Today’s Wall Street Journal has a superb letter to the editor, attacking one of the great political fables of our time, namely that government spending creates jobs. Here’s the letter:
Only Invested Capital Creates Jobs
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. ?Multiplied many, many times over,? she lectures, such benefits result in economic and job growth. Really? She should have added, only if the government prints all the extra money. Otherwise, the money just comes from taxing the ?local storeowners.? Does anyone really believe this system works? It?s like passing the cornbread around the Thanksgiving table, with everybody eating and nobody baking, eventually all that is left are the crumbs.
The fact is that government is fiscally incapable of creating any job. Jobs are ?created? when capital is invested in a new economic activity. The government has no capital of its own: It can only tax 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 new jobs.
Dick Meloy
Darien, Conn.
