DownsizeDC.org
September 9, 2010
UNEMPLOYMENT: Why Government Spending Increases Unemployment
By James Wilson

In this message . . . why increased federal spending destroys more jobs than it creates.

President Obama has unveiled yet another, $50 billion government program to "create" more jobs.

But, as the letter below indicates, government spending actually destroys more jobs than it creates!

This is why Obama's new program should be opposed, and why Congress should take immediate steps to cut federal spending.

Please use DownsizeDC.org's Educate the Powerful System to tell Congress to stop this next stimulus plan and cut spending.

You may borrow from or copy this letter . . .

I oppose President Obama's proposal to increase the deficit by $50 billion to fund yet another "job creation" program.

Deficit increases today mean Americans will suffer later through higher taxes and inflation. But that's not the only harm that increased federal spending causes . . .

Federal spending actually HURTS the economy and DESTROYS jobs!

It's simple math. As Daniel R. Amerman, CFA, points out, government and the private sector co-exist in the same economy with the same limited resources. This means that when government grows at a faster rate than the private sector, it does so AT THE EXPENSE of the private sector. http://news.goldseek.com/GoldSeek/1275592140.php  

This is harmful because wealth is transferred from the highly productive private sector to the less efficient government sector.  

It's true that Obama's bill may lead to more government construction jobs, but a study by James Sherk shows that this approach won't encourage private businesses to invest and hire. http://www.heritage.org/research/reports/2010/03/the-cause-of-high-unemployment-still-due-to-dwindling-job-creation

In addition, as James Sherk also points out . . .

"The resources the government spends do not materialize out of thin air -- they are taken from the private sector. Each dollar the government borrows is one less dollar that entrepreneurs can borrow to fund new operations or that private consumers can spend. Research shows that government spending crowds out private investment. Each $1 increase in government spending reduces private-sector investment by between $0.46 and $0.97 after two years, and $0.74 and $0.95 over five years. Government spending substitutes for private-sector investment; it does not supplement it. Increased government spending will further reduce private-sector investment, making the problem of low job creation worse... Government spending eliminates more jobs than it creates."

Even in places that receive "free" federal spending (in the form of pork), such spending reduces private investment. http://www.cato-at-liberty.org/do-earmarks-crowd-out-local-private-investment/

But that's still not all. According to Cato's Alan Reynolds . . . http://www.cato.org/pub_display.php?pub_id=12120

* These years of government "stimulus" are unprecedented, on a scale not even attempted by FDR
* Previous recessions had quick recoveries without government stimulus

The best thing you can do for the economy is to slash the size, scope, and power of the federal government. You can start by opposing all new spending and by cutting the federal budget. This will allow the private, productive sector of the economy to grow, and to start hiring again.

END LETTER

You can send your letter through DownsizeDC.org's Educate the Powerful System.

And if your friends are also concerned about federal spending, please forward this message to friends and re-tweet it.

Jim Babka
President
DownsizeDC.org, Inc.

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