Monday, February 1, 2010

Industrial Jobs Returning Via Deficit Spending

We are now seeing a trend, assuming the forecast is correct: Manufacturing in U.S. Probably Grew for Sixth Straight Month. Here are excerpts:

Factories are stepping up production as stimulus-fueled gains in demand and record cutbacks in inventory boost orders. . .

Government stimulus helped spark rebounds in the housing and automobile industries, two of the most depressed areas during the recession . . .

Production gains are starting to encourage the hiring needed to ensure the recovery is sustained. . .

General Electric Co. is hiring workers in energy, health care and rail transportation, in part because governments’ economic-stimulus plans have helped lift demand.

GE, whose power-plant equipment generates one-third of the world’s electricity, is bidding to supply new passenger locomotives for Amtrak and in November announced a joint venture in China that would make high-speed rail locomotives that may add 200 U.S. jobs.

“We will create jobs in the United States that could not have been created any other way,” John Rice, chief executive officer of GE Technology Infrastructure, said of the rail programs in a Jan. 28 Bloomberg Television interview.

Please consider the quote from Mr. Rice. These jobs were only created from taxpayer funds. I do not know if they are for worthwhile projects, but it appears clear that socialist-style industrial policy is in effect here. Worse, it is incorrect to say that industrial hiring will "ensure the recovery is sustained". After all, there was a depression in 1920-21. Then there was hiring. There were 3 more recessions/depressions in the remainder of the 1920s. Similarly, the severe recession of 1958 ended with hiring by private industry. Yet there was a (mild) recession in 1960 that helped elect John F. Kennedy. If indeed Mr. Rice is correct and these jobs could only be created by government, that means they do not meet a need of the free market. All industrial jobs are cyclical, but those created by a heavily indebted government are at extra risk.

Meanwhile, unsaid in this cheerleader article is the fact that only about one-sixth of jobs in the U. S. are industrial. The length and depth of job losses shows that reviving industrial jobs, via money-printing and other budgetary gimmicks, does not ensure even an exit from the Great Recession/depression.

But rest assured, larger deficits are on the way, it appears. The government is pulling out all the stops. It is doubling down by making sure that its debt increases faster than private debt shrinks. Plus it is encouraging yet more municipal debt by planning to expand the Federally-subsidized Build America Bonds program.

All this debt is dangerous and ultimately creates more instability.

A few extra jobs at GE don't merit all this.

Copyright (C) Long Lake LLC 2010


  1. and the US doesn't do the command economy thing well at all