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Wednesday, June 15, 2011

Obama’s Jobs

"All rational action is in the first place individual action. Only the individual thinks. Only the individual reasons. Only the individual acts." — Ludwig Von Mises

The other day President Obama made a comment about “shovel ready jobs” at a jobs summit in North Carolina. He said; shovel ready as not at shovel ready as we expected” and then he laughed. This is just another example of Obama’s total lack of understanding of how jobs are created. After all, why should a professional community organizer know how to create a job or how business works?

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Several months ago I wrote a blog post on the fallacy of “shovel ready jobs” and why Obama’s and Biden’s brash proposal would not work. With Obama’s comment in North Carolina I feel somewhat vindicated in my prediction that his jobs stimulus would fail — as it has. In the post I said;

“A word about so called “shovel ready” projects the bonehead progressives like to tout. So what is a shovel ready project? It’s a project with the design completed, right-of-way acquired, permits in hand, cost estimates done, financing in place and construction bids in.

One of the purposes of Obama’s stimulus package was to get so called shovel ready projects underway. Would someone tell me what agency or municipality spends money for the planning, design, right-of-way acquisition and permitting of a project to put in the ice box until someone comes up with the money? You pinheaded liberals it doesn’t work that way. Projects are set in motion when there is a known source of funding. Studies and preliminary planning may be done from existing funds, but these are done for the purpose of obtaining funding and environmental approvals, not to bring shovels to the site. The average transportation infrastructure project takes from 5 to 10 years to get the shovel ready stage — this includes widenings. Once again this is a terrible use of the taxpayers’ dollars.”

While a wave of enthusiasm swept Barack Obama into the White House in 2008, the President is reportedly facing much bleaker prospects in certain States as he attempts to get re-elected.

According to The Associated Press, in 2008 Obama was the first Democrat to win North Carolina since Jimmy Carter in 1976, but he barely did so, besting Senator John McCain (R-Ariz.) by fewer than 15,000 votes. Such an upset could be much less likely in 2012 as the President’s polling numbers remain low in large part because of the weak economy.

The news sources report that interviews it conducted throughout the Tar Heel State, which has the nation’s 10th highest unemployment rate, showed that many who were vocal supporters of Obama in 2008 have lost some of their excitement.

"President Obama says he's 100% focused these days on creating jobs. So why is he taking advice from a bunch of CEOs whose companies have been shedding jobs for years? In February, Obama chartered the Jobs and Competitiveness Council with a mission of leaving 'no stone unturned' in the search of ways to boost the country's anemic job growth. But you could tell from the start that this council would have trouble even finding those stones, let alone turning them over. After all, Obama stuffed the group full of Fortune 500 CEOs — General Electric, American Express, DuPont, Time Warner, Eastman Kodak and Xerox, among them. While these may be good companies, they've hardly been roaring engines of job growth. In most cases, in fact, the opposite is true. The board is made up of the heads of two big unions, an energy company, a railroad, an airline, a couple investment firms, and the like. Just one business represented on the board — Facebook — is a genuine growth company. And the council is all but devoid of the kind of small- and midsize firms responsible for two-thirds of the nation's new jobs. It's little wonder, then, that the list of immediate must-do, job-creating ideas the council came up with — and outlined in a Monday op-ed signed by GE's Jeff Immelt and AmEx's Ken Chenault — is so uninspiring. More money to retrain workers? More tax dollars retrofitting commercial buildings to boost energy efficiency? More government loans passed out by the Small Business Administration? That's the best the council could come up with after almost four months' work? How about an immediate cut in corporate and capital gains taxes?" [Source: Investor's Business Daily]

In another statement Obama blamed the use of bank ATMs and airline check-in kiosks for the loss of thousands of jobs — duh. Perhaps the banks can stay open 24/7 and get rid of the ATMs. How many jobs would that create?

Obama said:

"...There are some structural issues with our economy where a lot of businesses have learned to become much more efficient with a lot fewer workers. You see it when you go to a bank and you use an ATM, you don't go to a bank teller, or you go to the airport and you're using a kiosk instead of checking in at the gate. So all these things have created changes..."

Here are a few other job creation suggestions for the Obama Jobs Council:

  • Eliminate golf carts from golf courses and go back to caddies. I know these would be low paying jobs and would depend a great deal on tips. After all 30,000 of the 53,000 jobs created last month were by McDonalds. Also it would give the SEIU an opportunity to unionize the caddies and garner more money for the unions and raise the green fees.
  • How about taxi cabs? Why not go to rickshaws. The operators of the rickshaws would not be able to go too far and it would require many more rickshaw operators. It would also reduce air pollution and obesity while conserving energy.
  • Eliminate automatic elevators in office buildings and hire union elevator operators. This would be another opportunity for the SEIU to get more funds to contribute to Obama’s reelection campaign.
  • How about passing a national law, like Oregon, to forbid you from pumping your own gas. Look at the jobs that would create and you would get you windows smeared and your oil checked. Not bad eh?

I am sure you than think of a many more ways to create jobs and add the cost of almost everything we buy.

As a country, we are paying a tremendous price for the economic ignorance of this president and his ilk. Even basic economic principles, Econ 101 level stuff, apparently elude them.

The "automation myth" - the belief that increased productivity, efficiency, and technical innovation lead to net involuntary unemployment as well as other woes - is Marxist malarkey that won't die.  On this topic, the late economist Henry Hazlitt wrote in the best-selling book, Economics in One Lesson (1946):

“Among the most viable of all economic delusions is the belief that machines on net balance create unemployment. Destroyed a thousand times, it has risen a thousand times out of its own ashes as hardy and vigorous as ever. Whenever there is a long-continued mass unemployment, machines get the blame anew. This fallacy is still the basis of many labor union practices...

The belief that machines cause unemployment...leads to preposterous conclusions. Not only must we be causing unemployment with every technological improvement we make today, but primitive man must have started causing it with the first efforts he made to save himself from needless toil and sweat.”

Blaming unemployment on machinery was common during the Great Depression so it is not surprising, yet still disappointing, to hear President Obama channel his inner FDR (or Rep. Jesse Jackson, Jr.).  In the early 1930s, so-called Technocrats traced the economic downturn to an increase in productivity. Of them Mr. Hazlitt wrote:

"The Technocrats were finally laughed out of existence; but their doctrine, which preceded them, lingers on. It is reflected in hundreds of make-work rules and feather-bed practices by labor unions; and these rules and practices are tolerated and even approved because of the confusion on this point in the public mind."

Companies strive to maximize output while minimizing inputs and that's a good thing. (If only government did likewise.) We act similarly in our personal lives. This leads to the most efficient and economical outcomes, guiding scarce resources to where they are needed and valued most.

Using an example of a coat manufacturer, Mr. Hazlitt explains in detail the impact of technological improvements and labor-saving machinery. He writes of all eyes being focused on "Joe Smith," who loses his job to the new machine. Forgotten are " Tom Jones, who has just got a new job in making [or servicing] the new machine," "Ted Brown, who has just got a job operating one, and Daisy Miller, who can now buy a coat for half what it used to cost her." Overlooked too are the manufacturer's higher profits, which are spent on new machines, invested in new businesses or lines of business, and/or consumed, each of which increases employment.

The focus on Joe leads to "reactionary and nonsensical policies" that are ultimately detrimental to everyone else. (How best to deal with Joe's personal situation, which is "incident to nearly all industrial and economic progress," is dealt with elsewhere in the book.)

In short, the "real result of the machine is to increase production, to raise the standard of living, and to increase economic welfare" by lowering prices or raising wages or both. But this president does not get it. So much for "progressives" being for "progress."

Let’s get his straight right from the beginning — a business’ mission is not to create jobs, it’s to make a profit. People don’t go into business to create jobs. They go into business to deliver a product or service people want at the lowest possible cost they can while maintaining a high level of quality.

As a former owner of a land surveying business I can share a tale of how the surveying profession changed over the years. When I entered the profession in the 1950s it took three or four people to conduct a land survey. You needed one person to operate the transit or theodolite. You needed two people to hold the ends of the 100 foot tape to make the measurements. And, sometimes you needed a person to cut brush so the transitman would have a clear line of sight or a person to flag traffic for the safety of the crew.

Over the year the use of the integrated electronic distance measuring device came into use. This EDM gave the operator to measure the distance and the angles with one integrated device. It not only eliminated the need for one person it also sped up the survey so they crew could accomplish more work in less time.

Now we have survey grade GPS that can be used by one person to conduct a land survey. There is no need for a line of sight and the surveyor can stay out of harm’s way as he moves about the property or roadway. He can survey with better accuracy and quicker than the even the crew using the EDM. The surveyors also have laser scanners that can do a complete topographical survey of a roadway in one tenth of the time it used to take a crew using EDMs.

Technology has not only eliminated rational jobs, but has created jobs for the manufactures of the technology. The problem is that most of those manufactures are not in the United States, they are in Asia.

Even the housing and construction industry has changed the way they build houses, building or construct roads. There are very few “shovel jobs” in those industries. Once, while in high school I helped a neighbor build his home. He was a carpenter by trade and knew what he was doing. One of the jobs I had was to nail down all of the plywood on his roof. I worked for several days swinging a hammer and driving nails. My arms ached for a week. Now one man goes on the roof with a pneumatic nail gun and finishes the roof in several hours. They can complete two or three roofs in a day.

When you drive by a construction site where homes are being built, if you can find one, you will hear the whirring and whining of power tolls along with the boom boxes blasting our salsa music. That’s the construction industry today. It’s a Habitat for Humanity project.

Do Obama and his Jobs Council understand this fact? I doubt it. They are trying to apply Roosevelt’s 18th century Keynesian economics to the creation of jobs in the 21st century.

Jobs are created by small business entrepreneurs who perceive a legitimate demand for a product or service and are willing to risk their capital to fill that need. They are not created with government tax breaks of credits. Why on earth would a small business owner take a $7,000 tax credit to hire a person they do not need and pay them $15,000 plus benefits for the year required to qualify for the credit? It’s just nonsense. In Obama’s Marxist mind he believes if you create the product or service he demand will follow. Community organizers do not create jobs, they create civil strife and chaos.

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