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January 13, 2010

AP Report: Unemployment Unchanged by Road Projects

AP Report: Unemployment Unchanged by Road Projects

Click here for the video portion of this blog

In another somewhat stunning (depending on who you are) finding, the AP reported on Monday that President Barack Obama's $20 billion roads project in the first stimulus had no effect on unemployment. For those of you who do not remember, these were the projects that had all those large signs reminding you that they were putting people to work.

I recall that a section of Interstate 77 on the southern edge of Canton was re-paved with the stimulus money. It’s easy to remember this because the government spent money on signs to tell us this. Less than 3 months later, there are several potholes in the area (especially northbound) (maybe we should have paved it after the snow as opposed to in late summer). Furthermore, the AP report found that it did not matter whether much money or no money was spent, unemployment did not move nonetheless (to those who will argue the stimulus saved jobs).

This is another in the latest of findings which are showing that massive amounts of government spending are indeed not assisting in the economic recovery. The administration’s economists are arguing that we are going to receive a greater return on their investment than what is spent. The stimulus may be distorting the GDP numbers, but they certainly aren't putting people to work, giving businesses and consumers more access to credit, or giving consumers (or business leaders) more confidence in the economy. This raises the question, where is all this money going? What is the return on this money? If it can’t be measured, why is it being spent?

I have looked hard and long for any individual who can stand up and say, "my business hired me because of government stimulus money." Some may argue that they had work to do because of the government stimulus, but what’s to say that there wasn't work to do without a government stimulus? NOTE: The administration announced yesterday (since the writing of this article), that it will change the counting method for jobs affected by stimulus, likely proving this point.

The administration, apparently has disagreed with the AP's findings (at least I hope they did), because they pushed through another $75 billion jobs bill last month. If the first bill didn't do anything, what does the government expect the second bill to do?

More importantly, why aren't people hiring?

Surveys of small business owners (who hire 2/3rds of the workforce) show that uncertainty is the main reason hiring isn't occurring. With health care costs rising, economic growth uncertain (the private sector of the economy is not growing), banks lending to the government as opposed to businesses and taxes set to go back up to Clinton-levels, small business owners do not want to commit to hiring more employees. If this administration wants to boost hiring, it should consider:

1) Killing the current health care bill (a bill which does nothing to cut costs, in fact it makes future costs more uncertain)

2) Extend the Bush tax cuts, possibly permanently.

3) Enact a two year payroll tax cut.

4) Encourage exports by creating export incentives and reducing restrictions.

By spending and borrowing, the government is not doing anything to create jobs. By relaxing employer uncertainties, decreasing the cost of employment (including benefits), and curbing on this ridiculous amount of spending (which is making it harder to get credit, which will be discussed in a future blog), the government can contribute more to the employment market.

This advice has already been given to the Obama administration, but who knows if they are listening.

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