Buying Jobs with Borrowed Money

Does borrowing and printing money to create jobs make sense? While it sounds like a simple question, the answer is not so simple. Let’s begin by looking at the job impacts of the 2010 and 2011 deficits, the Federal Reserve’s “money printing“ quantitative easing, and the proposed budget for 2012 to 2022 recently released by the Obama administration.

The deficits for 2010 and 2011 total $3 trillion. The Federal Reserve “money printed” was many trillions more starting in 2009. Average wages for jobholders in the U.S. last year was about $50,000. Assuming a minimum total borrowed and printed money of $5 trillion this is enough money to give $50,000 to 100 million citizens. Most of the money went to government deficits and corporate bailouts to avoid bankruptcies. Yet only 3 million jobs were created in these two years, and perhaps a few million jobs were saved by the bailouts.

The 10-year Obama 2012-2022 budget estimate shows a debt increase of $3 — $7 trillion over 10-years dependent upon assumptions. This budget assumes rapid growth, takes credit for already approved spending reductions, and increases taxes over those in 2011. Personal income taxes increase 161%, corporation taxes increase 154%, social insurance taxes increase and 86%. History shows average wages and benefits have risen about 50% per decade since 1940; thus, all who have jobs will pay considerably more taxes than what they will receive in wage increases. Fortunately, both the House and Senate have rejected this budget.

Meanwhile, both parties regurgitate their political rhetoric while neither party’s “solution” is enough by itself. Big spending cuts will require major entitlement changes since, simply, the rich are not rich enough to cover the deficit, and U.S. business taxes are the highest in the world. Entitlements, taxes, and many other major systems will require serious restructuring in order to transition to long-term solutions. The accumulating debts place a big burden on our younger citizens, particularly those under the age of twenty-five. Unfortunately, most of these young people able to vote are susceptible to political rhetoric received via Facebook news-feeds and YouTube sound bites that tells them what they want to hear. Most in this young population do not have a clue of how they are being impacted.

Next, we wonder, what happens if we allow career politicians to continue “borrowing and printing?” A rising debt burden (verses GDP) will ultimately result in debt holders demanding higher interest rates and lead to hyperinflation for all of us. Printing money to pay our debts, keep interest rates low, and cover government borrowing may help fix some short-term problems, but it also makes every dollar earned less valuable in the long-term. Buying jobs with borrowed or printed dollars kills new jobs and lowers everyone’s standard of living.

So, why are we in this mess? This question has a disappointingly simple answer: short-term solutions delivered in misleading, though appealing, rhetoric wins elections. When career politicians hand out “free money” and other benefits, and tell voters what they want to hear, they secure their reelection. Career politicians look out for themselves and —unlike our soldiers —are cowards unwilling to do what is in our best long-term national interest. Many politicians exploit our problems by using them to scare, seduce, mislead and divide us. Few tell the whole truth. This is demonstrated by the Obama Administration’s proposed budget and most political rhetoric.  

As humans, we would rather not face the discouraging facts that our politicians have bestowed upon us. More government paid entitlements and the (false) hope for better infrastructure, education for our children, etc. are much easier to swallow than the truth. Our only hope is to now accept the truth and prepare to sacrifice.

Let’s recap: “Does borrowing (or printing) money to create jobs make sense?“ The simple answer is “no” for the public sector and “yes” for the private sector. Government debt, deficits, and money printing driven by politicians are not in the best long-term interest of our nation and are highly inefficient. Our current political system is unstable since decisions are made by out of control career politicians seeking reelection who depend upon deceiving voters to gain votes. The private sector cannot print money so reinvestment of profits and borrowing are their only job-generation and profit options. In a capitalistic system, survival requires careful risk verses benefit considerations. The result is a stable system wherein the business must meet needs and wants of its customers and stakeholders (profits or growth) to survive.

 

We the People” can and must learn the facts and not accept the false political rhetoric. We need to change our focus, and elect leaders who will develop and execute longer-term solutions for our nation. Let’s make it clear to every career politician that without real change, we will drain the Washington swamp and kill the alligators.

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About

Dr. Cleland’s Ph.D. is from Purdue University where he specialized in complex systems theory. His technical training and experiences includes analyses of many types of systems, involvement with numerous federal, state, and local agencies, and management of a broad set of set of professionals, services, and trades people. He has managed scientists, engineers, policemen, firefighters, environment, health, safety and emergency planning experts, building trades and maintenance crafts personnel, and others.

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