Even John Maynard Keynes himself would not have endorsed this jobs bill. During the time Keynes developed his theories, governments balanced budgets each year. Sometimes there were deficits and sometimes there were surpluses but, cyclically, there was balance. This allowed for “savings” during surplus years and these savings could be spent during recessionary periods to stimulate demand without adding to deficits. However, we run chronic deficits. This standard operating procedure has been symptomatic of legislators on both sides of the aisle. During the eight years George W. Bush was in the white house, G.D.P. grew by 15 percent and government spending grew by a whopping 58 percent. When you borrow from yourself in good times, you can’t do it during bad times when you really need to without harmful side effects.
So now we have deficits that have grown to record levels and national debt that has ballooned from $10 trillion two and a half years ago to $14 trillion today. How this condition will be dealt with is a key question. Will we inflate our way out? Tax the rich? Tax everyone? Cut spending? Implement a value-added tax? Adopt Herman Cain’s 9-9-9 plan? At the end of the day the music will stop and someone will be left with no chair.
During the previous stimulus packages, businesses hired some workers for projects they knew were going to be short term. Local governments and households used savings to pay down debt and knowing that the stimulus was temporary, few people changed their long-term behavior. The government essentially wasted billions of dollars on projects that did little economic good. Impactful for commercial real estate, job creation has been too slow to impact the economy as demonstrated by the September jobs report.
In September, the unemployment rate remained at 9.1 percent even though 103,000 net new jobs were added. This included 137,000 private-sector jobs being created, which is seemingly positive, while 34,000 government jobs were eliminated. However, if we look into these numbers further, the details are telling.
One-third of the 137,000 private-sector jobs “created” were those attributed to 45,000 striking Verizon workers who returned to work and were counted as unemployed the prior month. This means that 92,000 private-sector jobs were really created. If we subtract the 34,000 government workers that were terminated, the net gain to the economy was just 58,000 jobs, far short of the 100,000 to 150,000 needed per month just to keep pace with population growth.
Long-term joblessness, for those out of work for six months or more, now makes up 44.6 percent of the total number of the unemployed. This number has been growing as our population grows and, every month job creation remains at these low levels, it creates a worse problem for the long-term unemployed, who become increasingly invisible to employers. This is perhaps the biggest source of frustration for Americans.