How to Grow an Economy and Create Jobs

Contrasting schools of thought“In this present crisis, government is not the solution to our problem, government is the problem.”

— Ronald Reagan, 1st Inaugural Address, 1981

Below I present reprints of two interesting editorials.  The first makes the point that punishing the rich does nothing to further the goal of reducing poverty.  That particular goal is best achieved through job creation.  It may feel good to steal from the rich and give to the government er, poor, but the reality is those with money are the ones providing the jobs.  Don’t get me wrong, the rich can afford to pay more and should, but there is a point of diminishing returns.  As you increase the burden, more and more jobs are cut and those remaining become increasingly demanding.  This results due to business owners’ desperate attempts to hang onto profits or in many cases just stay in business.

Not a Government Policy

November 30, 2010

Michael D. Tanner is a senior fellow at the Cato Institute and the author of “Leviathan on the Right: How Big-Government Conservatism Brought Down the Republican Revolution.”

Income inequality is the wrong focus for government policy. After all, if we doubled the income of every American tomorrow, inequality would actually increase — but we would also lift a lot of Americans out of poverty.

A more expensive government is a burden that will ultimately reduce growth and make it harder for the poor to move up the income ladder.

In the context of deficit reduction, that means we should keep this goal in mind: not punishing the rich, but reducing poverty. And we know that in the long run, the best way to reduce poverty is to create more jobs and opportunity. Too many think of the economy as a fixed pie, and the role of government is to divide up the slices of that pie. If one person gets a bigger portion of pie, others of necessity get smaller pieces.

But in reality the size of the pie is not fixed. We can pursue policies that grow a bigger pie, allowing a bigger slice for everyone. Conversely, we can shrink the pie, meaning everyone gets less. And unfortunately, if the pie shrinks, those without skills and connections in society — the poor — are likely to end up with little more than crumbs.

And history also shows that government programs and redistribution do a surprisingly poor job of reducing poverty, especially when compared to economic growth. For instance, at the start of the 20th century more than three-quarters of Americans were poor by most definitions. By 1965, that had been reduced to less than 20 percent. That happened not because of government redistribution but because of the phenomenal growth of the American economy. More than $15 trillion in social welfare spending since then has done little to further reduce poverty.

As we look for ways to reduce the deficit, we should avoid policies like raising taxes that will discourage economic growth and job creation. Instead, we should recognize that an ever-growing and more expensive government is a burden that will ultimately reduce growth and make it harder for the poor to move up the income ladder.

Now a related editorial.

Insourcing: The Secret To Job Growth

Want to put Americans back to work? Help multinationals grow their U.S. operations.

December 6, 2010

Robert M. Kimmitt and Matthew J. Slaughter

Source: BLS Nov. 2010 Unemployment GraphThe Labor Department reported on Friday that the U.S. unemployment rate is now 9.8%, as the economy added only 39,000 jobs in November. Since the start of the Great Recession, America has lost nearly 7.3 million private-sector jobs. Today’s 108 million private-sector jobs are the same number America had in April 1999. And unemployment, Federal Reserve officials predicted last week, will likely remain at 9% through 2011.

Meanwhile, U.S. policy makers are fiercely divided over how to support job growth. The Fed’s second round of quantitative easing triggered sharp criticism both at home and abroad, and fiscal prospects remain bleak, …

  1. Nice article. Thanks for articles.

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