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Why our President won’t fix Jobs.

Premature negativity sounds hyper-partisan,  with some random blogger here criticizing  the President’s job proposal speech before he gives it. It is President Obama, though, who is bound by that hyper-partisanship (among other things) to propose inefficient methods of job creation. Obama will be forced to propose inefficient methods of stimulus, and bound by the debt-ceiling and his view of economics.

Spending will be proposed in this speech, with likely recipients including infrastructure, R&D, education and energy. These are all worthwhile endeavors, and segments of our society that need improvement. What stops the liberal from spending effectively is sandbagging, the attachment of causes to current action. Democrats and Republicans both have a long history of adding spending to bills, even vital bills close to their heart, but liberals have it tied to their consciences.

Any spending on our infrastructure will include new paths plowed for mass transit, where the money could build twice as many roads, any research will be directed by congress to social priorities, reducing its value (regimented research is guaranteed to produce exactly nothing), any additions to education will attempt to end the achievement gap and keep teachers, needed objectives but not problems that money has been able to solve. Any energy bills will direct funds to alternative energies, promoting currently inefficient forms of electricity and fuel. In attempting to steer our nation, Obama’s proposals have thrown our economy in  the ditch. Untying the social needs from the economy will be too difficult for this president.

Money is a powerful tool, but its misuse is what got us here.

Efficient use of Capital

Jobs depend on efficient uses of capital...

Money appears to also be the only tool in a liberal’s economic toolbox, an effect that is tied to Keynesian economics and interest groups. Keynes argued that any government spending would stimulate the economy, because the people would take that money and spend it again, creating a cyclical effect that helps everyone. What legislators fail to accept, though, is that conditions were very different during the Great Depression. People who had money hoarded it, not wanting to fall victim to poverty like their neighbors. The benefit of government spending was that it forced spending, and gave wealth to those who had to spend most of it to stay alive, or at least stay in their homes. These people also had to spend in very rational ways, making the “Black Box” of demand very efficient compared to today, able to be ignored, a luxury I don’t believe we have today.

It is not my goal to debate Keynesianism, but rather to show that even Keynes wouldn’t have got us into today’s situation. In Keynes’ view, government should be pulling back on spending during the good years, but Congress hasn’t ever done that. And that is especially true for Democrats, due to liberal interest groups. These groups have causes, some good, some bad, whatever. But they promise progress and only demand funding, freeing the Democrat legislator to think only in terms of allocations and never having to wade into the mire of social policy. It has been a convenient arrangement for Democrats, but one that makes our current economic woes intractable.

So we are today caught between a rock and a hard place, and do not have the insight or tools to get out of it. Even many Republican lawmakers who have advocated for slashing spending or not raising the debt ceiling don’t fully understand the economics behind their positions. What is needed is insights into the microeconomic level of spending, something that Congress and presidents have avoided like the plague.

So President Obama cannot break through the debt ceiling, cannot go below the spending “floor,” because of ideology and opposition in Congress, and is “walled in” by inefficient spending because of conscience and interest groups. He has nowhere to go, but to propose platitudes, blame others, and appeal to our compassion. Real economics tied to effective allocation of resources will help our economy, but it is a political impossibility for this president at this time. Sadly so, I hope I am mistaken.

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