In the run up to the SOTU address, I have MSNBC on. Former mayor of San Fransisco, Willie Brown, wants President Obama to announce that the government will fully subsidize the salaries for a year of anyone hired, say, starting tomorrow.
He thinks this will create jobs.
Riiiiight! If any employer believed such a plan were in the works, the rational thing for her would have been to fire everyone a week before the SOTU speech, and then hire them back once the subsidy was enacted.
And, for individual workers, the rational thing to do would be to resign right now, form a company, and hire their spouses at, say, $150,000/year.
First, this whole creating jobs thing is such a grotesque misnomer that every time I hear it I want to rip my own intestines out.
Jobs are not created. Especially by government decree.
To make money, people in the private sector try to provide stuff they believe others will want. They do this, because if they guess correctly what people will want, they make a lot of money (and, if they guess wrong, they lose the resources they expended in the process).
To be able to provide the stuff that they believe others will want, these people usually need the help of others.
There are people who would rather provide their help to the people who are trying to figure out what people will want. These people do not want to take the risk of trying to figure out what people will want 10 days or 10 months from now. They would rather be paid a wage rather than face the risk of a substantial loss.
The people who are trying to guess what others will want are called entrepreneurs. The people who prefer the certainty of a wage are called workers. The people who buy the stuff entrepreneurs provide with the help of workers are called consumers.
How many workers entrepreneurs hire, and how much they pay those workers, depend on how much stuff they think consumers will want, and how much they think consumers will be willing to pay for that stuff.
If entrepreneurs think that the current number of workers they have on the payroll is greater than what they think they will need to produce the amount of stuff that consumers will want, they will lay off workers.
On the other hand, if entrepreneurs think that the current number of workers they have on the payroll is less than what they think they will need to produce the amount of stuff that consumers will want, they will hire more workers.
How much stuff consumers want depends on three main factors: Tastes, prices, and incomes. Assuming tastes are stable, overall higher prices mean consumers can afford less stuff with their income, and lower incomes also mean they can afford less stuff at given prices.
We are at a point now where consumers' incomes have fallen significantly due to both job losses and a higher current and anticipated tax burden.
We are also at a point where inflationary expectations are rampant. The government simply cannot continue increasing the money supply without causing inflation.
Currently, there is not much of a reason for any entrepreneur to think she needs to hire more people to produce more stuff. After all, she probably won't be able to sell most of the stuff these workers would produce.
It is sad that people whose words end up mattering have not been able to grasp this very elementary process all their lives.
In the words of Forrest Gump, Stupid is as stupid does. Indeed.