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ThoughtsOnline

Friday, December 04, 2009


In addition to it not being a good idea to believe a guy who has a now-proven track record of lying (and, no, I'm not talking about Tiger Woods), there are many reasons to discount Obama's claims that he is working on a plan to 'jump start' hiring.

Yes, Obama, not too many months ago, sold the country that his stimulus bill was going to save the day. It wasn't too long ago that his Administration was touting the number of 'jobs saved or created' and his Vice President was crowing that the stimulus plan was working better than could have been imagined.

But, as we know, his stimulus bill was - and remains - a failure. Unemployment is higher than Obama told us it would be if his stimulus bill passed. Consumers are still scared to spend, employers are scared to hire.

So... having sold us a defective bill of goods the first time, he's now telling the American people that he is going to take another crack at getting it right.

Well, keeping in mind the timeless adages 'once burned, twice shy' or 'fool me once, shame on me...", let me tell you why he's not going to get it right this time either, why the follow up is going to be just as useless (and possibly even counter-productive).

It starts with the fact that the people he relies on are people with no real experience in the private sector. Forget about the photo-op with private sector businesspeople that he had yesterday, the plan is going to be developed by the same folks who came up with the first plan. How can people who have never hired and fired in the real world be expected to have a clue as to what will motivate managers and business owners to start hiring? Short answer? They can't.

But the bigger reason (and, admittedly, this is both a variation and result of the above) for my skepticism is the basic flaw at the heart of what I call the liberal version of 'trickle down economics': taxpayer money goes to state and federal government which siphons off most of the money in the form of staffing and spending, leaving but a small slice left to trickle down to the private sector. This creates a 'reverse-multiplier' effect: each dollar of money going to government leaves but pennies flowing to the private sector.

This results in a dynamic where, if, for example, $10,000 in enticements are needed for private sector employers to add a position, somewhat in the area of $100,000 first has to flow into government accounts. Each 1 million jobs in the private sector requires $100 billion... and creating jobs for the approximately 10 million or so people who have lost jobs, haven't been able to find jobs or are only able to find part time work will require $1 TRILLION in additional government spending and borrowing.

Unfortunately, the consequences of federal and state governments sucking up another trillion dollars is going to seriously freak out private sector employers who, naturally and quite justifiably, fear that government is going to look to them to cover the bills... and freaked out employers are not employers who are hiring and adding staff.

So the end result of Obama Stimulus Plan, take two, is going to be a whole bunch more spending at the federal and state level... and with no job growth in the private sector. I imagine there's an entrepreneur somewhere selling T-shirts "My President Spent a Trillion Dollars on a Stimulus Plan... and all I got was this lousy T-shirt".