What Should Government Do To Create Jobs?

This morning, the CBS-News producer of the show I'll appear on tomorrow emailed me. He asked, "Is it okay if the host asks you, "What should government do to create jobs?"
Here was my response:

• Proposals for taxpayer-funded job-creation attempts are usually couched in unarguable terms: "Rebuild infrastructure! "Save" teacher and police jobs!, "Fund alternative energy!" But when you dig beneath the surface, government-created jobs are probably a poor use of taxpayer dollars and will create few jobs. For example, theObama Administration itself admittedthat its job creation efforts have cost the taxpayer $200,000 per job!. The Obama Administration's "Green Jobs" initiatives have beenfar more costlystill while creating very few jobs.

For example, the taxpayer continues to fund job-training programs for solar installers when existing solar installers are having a tough time finding work. And worse, the forward-looking index of solar stocks is very bearish on solar's future. SUNIDX (the market basket of solar stocks) reached its high of 1555 in late 2007, right after Obama's election when the public knew Obama would subsidize solar with tax dollars. Now, the price of that solar stock index, which represents millions of people's collective bets on solar, is72, down 96 percent!Yet there are calls to use yet more of our tax dollars to fund training for solar jobs.I fear that solar will become today's cigar stores: hot for a few years, then moribund.

Indeed, a New York Timesreviewof job retraining programs said: "For all the popularity of these government-financed programs, there are questions about whether they actually work."

• The taxpayer "saving" GM jobs hasalready cost us $17 billion. We were forced to buy 60% of GM's stock at 33., We were promised we'd make money. The breakeven point is 53. Despite President Obama's having declared our investment a success, it closed yesterday at 20. If all that money, let alone the new, additional money being proposed to try to create jobs were left in taxpayer hands, many more jobs would likely be created. Not to mention that you and I wouldn't be using our money to subsidize a car manufacturer that makes inferior vehicles.
• Government has long imposed ever-more onerous burdens on business in its payroll taxes, recordkeeping, and legal liabilities, which makes U.S employers more likely to offshore, outsource, automate, and part-time work. Policies such as the"Disparate Impact" definition of discrimination is moving merit further to hiring's back seat.
• The undergirding principle behind taxpayer-paid job "stimulus" efforts is Keynesian economics, which argues that government spending should increase during economic valleys. Alas, the empirical evidence for doing so is meager:For example, the argument that the Great Depression was ended by FDR's New Deal . There wereco-variates,for example, the 1945 tax cuts and ending of price controls. Also, when Japan tried a massive taxpayer-paid stimulus,it failed.In recent years, while most of the EU responded to its recession with massive government spending, Estonia cut the size of government so its debt to GDP ratio is 6% compared with Greece's 170%. Estonia's GDP is positive while Greece faces depression and other EU countries are tilting there. When many covariates exist, logic need trump empiricism. And logic suggests that dollars left in the hands of 300,000,000 Americans to spend as they individually deem wise will result in more jobs, products, and services than if that money is left in the hands of the too-often inefficient, ideologically jaundiced,and corrupt government.
• The money from private sector job creators is diverted to paying for badly overpriced or unnecessary products. For example, the perfectly good street in front of my house was repaved by three workers who spent much of the week standing around, leaning on their expensive equipment. The main effect of that taxpayer spending is that, for weeks, my street smelled of eau de tar.
• Government workers generally have less accountability than do private sector workers, but lots of job security. Too often, the result is that the workers punish each other for working hard. A caller to myNPR-San Francisco radio showsaid that City of San Francisco carpenters had an unspoken rule: Work too fast and we slit your tires. That caller added that despite the constant slowdown, there's not enough work to make them look busy so the carpenters would, for example, build a fence, knock it down, and then build it again. When I visited the incomprehensibly plush Federal Building in Oakland (complete with a massive atrium with a 75-foot glazed rotunda and skybridge atop a 100-foot-tall dramatic ceiling,) when I got upstairs to the offices, I saw desk after desk, with virtually nothing on it, with employee after employee literally or figuratively polishing their nails.

That all said, I am aware that entrepreneurship cannot fully solve America's employment problem in our ever more competitive global economy. No matter how entrepreneurial America becomes, as many as half of Americans will simply not be able to compete for living-wage work. I believe, the only answer, and it's not a great one, is to teach people how to live on less and for us to give them a basic safety net, for example, dorm housing and food, with supervision and social services to reduce drug abuse and violence and increase their prospects for self-sufficiency.. If supervised dorm living is good enough for Harvard students, it should be good enough for welfare recipients.