Tuesday, September 13, 2011

Obama's jobs program

This week Obama proposed a $447 billion plan to create jobs. The two big items in the plan are more tax cuts and more aid to states. Most state governments are in miserable long term shape (see Illinois). If the problem were simply liquidity then I'd support the aid but many states are insolvent long term. They've promised more in pensions, benefits etc than they can possibly afford to pay. The aid only puts off the day of reckoning - this seems to be a common theme of late. The tax cuts will certainly encourage the hiring at the margin, but at what cost? We have had limited success getting the economy growing with the existing tax cuts and monetary easing, why do we think more of the same is the solution? Furthermore the federal government is pretty bad at cost benefit analysis because it faces limited consequences if it screws up. If a company malinvests billions they go bankrupt, everyone who invested loses lots of money. If the government malinvests billions someone might get fired, but more often than not no one even checks to see if the investment is having the intended effect. James Bovard writes in the WSJ about the historical performance of job training programs (spoiler: they have a very poor record)


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