Friday, August 24, 2012

Bob's Take on Creating Jobs and Using Common Sense ... Public versus Private Sector ... One Doesn't Really Create Jobs or Wealth and the Other Does ... Guess Which

 A friend just sent me a letter from a small business owner to his employees. The business owner is obviously "mad as hell and not going to take it any more."

He essentially said in his letter that he "did build that business" and that he wasn't going to pay more and more taxes and work harder and harder just to give more and more of the wealth he was creating to the government knows best gang to do with as they please. Instead he'll close his business, lay off his employees and retire to the Caribbean beaches. He's tired of being verbally assaulted by the big government progressives all the time.

That letter from in all probability a good guy having a bad day prompted what follows from me. By the way, I'm having a good day.

(1) When the public sector creates jobs, such as government workers, teachers and such, eventually it must get the money to pay for them from someone who has it. Thus, the new government job is paid for by taxing the private sector employee or borrowing from a foreign country, for example.

In other words, the money is transferred for redistribution purposes from the wealth creator in the private sector to the public sector. No new wealth is created and therefore no new jobs are created either. When we take $1 from someone and give it to another person, it's a net zero, except, of course, for the "handling charge" the government takes to make the transfer. Accordingly, it's in actuality a net negative.

As a result, no wealth is created, and no net new permanent jobs are created.

To the contrary, in the long run, all other things being equal, there may be fewer jobs created as the one taxed will have less incentive to work hard in the future. That's human nature, despite what the pols may say. We'll work harder and longer for $200 than we will for $100. So what we get to keep of what we earn is what matters most to us.

(2) When someone in the private sector creates something of value to someone else, jobs and new wealth are the result. For instance, if we drill for oil, as an example, and then sell that oil, we've created jobs and new wealth. If we develop, manufacture, distribute and sell an Apple computer, we get the same jobs and new wealth creating result. If we find a new and less costly way to do something we've always done and later sell it to someone else, the price will be less for the buyer, or the profit will be greater for us, and one of us in turn will have more MOM left after the sale or purchase. With that additional MOM, we can make other purchases, which in turn will require more production and jobs. And so on.

We conclude different things from examples #1 and #2, respectively.

(1) Jobs created in the public sector detract from what economic growth would otherwise be over time, despite the short term and immediately visible 'sugar high' of the new government job created. What's left unseen is what the citizen taxpayer would have elected to do with his money had he not been forced to pay for the new government worker.

(2) Jobs created in the private sector are the result of someone producing something which is of value to someone else, and for which that someone else is willing to exchange his labor, thereby causing both seller and buyer to produce and purchase more products and services. And so on.

Now that's simple stuff, of course. I've often wondered why more people don't "get it."

Such as the "progressives" and big government guys, for instance. And at the risk of all this being seen as a bit cynical on my part, I believe I know why they don't "get it."

The big government guys don't want to get it and don't want their fellow citizens to get it either for one very simple reason.

There would be no need for progressives and big government. We'd all be trying to do more with less.

And that in turn spells productivity, the best jobs and wealth creator of all. It's also a public sector no-no.

But innovation and productivity, doing more with less and finding new ways to do old things represent the real American way. The only real way to have a free, secure and prosperous society.

For each and all of us.

Thanks. Bob.

No comments:

Post a Comment