“The Forest Service has directed that $2.8 million in ‘Wildland Fire Management’ funds, approved under the economic stimulus law, go to groups that will create ‘green jobs’ in the District of Columbia. The projects are intended to restore public parks and watersheds in the city and highlight the value of urban parks, including a park 2 miles north of the White House that once was plagued by crime.” (AP, Thursday)

“Green” jobs aren’t free.

FEE Timely Classic:
“Why Government Can’t Create Jobs” by Mark Ahlseen

Actually, a government bureau is the nearest thing to eternal life we’ll ever see on this earth! –Ronald Reagan

FEE (Instant) Classic:
“Transforming America: The Bush-Obama Stimulus Programs” by Randall G. Holcombe

It takes some sophistication to follow Henry Hazlitt’s economics lesson and trace the consequences. Under the new supply and demand conditions, if prices cannot rise beyond a certain arbitrarily set level, supplies will run short, since people have no incentive to conserve and entrepreneurs have no incentive to divert goods from where they are relatively plentiful to the stricken area where they are relatively scarce.

Similarly, most people think the minimum-wage law is a good thing because they dislike that unskilled workers are paid very low wages. What could be more humanitarian than to set a floor beneath which wages cannot fall? If they thought like economists, they would realize that a mandatory minimum wage set above the marginal productivity of unskilled labor creates unemployment or less-desirable jobs for the workers it is intended to help.

But lately an idea has been floating around that anyone should be able to see through because it has no superficial logic whatsoever. It goes like this: The government hasn’t been able to spend $500 billion fast enough to stimulate the economy, so the only thing to do is . . . give the government even more money.

Huh? How does that make sense?

The Obama administration, for now, seems to grasp the weakness of this reasoning, but the same cannot be said for some members of Congress. There is talk of a second “stimulus” package. We shouldn’t discount the possibility that the congressional backers of a new bill know it’s a ridiculous idea but that they stand to benefit from passing it anyway. That’s how incentives work in the political system.

The first “stimulus” package under Obama was no such thing. As has been noted many times, any money the government spends must be acquired from somewhere in the economy first through borrowing or taxation. While moving money around may stimulate a given activity, it comes at the price of the other activities to which that money would have been directed. And since bureaucrats, not entrepreneurs, direct the “stimulus” projects, this redirection of scarce capital is detrimental to consumer welfare. If the projects served consumers and thus were profitable, they would have been undertaken privately and more efficiently than bureaucracies could have accomplished them.

The money in the earlier bill was supposed to be used for what we were assured were “shovel-ready projects.” But the truth seems to be that precious few were shovel-ready. They won’t get started for a year or more.

Edward Lazear writes in the Wall Street Journal, “By June 26, about $56 billion [out of about $500 billion] was spent on the stimulus from the American Recovery and Reinvestment Act of 2009, passed Feb. 17. A large proportion of that actually reflects mere transfers from the federal government to state governments, so the amount that has gotten into the economy is significantly lower.”

What Were They Thinking?

Thus even if the “stimulus” plan had been sound in theory, back-loading the spending to such an extent undermined its stated purpose: immediate job creation. It makes you wonder what the bill’s architects had in mind. Did they actually believe what they were saying? If so, their actions make no sense. When the bill passed in February, the unemployment rate was 8.1 percent, Today it is 9.5 and rising. That doesn’t seem terribly stimulating. Obama might claim he saved some number of jobs, but he wouldn’t be able to prove that.

Administration spokesmen are now asking for patience, but they are the ones who created a public expectation of quick stimulus. They have only themselves to blame for the disappointment showing up in the popularity polls.

Outside advocates of stimulus, such as Paul Krugman, will say the unabated rise in unemployment only proves what they said all along: The spending package was too small. But that is not a satisfying rebuttal. First, as noted, if government agencies can’t disburse a half-trillion quickly enough to jolt the economy, logic compels us to conclude that they can’t disburse a trillion. Should they fly around in helicopters and drop the money? (That wouldn’t work — people would do unpatriotic things like save or pay off debts.)

Second, economic theory refutes the Krugmanian claim. Since government can spend only what it has first taken from someone else (by borrowing or taxation), the spending can’t create jobs on net. So even if the government-created jobs were real jobs — in the sense that they ultimately contributed to consumer well-being according to consumers’ own priorities — they were created at the cost of other productive jobs that would have been created in the absence of government intervention. Resources are scarce; government spending displaces private economic activity. There is no way around that.

If the Stimulus I was a bad idea, Stimulus II is even worse.

Most commentators I have read are treating the “stimulus” as a mechanism through which the government is able to “get money into the hands of consumers” in order to cover a supposed “large hole” in consumer spending until the economy “recovers.”  Thus, according to this reasoning, Obama simply is throwing out a lifeline to people who really can use the money.

However, that is not what is happening, and the sooner we understand what the government is doing, the sooner we can speak out against it.  I am going to make a statement that will seem almost conspiratorial in nature, and I am decidedly not a conspiracy theorist.  Nonetheless, I am going to say it: there will be no recovery, and the government is going to make sure that it does not happen.

Yes, I know this seems counterintuitive.  Everyone supposedly knows that the politicians in power want a strong economy so they can get credit for it.  Sorry, people, but that is not how politicians operate.

First, no politician–no president, senator, representative, or judge–can “provide prosperity.”  At best, they can help create a playing field in which the participants in an economy can face consistent laws, protection of property rights, enforcement of contracts, and the other things that entrepreneurs and business owners need to create a prosperous economy.  In other words, the “positive” role that legislators can play is largely negative in practice; it is those things that legislators and others do not do that often help to determine whether or not a nation’s economy will be prosperous.

Second, politicians love to be seen as doing something.  Look at the press treatment given to those members of Congress who have voted against the “stimulus” and to those few governors who have said they won’t take the cash.  (The editorial page of the New York Times seems to be “Stimulus Promotion Central,” and anyone who opposes this legislation is portrayed either as evil or just plain stupid.)

Third, and most important, politicians do not gain votes by doing nothing for their constituents.  A politician who stands before voters and declares, “I have not voted to send you money, but instead voted to create an arena in which entrepreneurs and business owners can help create a stronger economy without government largess,” is not a politician who is going to win an election.

Politicians cannot help individuals who are able to find work in a recovering economy.  However, if an economy consistently has 10-15 percent unemployment and people have to ask politicians for lots of favors, especially when it comes to employment, that presents a wonderful opportunity for those in power.

Indeed, I believe that this administration plans to institutionalize double-digit unemployment and turn the United States into a European-style social-welfare system in which unemployment is high and the economy grows slowly at best, a condition that has been called “Eurosclerosis.”  To those who claim Americans will not put up with this state of affairs, I remind readers that during the New Deal, Franklin Roosevelt and his political allies won election after election despite high unemployment and slow growth.  A recent Thomas Friedman column approvingly lays the new roadmap to this brave, new economy.

From the new financial restrictions to new draconian environmental policies, the government clearly is going to stand in the way of new economic growth.  The “green jobs” path to greater employment is just a myth.  For every new “green job” created, many other sources of employment are destroyed.

Right now, the government is talking recovery.  A year from now people will be trying to survive, and it always is easier to survive when those in power are on your side.