Supreme Court also, want the global economy to remain as it is. They benefit from a climate in which they can produce their products in the least expensive location. In the current global economy with open borders, they freely move their jobs to countries that provide the lowest wages, the lowest taxes, and often these places produce the most pollution because they lack environmental regulations.
Hayek’s Road to Serfdom made a significant impact on my own thought and in my book, Life, Liberty and the Pursuit of Happiness, Version 4.0. Hayek proposed the idea of “planning for competition.” This is not some sort of redistributive socialist planning of the economy, but having government referee a level economic playing field on which all people can compete equally. This is similar to the way traffic laws allow all people to pursue driving to their destinations freely and in ways that are regulated so as not to harm other people’s ability to do the same.
This notion gives a role for government in the economy that the laissez-faire economists do not want. This is where Hayek and Von Mises, both Austrian economists that understand the power of free markets, have their differences. We generally accept the idea that the government has the responsibility to create social order through rule of law in the cultural sphere, but often deny government that role in the economic sphere.
Generally this denial is done for selfish reasons, by people on either the left of the right, who are attempting to manipulate the power of the government to interfere with the economy to gain some economic advantage for one person or group at the expense of someone else. Laws created in such a manner oppress one group for the welfare of another. It is a form of conquest through “legal” means. It is not different from the Hutus and Tutsis battling for control of the government of Rwanda so they can channel financial power away from other tribes and toward their own.
When any type of group controls a government through laws that do not treat everyone the same, like laws that give the highway right of way to a special group of motorists, such laws are considered illegitimate and immoral. They not only violate the commandment “thou shalt not steal,” but they undermine the Founding Father’s premise that everyone has an equal right to pursue life, liberty, and happiness. The protection of private property, not its theft, is the bedrock of a prosperous economy.
Hayek wrote in the Road to Serfdom,
Planning and competition can be combined only by planning for competition, not by planning against competition. The planning against which all our criticism is directed is solely the planning against competition.
Planning for Competition is Unpopular with All Political Parties
The idea of planning for competition, rather than socialist planning, is obviously a problem for the Democratic Party that is dominated by socialist ideology as a method of redistributing money from income producers to dependents on government. But, it is also an idea that those who control the Republican Party will oppose, because it would eliminate all corporate lobbying–like a player asking the referee to give him an advantage on the field. In the end, you will find that Hayek’s view is generally unpalatable to (1) the Republican Party, (2) the Democratic Party, or (3) the Libertarian Party.
All political parties today are supported by interest groups, rather than a concern for the well-being of the nation. Last week’s Supreme Court decision aggravated this situation and virtually guarantees that the largest contributors–who contribute because of their own interests–will control the government rather the the people of the United States. It was a decision in favor of the elite and against the Middle Class. On this point President Obama was correct.
It can be argued that unequal income taxes on corporations are planning against competition because those taxed the highest will have to move or go out of business. Such taxes in the US force corporations to move to other countries because the global playing field is not level. And, they often do not want a fair playing field, they want an unlevel one where there can triumph.
A Level Playing Field Would Bring More Real Jobs Home
Hayek’s ideas would bring more jobs to the United States in our global economy than current views, because they are based on the idea of creating a fair competitive playing field for all. American producers of goods send jobs and production overseas because the playing field is not level. One of the reasons it is not level is that taxes on companies in some other nations are lower than taxes on US companies. Chinese energy is cheaper because the Chinese are building polluting power plants while the US is hampered because restrictions on energy production are so severe.
The Copenhagen Conference’s proposed $5,000 tax in a middle class baby in environmentally concerned country would deter the create fewer middle class conscientious citizens who seek to protect the environment and leave the world to people more concerned with their day to day survival than the environment. It is 180 degrees opposite the type of incentive needed–taxing the consumption from a polluting source to deter production of pollution.
This is not a level playing field, and “free trade,” is not fair trade—it is a form of international anarchy that allows large companies to produce in the least costly locations, even if those locations are the largest contributors to world pollution. Large global corporations might not like a “pollution tax” on imported Chinese goods. But this is the type of tax that should be applied if we want both a cleaner environment and a more level playing field.
President Obama might not like reducing taxes on US corporations, or tort reform that would limit class action suits with high settlements on dangerous products made on the US when corporations in other countries cannot be touched by such lawsuits. But these things would make the playing field level so that American companies would be more competitive and be able to provide jobs going to other countries.
If President Obama wants a real jobs bill, we will need laws that the special interests supporting all political parties will oppose. He and US citizens need to understand that the federal government cannot create jobs directly by hiring people and help the overall employment picture. Nor, can we sit idly by and let international economic anarchy determine the winners and losers without US government action. Planning for competition makes rational economic sense, but it is hard to impose on people who have been profiting by its absence.
I discussed many ways to eliminate the legal bribery of legislators and earmarks in my book. One step forward would be to make earmarks illegal. All new bills should be an up and down vote on a single item. That is what the framers of the US Constitution envisioned. In short, if you want an earmark, make it a separate bill. Another step would be to eliminate all political contributions from groups, and only allow each citizen a maximum of $100 contribution. This will mean all people can contribute, and the political parties will represent to people, not interest groups. Finally, we should level the playing field so that American citizens can compete for jobs fairly against people in other countries.
Failing to do make this type of change that I can believe in will deliver the United States into one of three types of Hell. (1) Anarchy–and poverty and death, (2) Socialism–and poverty and death, or Facism–and poverty and death. It was a middle class that believed in hard work, ingenuity, and fair play that made the United States prosperous. The legal system the founders created supported that culture of prosperity. Many of today’s laws oppose it and feed of the capital our ancestors accumulated and debt to future generations. That will kill jobs, not create them. We need to bring back a level playing field to bring back jobs.