Saturday, August 08, 2009

Only Invested Capital Creates Jobs

So writes Dick Meloy of Darien, Conn., recently in the WJS. "Elizabeth McNichol of the Center on Budget and Policy Priorities in Washington (Letters, July 22) offers the familiar but totally false description about how government stimulus 'creates' jobs. She describes how unemployment payments spent on food and school supplies help 'local storeowners" pay their employees and order more goods from their suppliers. McNichol lectures that multiplied many, many times over, such benefits result in economic and job growth."

Really?, asks Mr. Meloy. "McNichol should have added, only if the government prints all the extra money. Otherwise, the money just comes from taxing the 'local storeowner.' Does anyone (yes, a lot of populists do, my comment) really believe this system works? It's like passing the cornbread around the Thanksgiving table, with everyone eating and nobody baking, eventually all that is left is the crumbs.

The fact is that government if fiscally incapable of creating ANY job. Jobs are 'created' when capital is invested in a new economic activity. THE GOVERNMENT HAS NO CAPITAL OF IT'S OWN; It can only tax (collect revenues) and borrow. No capital, no jobs, period. The sooner we can communicate in the same language, the sooner we can set about improving the environment so that those with capital will want to create jobs."

Well said, Mr. Meloy.

There appears to be an move upward in the economy, at least in the value of depressed stocks, mostly rising on anticipation of a stronger worldwide economy, but I believe some of this "move up" is false and some time latter, many of these stimulus dollars given away, will have to be paid back. If the Fed plans to do that with more printing of these dollars, we will find out that inflation and debt will once again, kill the economy in many more different ways.

This economy upturn will become "real" when entrepreneurial risk-taking with private dollars confidently returns. Expanding government and more taxation, regardless of the form it is in (think garbage pickup-fees) will continue to feed a false economy and eventually, only the "crumbs will be left".

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