Mitt Romney stirred the pot in the last debate with the always vague bromide that government does not create jobs. A few notables have commented on this statement —Karl Smith and Paul Krugman among them. I have absolutely no idea what this means, but it’s stupid on just about any level you can imagine.
There are ways to rebut this claim that are indeed very simple. Without money, people would still probably work, but the problems of a barter economy would almost certainly result in far more unemployment. Who creates money? The quasi-governmental institution known as the Federal Reserve. So but for the existence of government-created money and monetary policy, there would be fewer jobs.
I could make dozens of points like that, but they are too easy. Instead, let’s actually peer more deeply into what I imagine Romney — and those who repeat that line — think they are cleverly saying. They probably have in mind a basic crowding out story (a pointKrugman partially addresses). The way that story works is this: sure the government might employ people, but the money they use to do it must be taxed from citizens, and those citizens would have spent that money anyways. So therefore, the government can’t create jobs; it necessarily destroys as many jobs as it creates.
Of course this story does not hold in periods where idle resources exist, but it’s also an ideologically confused story even in periods where there are no idle resources. In its general form, all the crowding out story says is that the only way government can create jobs is by excluding resources from others who would have created jobs with the resources anyways. But guess what: that’s the only way any entity ever creates any jobs. All production involves the allocation of scarce resources, and any particular allocation necessarily precludes every other particular allocation.
If you open a factory, the land and all the pieces of matter that go into the factory could have been allocated some other way. Using those resources to create a factory necessarily precludes all other uses of those same resources, and therefore any jobs that would come from those other uses. The crowding out story — which again is the most charitable construction of whatever the hell Mitt Romney is trying to say — is nothing more than a fancy way of saying that scarcity is real. But of course, scarcity is real whether the employing firm is called “government” or “General Motors.”
If we are going to say that where crowding out exists, jobs are not created, then no jobs are ever created (except I suppose after recessions when idle resources exist). I suspect that this is not what Romney wants to say, but it’s either this or something even dumber. What’s sad is that the right-wing has other classical arguments for its position here. The right-wing could talk about relative efficiency between public and private sector, the extent to which private purchases better track individual welfare because they are individually directed, and so on. But somehow the right-wing has become so intellectually retrograde that it can’t even manage to sire its classical positions on the topic of public employment. Instead we are treated to what amounts to intellectual garbage.