How to create jobs
This election season is all about jobs. Which politician and/or party is best capable at getting America back to work? With the U.S. unemployment rate near 10%, and with the rate of under-employed at least double that, there is a lot of understandable anxiety about the lack of jobs.
It is a little depressing to listen to this collection of candidates talk about what they plan to do to create jobs, if elected. The only hope I have is that these are campaign sound bites and that, once in office, a more sensible and effective approach will prevail. That is a fleeting hope, though. It seems like our entire national mentality on strengthening the economy resolves around the notion that, as James Kunstler is often saying, we can get something for nothing.
Job Creation "Ideas"
Here is a brief list of "ideas" you've probably heard and will hear more about in the next two weeks.
Build roads
The ideas is that we can solve our problems if we only build more roads. Not only will the act of building the road employ good Americans at well-paying jobs, but better roads will help us get to places faster (always good) and will thus allow more places to be developed. This strategy overlooks the two obvious facts that, first, we are already overwhelmed with unfunded road maintenance costs and, second, we have already built more houses and commercial properties than we can use. The fact that we are building roads now with largely borrowed money only adds to the ridiculousness of this strategy.
Invest in infrastructure
For most voters and politicians, infrastructure means roads, but there is also the sewer and water systems, ports, rail lines and other components of the Old Economy that brought us prosperity when we initially built them. The problem here again are the diminishing returns. Sure, we can connect everyone to a public sewer system, but the problem is that we long ago finished doing that in places where people lived efficiently. Today, this type of project requires massive subsidy and leaves the local community with huge, long-term maintenance liabilities. It was one thing to build the Hoover Dam in the labor-intensive era of the Great Depression. We do these projects differently now, so the math on actual jobs created is so much different.
Cut government spending
There is a belief that if we simply dialed government spending back that this would free up the private sector to consume more, that essentially the private sector is being squeezed out by the public sector. There is some truth to this in the macro-sense that, with the Federal Government issuing billions of dollars of debt each month, private-sector savings is going into government bonds and not other, private-sector investments. When we look at what advocates for less government spending have and would cut (essentially nothing, except possibly programs that help poor people, when it comes right down to it), they a) lack credibility and b) fail to matter. The "cut government" crowd still prays at the alter of the current reincarnation of the American Dream, which has as idols congestion free roads, low energy prices and government intervention on behalf of business and homeowners. This system takes lots of government money to prop up, which is one reason why they have failed to cut spending in a way that matters, despite controlling the levers of government for huge swaths of the past 30 years.
Increase government spending
Since John Maynard Keynes made it okay for governments to spend, they have been spending. We now have public debt levels that are unfathomable. Ratios of leverage to production are indicative of World War II spending levels, when our very existence as a nation was threatened. It is one thing to stimulate a young economy working on a new model. It is another thing to try (again and again and again) to stimulate an old economy working on a dieing model. If government spending is the answer, how many more trillions will it take until we have prosperity? This is the toolbox that has only hammers and sees only nails.
Fix health care
The idea here is that, if we just fixed health care, everything else would right itself. While it is true that health care spending is an albatross around the necks of the public and private sector, and while it is true that we have the worst of all systems -- not public or private enough to have the efficiencies of either approach, poor levels of coverage and a tremendous burden on everyone -- solving this problem handles just one of a myriad of pending disasters we face. If you want to solve the health care problem, I'm there with you, but doing so only removes a ten pound rock from the hundred pound sack we are lugging. A good start, I agree, but it will not create a flowering of jobs from sea to shining sea.
Cut taxes
See "cut government spending" above. We have become quite adept at cutting taxes yet continuing to spend like drunken sailors. This only makes our problem worse. The idea of cutting taxes is that it will put more money in the hands of "real" people who know how best to spend it. Okay, but if you really want jobs what is needed is not a cut in taxes but a different tax system. Our system today taxes employment, incomes, earnings and investment. We need a system that taxes consumption, energy, idleness of capital (inheritance) and waste. This is not "less" tax but "different" tax. Simply reducing taxes is not going to create jobs (see years 2001 through 2008).
Inflation
This is the Fed's contribution - perhaps the worst idea of all in my estimation. We're a country of debtors. The idea is that we'll print more money to create inflation. This will reduce our debt in terms of dollars and give us room to borrow yet more money. The idea is that this extra borrowing capacity will stimulate growth, or at least the illusion of growth (since there will be more dollars out there, they will just be worth less). Just writing that makes it sound even crazier. We're in debt so our strategy should be to systematically screw over our creditors so that we can go and ask them for more money? Seriously? Do we really think the world is that stupid?
So how do we grow jobs?
The answer is not "something for nothing", it is a long, difficult and purposeful retooling of our economy around a strategy of localization. It is the exact opposite of what we are doing now.
Distance costs money. Today we export raw materials and jobs and then import finished goods (our founders called that mercantilism and fought a war over it - we call it globalization). We eat blueberries in January that were shipped half way around the world. We do this sitting in chairs and wearing clothes that were likewise imported. This is all made possible by two things: a) cheap energy and b) government subsidy/protection.
Think of all of the "too-big-to-fail" undertakings we have today that used to be local endeavors. Banking is the most obvious, but consider also agriculture. You have to work hard if you want to consume local food. Agri-business is subsidized beyond belief.
Or energy. Energy production used to be local, but has now been scaled to tremendous proportions. We all have at least a basic understanding of how our energy supplies are defended and subsidized around the world. With the rest of the world rising and the dollar (intentionally) falling, we're up against the limits of the cheap energy era.
Transportation, again, what used to be the purview of the private sector has become a classic tragedy of the commons story. We now have massive deficits in our transportation funds and have lost the ability to maintain the systems we have created.
Too-big-to-sustain
Our too-big-to-fail economy has become too-big-to-sustain. Thomas Friedman had it right in a recent opinion piece when, talking about China, he reconciled his "flat world" viewpoint with our need for creative destruction:
“In a world where so many people now have access to education and cheap tools of innovation, innovation that happens from the bottom up tends to be chaotic but smart. Innovation that happens from the top down tends to be orderly but dumb.”
We've ridden the efficiencies of a centralized economy way beyond its point of diminishing returns. The end of cheap energy is going to thrust us unprepared into an abrupt transition to a more localized economy, unless we start preparing for it. Politicians wanting to run on a platform of "jobs, jobs, jobs" would benefit from understanding how a Strong Towns approach - embracing the chaos of building from the bottom up - will not only grow jobs but drive the innovation that must happen if we are going to enjoy a second American Century.
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