Stimulating Job Creation

Congress is considering an economic stimulus bill to pump more than $800 billion into the U.S. economy. While the package has been evolving and includes some useful tax cuts, it is essentially a Keynesian effort to prime the pump.

But what kinds of jobs will the “American Recovery and Reinvestment Act” create? The bill has certainly accomplished one goal – it has stimulated an interesting debate.

The discussion started when Mr. Obama said in his weekly address on January 3 that he would “create three million new jobs, more than 80 percent of them in the private sector.”

Senate Republican Leader Mitch McConnell (KY), appearing on ABC’s This Week, did the math and said, “Well, do we really want to create 20 percent of the jobs in the public sector? That would be 600,000 new government jobs. That’s about the size of the post office workforce.”

In his speech at George Mason University on January 8, Obama said, “The overwhelming majority of the jobs created will be in the private sector.” He added, “While our plan will save the public-sector jobs of teachers, police officers, firefighters and others who provide vital services.”

Flash back to 1993. Bill Clinton, a new Democrat was elected president, succeeding President Bush, riding a wave of public uncertainty summarized by the infamous James Carville sign on the campaign headquarters wall — “It’s the economy, stupid”.

As a new Congress with a swollen Democratic majority in the House and Senate took office, Senator Joe Biden of Delaware introduced his own economic stimulus bill. In the 103rd Congress, 1st Session, January 21, 1993, Biden introduced S. 12, the “Infrastructure Growth and Employment Act of 1993”.

The bill would “authorize the Secretary of Commerce to make grants to States and local governments for the construction of projects in areas of high unemployment, and for other purposes.” It provided infrastructure construction grants by the Secretary of Commerce (through the Economic Development Administration) to state and local government, to fund projects to build infrastructure, reduce unemployment and stimulate the economy.

The bill, as introduced by Senator Biden, included the following provision:

CONTRACTING OUT REQUIRED – No part of the construction (including demolition and other site preparation activities), renovation, repair, or other improvement of any public works project for which a grant is made under this Act shall be performed directly by any department, agency, instrumentality of any State or local government.

Senator Biden recognized that real job creation belongs in the private sector. The Biden bill did not say 20 percent of the jobs should be in government, not 10 percent, not five percent. His bill said none of the work could be done by a government agency.

Biden was right in 1993. Real job creation happens in the private sector, not government.

“A government bureau is the nearest thing to eternal life we’ll ever see on this Earth,” Ronald Reagan said. His point is relevant to the current stimulus debate.

What will happen to those 600,000 government jobs once the economy recovers? The answer is they will be hard to extricate from the public payroll.

The Reason Foundation has just warned that the next financial catastrophe to hit will be the unfunded pension liability of government. Trillions of dollars in liabilities will have to be met in the coming years, the price we the people will have to pay for all the federal, state and local government employees we’ve had, and continue to have. As the massive Great Society, Baby Boom bureaucrats retire in record numbers, the pension problem will explode. President Bush did not help the situation, converting baggage checkers at the airports from private sector to Federal TGSA employees.

Adding 600,000 new government employees will not help create meaningful jobs to stimulate the economy in the short term and it won’t help the pension problem in years to come.

More than 850,000 federal employees, almost 50 percent of the non-uniformed workforce, has jobs the Clinton Administration identified as commercial in nature – jobs that can be done in the private sector.

The Biden principle should be applied to the stimulus bill. Creating government jobs that duplicate and compete with the private sector won’t get our economy going.