JOBS VS MAKE WORK
Our new president has promised America 3,000,000 jobs. There is a big difference in hiring folks to work for a while and providing a new job.
In the 1930’s President Roosevelt started the WPA, the Works Progress Administration, affectionately known as We Poke Along. They built roads, bridges and dams all across this beautiful country and received a paycheck every week. It did keep them and their families in food and shelter – barely. It did help. It was done with their version of a stimulus bill. In fact they had 8 (yes, eight) stimulus bills. When one didn’t do the job the Congressional solution was always the same – throw more money at it.
In 1937 Treasury Secretary Morgenthau made the statement, “We have spent all this money and it hasn’t worked”. Unemployment was about 17% down from 24% and remained as high as 14% into the 1940s. It is not difficult to predict the same result for the current stimulus bill. It will not be discussed here that this is a pork bill and not stimulus. The outcome will be the same.
The first question should be, “Why won’t it work”?
It is easy to create “make work”. Repair bridges, build electrical wind power stations, overhaul sewer systems, dredge out waterways, fix old rutted roads, etc., etc.
Anyone can realize that once the work is done there is no more job. That’s the difference in make work and a real job.
When a new business is started such as a messenger service (pick one) the entrepreneur puts his own capital at risk (not taxpayer money) to take the chance he can make money. He buys a truck, rents a garage, needs a bookkeeper, hires a driver and on and on with myriad of details creating jobs for others. As his business grows he expands with more vehicles and workers. This is job creation that does not end when then the project is completed.
If the business is not run efficiently the founder loses his money not taxpayer money – yours and mine. The government does not come in with a handout to continue a poorly run operation. That is the true capitalistic system. It is the evolution of success. The weak die off and the well run become models for other new businesses.
How are real jobs created?
Certainly not with handouts! They must be incentives for entrepreneurs to take chances with their money. One of the best is to show them a better way to make money. This could be in the form of tax breaks. These could be in many forms – no income taxes for certain periods such as 3 to 10 years for both state and federal, reduction in payroll tax for newly hired, tax breaks for the purchase of new equipment and real estate, easing of some environmental requirements. Those are a few. There are many more.
Until a stimulus package is enacted that creates real jobs this giveaway of taxpayer money will continue ad infinitum. It will destroy our monetary system.
You may receive Al Thomas’ investment letter that made 15% in 2008 at no charge for 3 months on the web site www.mutualfundmagic.com Never lose money in the stock market again. His book “IF IT DOESN’T GO UP, DON’T BUY IT!” has become a classic. Copyright 2009. Williamsburg Investment Co. All rights reserved.