How it hurts the economy when the government hires the unemployed

On www.bloggingheads.tv, John and Glenn ask the question why can’t the government just hire people, WPA style, to create jobs. http://bloggingheads.tv/diavlogs/38656?in=04:46&out=09:52  One answer is a very practical one. Hiring people to repair park benches and clean the streets will impact the government workers who are currently employed to do just that. Unions of government workers and contractors would likely be the strongest opponents of WPA like work projects.

The core problem with the government hiring people to do work is the inability of the government to know what to produce. An economy is all about producing the goods and services that people want and need. When the government decides to tear up and repave a road in order to replace the sewer pipes, how confident are you that that project was selected to be implemented because it was necessary? Or because it would employ 30 workers for 6 months? And when the project takes 6 months to complete, is that better than getting the job done in 3 months?

Put aside the ridiculous circumstance we are in these days where the government pays people to be idle thru ever extended unemployment benefits. ( Requiring those receiving unemployment checks to show every day for their WPA work assignment would help the economy simply by encouraging people to take an available private sector job. ) Paying people to produce a good or service that is not in demand prevents that person from producing goods and services that are in demand. The way to know there is a demand for something is the price people are willing to pay for it. The free market is far superior to setting prices and weighing demand than government decision makers.

End all unemployment insurance payments now!

The government providing extended unemployment benefit payments to individuals is just about the worse thing that can be done to the economy. An economy is all about production. The more we all produce, the more we will all have. The end result of paying people to be idle is to reduce the total production of the economy. And the payments the non producers receive are the excess, tradeable production of producers in society. In a healthy economy, a significant portion of excess production is accumulated and traded for products that enable the producer to upgrade the quality and quantity of what it is they produce. Payments to idle workers take excess production away from the producers and reduces their ability to upgrade and continue their own production.

What to do? Stop paying the jobless extended unemployment benefits. If you want the government to do something, Enable the jobless to produce for each other . In practice, the jobless will get a job. There are minimum wage jobs available in the economy. Earning $400 per week at a minimum wage job is certainly difficult. People need more than that to live. But people can double and triple up in their housing arrangements. They can get by on a low wage job. And being productive, honest workers, once people are working opportunities to earn more and produce to their protential will present themselves.

Enable the jobless to produce for each other

A person without a job needs to consume goods and services to live. Just like the “rest of us”. And people are able to produce things they need for themselves. People can grow food, raise livestock, sew clothes, diagnose illness, repair cars, cut down trees for firewood. There are more than a few jobless individuals in towns and communities across the country. What about the jobless producing for themselves and trading their excess production with other jobless who themselves are producing and trading?

Focus public policy regarding the jobless on enabling those without jobs to produce for themselves and others. Provide repair garages that people can use, no charge, to repair cars. Expand the number of community gardens and farms in an area so that people can best grow food and raise livestock for their consumption. Let us go all out in a thought experiment kind of way and imagine a society where there are no free, public schools. The jobless ( more accurately identified as “people without an income”. ) have children who need to be educated. Have the government provide classroom space to those who cannot afford to pay school tuition. The jobless person who repairs cars can trade car repair services with another jobless person who teaches grade school mathematics. So does the person who raises chickens at the local farming facilities the government provides.

The suggestion of government providing the jobless with a means to production is presented for argument sake. Arguably, the furnished car repair facility, the furnished farming facility and the furnished schooling facility can all be produced and maintained by other jobless individuals. Providing facilities for others to use to produce is itself the production of a product. Which is sold to others who themselves have production to sell.

It is all about production

Here is a theory. Everything that is produced will be sold and consumed. Too broad? Try it this way - Everything that is produced that people need will be sold and consumed.

Another theory: A nation's net worth and standard of living is the product of the sum of its production. The more meals served in restaurants. The more cars produced. The more clothes tailored and mended. The more goods and services produced in a society, the higher the standard of living in that society.

Objections based on the argument that wide disparities of income will result in some people having a lot and others very little have to explain how the rich will consume all the products the economy produces. People only need, at most,  a few washing machines. And there is a limit to how much dental work they need done. As long as theory #1 is true, that all the goods and services an economy produces will be sold and consumed, then no matter the income level of the consumers, the more goods and services an economy produces, the more everyone will have to consume.