Saturday, November 7, 2009

Government-Run Economy?

In Obama’s to Fix op-ed in today's NYT, Charles Blow says that the current President needs to fix the jobs problem.

This view is all over the media.

What I wonder is whether the American people really believe that the Federal Government really can, or more importantly, should "fix" the jobs problem.

The proximate cause of the miserable jobs market is that government and its allies in Big Finance and subsidiaries such as homebuilders did not respond to any market forces and instead created an unbalanced economy and speculative financial companies. The simple solution is for Government to fix this financial mess while at all levels of government helping to support the truly needy. Force banks to do only banking and let gamblers gamble and win or lose without any claim on the public purse. Unfortunately, the Obama administration appears to be proposing things that move in the other direction. For example, you and I are now on the hook for huge quantities of FHA loans to subprime borrowers. Why? There's nothing wrong with renting.

Even an administration that fought against Wall Street scams, FDR's, did not really make a dent in unemployment.

In this rich country, which produces more than enough food, clean water and the like for all residents, and which contains a housing stock that can already house far more than the current 300+ million residents, and where the great majority of consumer products have 90%+ gross profit margins (meaning that companies don't really need all their employees just to get the goods out the door), the question of the need for "growth" at the expense of risk and stability of the system, the external environment, fairness, etc., must be discussed. The faster you drive a car, the greater the chance of an accident AND the greater the harm from said accident.
That's exactly what happened last year when a garden-variety recession transformed almost overnight into a jobs depression. Growth is not always good.

Putting jobs in perspective, let us say that the latest jobs number show 1 in 5 workers are unemployed or underemployed. Let us also say that the average worker works 2000 hours per year, counting commuting time. Why couldn't we get to full employment and have the average worker work 1600 hours per year, have more time off, and thus enjoy life more?

Now, I'm not specifically advocating for or against this outcome, but the underlying point is that the country must think through how it wants to allocate its human and physical resources. Does government at all levels have a necessary role in this process? Obviously. In a capitalist democracy, is it government's responsibility to decide on how hard people should work, how many motor vehicles should be in existence, how many homes of what square footage there should be and whether they should be rentals or "owned"? No. Especially when nowadays "ownership" means having little or no equity in the home. Sounds like renting under another name to me.

Public-private partnership re the economy? Yes, that's the way America grew. But a cursory review of the Declaration of Independence shows that governments are instituted among men to secure individual benefits, and the Constitution begins with "We, the people". Power emanates from the people. Government should be the servant and not the master. Thus Mr. Blow's op-ed has it backwards. The Feds need to do a better job regulating and improving the mess they helped create. The private sector in conjunction with more local governmental entities will work as hard as it wants doing work that it wishes to do to serve the real needs and desires of the people.

Copyright (C) Long Lake LLC 2009

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