Recently I’ve been poking fun at government’s attempts at “stimulating” the economy and creating jobs. You might remember the first food stamp debacle, then the unemployment insurance hilarity, and finally the second food stamp nonsense. Well, my jibes were mere child’s play compared to Amy Oliver’s TownHall.com article on the green jobs fallacy. Amy carefully picks apart the Obama administration’s “weatherization” program meant to “stimulate” the economy with new green jobs all while reducing carbon emissions and saving the planet! It’s like magic!

Unfortunately, down in the land of economic reality, government’s attempts at creating jobs always fails fantastically. For example, after receiving a federal grant of $20 million, Seattle went to work on its weatherization scheme. So what was the result of this massive influx of taxpayer cash over one year later? A whopping 14 jobs “created” and a rise in the unemployment rate. Sounds like success to me! Just imagine all the prosperity we could bring around the country if only the government could help “create” more jobs at nearly $1.5 million a pop. Cha-ching!

Amy reveals not only the massive waste that these jobs programs are, but also the fact that in order to execute these schemes, Washington, DC has to impose its will further into the purview of local affairs. In other words, some bureaucrat in DC has the authority to set the “fair living wage” that the local weatherization workers earn while pretending to do work. Because DC always knows better than you.

Please read Amy’s whole piece, but first put a hat on so you don’t pull out your hair.

Remember Whitehouse press secretary Jay Carney and his ridiculous statement about paying the unemployed and how that “stimulated” the economy? Well, agriculture secretary Tom Vilsack tried to one-up Mr. Carney earlier today. Watch this video (and try not to roll your eyes. I dare you):

Ok, so now food stamps are the most direct way to stimulate the economy. Apparently, unemployment insurance just doesn’t cut it anymore. Sorry Jay. But the truth is no different with food stamps than it was with unemployment insurance: wealth transfers don’t stimulate the economy. Let me repeat. Taking from some (who earned it) and giving to others (who did not earn it) does not, in any way, create wealth. It does not matter what the wealth transfer vehicle is – food stamps or cash – the result remains the same.

The Keynesian story that both Jay Carney and Tom Vilsack tell is nothing more than a half truth. They both focus on what is seen. Some people “spending” on items they might not have purchased without the stolen loot they were given by Daddy Government. In their minds, these purchases spur economic growth and hiring. Put more specifically, in the Keynesian story, these purchases spur economic growth and hiring with no offsetting costs. And that’s where the story ultimately fails. It only considers one side of the equation. The side that is seen. The side that they neglect to mention is the important “unseen” side – all of the costs associated with the redistribution program.

If told this Keynesian fairy tale, an intelligent lay person might wonder where the money came from to give some people food stamps to spend and to give others cash to spend. This is the million dollar question. To answer this question reveals the unseen costs these programs incur. By taking money from productive people, either now or in the future, the government is skewing the incentives in a few important ways. First, the productive people (including business owners) who are targeted for the government shakedowns have a disincentive to keep producing wealth and earning more money. Why keep earning more money if you can’t keep all of it? After a certain point, the take home percentage becomes small enough where the entrepreneur is better off just enjoying some leisure. Secondly, the unemployed who are being paid to remain jobless have the incentive to, now stay with me here… remain jobless. If the government is paying you because you don’t have a job, why would you get a job that could potentially pay you less than you earn sitting on your couch? Finally, the employers who are paying higher taxes in order to give jobless people money and food stamps could have used the money taken from them to hire productive people. These wealth transfers are realized in the higher costs of doing business for employers. Last I checked, it’s employers who hire and create wealth. How about we refrain from taking their money so they can more easily hire employees.

Even if we accept the Keynesian notion of a world with no costs, the whole food stamp scheme still doesn’t make any sense. If it did, then we could create more wealth and prosperity by simply adding more people to the food stamp rolls. Why stop at a few million people here and there? Why not put the whole country on food stamps? Clearly, wealth doesn’t come from buying food with food stamps. It comes from production. Food stamps, oddly enough, are not production.

I don’t want to place all of the blame on Tom Vilsack though. Remember Colorado Springs Gazette reporter Emily Wilkins? She made the same disastrous case for food stamps and their magical stimulus powers in this Gazette article. You’ll recall that Ms. Wilkins lamented the fact that only around 40% of Coloradans eligible for food stamps actually apply for them. She thought it was a shame. I think it’s a shame that economic ignorance is pervasive among bureaucrats in Washington and even some journalists in great newspapers like the Gazette. After all, it doesn’t take a rocket scientist to see through these stimulus scams. The results are all around us. $11 trillion in stimulus money spent since George W. Bush – and look where that got us.

White House press secretary Jay Carney took the American public on the economic fallacy superhighway yesterday. A Wall Street Journal reporter correctly asked Carney, “I understand why extending unemployment insurance provides relief to people who need it, but how does that create jobs?” Legitimate question. If Jay Carney or anyone else has the stones to say that extending unemployment insurance creates jobs, they ought to be called on it and asked to explain how exactly that happens. Carney, like the self-deluded Keynesian he is, replied arrogantly, “I would expect a reporter from the Wall Street Journal would know this as part of the entrance exam.” Watch the video of this exchange to see for yourself. Carney goes on to explain the typical Keynesian fantasy land narrative: (said in a pompous voice) “You see, when someone is unemployed they aren’t spending any money. Unemployment insurance gives them money to spend. That spurs economic growth. Duh.” He then goes on to say that economists across the spectrum agree with this analysis. Really?

I’m willing to bet that not all economists agree that extending unemployment insurance, a euphemism for paying people not to work, creates jobs on net. And that is the key here. A government policy can very easily create some jobs. But the real question is, has it created more jobs than it destroyed. And my guess is that most economists would agree that paying people not to work does indeed spur some economic production, while at the same time destroying much greater amounts of economic production. So on net it is a job and production destroyer. Taken further, if this story were true, we could all quit our jobs and collect unemployment checks while we sit back and enjoy higher and higher levels of economic prosperity!

I just so happen to be in a profession where I can talk to economists and see what they think. I first called economics professor and Independence Institute Fiscal Policy Center Director Penn Pfiffner. I explained what Jay Carney had to say and asked how he would reply. This is what Penn said,

Recent developments in the understanding of economics now point to an overall loss to the economy from extending unemployment insurance. While it does help the individual receiving the redistributed funds to continue spending, that spending is not based on increased productivity (output), therefore we’re continuing to borrow from the future in circumstances where the debt mood is already oppressing the economy.

Okay, that’s at least one economist who disagrees. Let’s talk to Linda Gorman, an economics PhD, former academic economist, and Independence Institute Health Care Policy Center Director. This is what Linda had to say,

Mr. Carney must believe that the money used to pay unemployment benefits comes from elves. In fact, it comes from businesses who have to pay the taxes that are used to support the unemployed instead of using the money to hire productive workers.

Okay, we’re two for two. Let’s talk to someone outside our organization. I thought about it and decided that I could give Professor of economics at George Mason University Bryan Caplan a call. Luckily for me, he was in his office and agreed to give me his reply to Carney’s assertion. This is what Professor Caplan had to say,

Even if that story were true, its not the whole story. What extending unemployment insurance does is help people not look for jobs. Even Larry Summers believed that unemployment insurance extensions delay people getting back into the workforce. The incentive effect against finding employment is larger than any positive effect of the unemployed spending money.

Ah-ha! Even former director of the Obama White House National Economic Council Larry Summers agrees that extending unemployment insurance only encourages unemployed people to remain without a job. What else should we expect when we’re subsidizing an activity (not working). When you subsidize something, you get more of it (people not working). I worked some Google magic and came upon this Larry Summers quote,

The second way government assistance programs contribute to long-term unemployment is by providing an incentive, and the means, not to work. Each unemployed person has a ‘reservation wage’—the minimum wage he or she insists on getting before accepting a job. Unemployment insurance and other social assistance programs increase [the] reservation wage, causing an unemployed person to remain unemployed longer.

This was taken from his chapter on “Unemployment” in the Concise Encyclopedia of Economics, first published in 1999. Of course Larry Summers changed his tune on unemployment insurance after he became an economist for the Obama Whitehouse, but he can’t hide from his past life when he was a relatively independent economist.

I wonder if Jay Carney has ever heard Larry Summers speak on the effects of unemployment insurance. Maybe Larry could change Jay’s mind some day. Or maybe this Independence Institute video on unemployment benefits could do the trick.

In a perfect world, our queen MAD (Mothers Against Debt) Mom Amy Oliver would be the 21st century’s Rachel Carson. And I don’t mean that in the environmental way. What Rachel Carson did in 1962 with her book Silent Spring was to start a worldwide environmental movement. The book helped launch the ban on DDT. Turns out that DDT was not the evil pesticide it was portrayed as, and banning it actually kills millions of people who suffer from malaria. (oops) Despite being wrong and extremely deadly, Rachel Carson and her book were able to sound the alarm, get activists fired up, change policies, and set in motion a movement that lasts some 40 years later.

Although Amy Oliver doesn’t have a book (yet), she is on a mission to kick start a movement to get activists fired up and policies changed. In this Townhall op-ed, Amy outlines her version of the Silent Spring – what she calls our “Economic Silent Spring.”

Right now every man, woman and child in the United States is shackled with more than $46,700 of national debt and that does not include interest or unfunded liabilities such as Medicare and Social Security. Assuming we continue down the superhighway of spending, by 2015 every child in America and their parents will owe more than $70,000 each according to the U.S. Debt Clock.

Debt is the new DDT. But unlike the harmless pesticide, debt is toxic. As it grows and grows it poisons our children’s future. Amy’s plea for less spending and a brighter future for our kids is not going unnoticed. Mothers Against Debt is getting bigger each day (like our debt). More Moms are coming to understand the danger in having policies that promote the “spend now, leave bill for later” lifestyle of Washington, DC. After all, the bills we are accruing at an unprecedented rate are neatly stacking up in each and every baby cradle across the country. Forget your kid’s impending college debt. They’re already tens of thousands in the hole before they take their first class.

If Amy gets her way, the Economic Silent Spring will start a movement that lasts over 40 years and changes business as usual in Washington. Help Amy ban wreckless debt. Join Mothers Against Debt today.

Was anyone out there happy with the debt deal Congress just made? I haven’t seen much in the way of praise for the deal, either from the left or the right. The left doesn’t like the “draconian cuts” made to their beloved social programs, while us free marketers don’t like the complete lack of any cuts at all. See, in Washington, a “cut” is when you don’t spend as much as you originally wanted to. For example, say you were going to spend an extra $1,000 next month. If you decided to take it easy and instead only spend an extra $950 next month, that would be a “cut” in Washington-speak. Despite all the “cuts” the left is wailing about, the federal budget is scheduled to increase next year. And the following year. And the year after that… etc.

In addition to senior fellow and Constitutional scholar Rob Natelson’s severe disappointment with the debt deal, our Barry Fagin is also not impressed. In yesterday’s Colorado Springs Gazette, Barry outlines why he isn’t a fan of the deal and also what we could do to end our perpetual federal spending crisis. Hint: it doesn’t require any action from those spendaholics in Congress.

Even though the whole debt ceiling fiasco is on its way out, I want to point this iVoices.org podcast in your direction. Last week a new narrative emerged from the debt ceiling = default storyline. It advanced the idea that the president could raise the debt ceiling unilaterally – Congress be damned! As you might have guessed, our constitutional scholar Professor Rob Natelson had some serious constitutional issues with this narrative. It’s no accident that the president does not enjoy both the power of the “sword” and the power of the “purse” at the same time. The Founders rightfully feared a president who was both commander and chief and guardian of the nation’s checkbook. Thus, the idea that President Obama could raise the debt ceiling by himself would have angered (and frightened) the Founders. Professor Rob Natelson addressed this issue in a blogpost on constitution.i2i.org and in this iVoices.org podcast.

Boy is the corporate welfare machine rolling in Aurora these days. Gaylord Entertainment is benefiting from a massive amount of subsidies and tax breaks from the city of Aurora for the honor of locating their hotel and conference center there. If Gaylord were not granted the $300 million in generous “support,” the theory goes, they would not have located their project in Aurora. Of course whether they put roots down in Aurora or somewhere else is besides the point. What matters is the massive wealth transfer from taxpayers in Aurora to a private corporation.

One way for a city to oil up their corporate welfare machine is to “blight” some land, which allows local governments, schools and special districts to “rebate to developers what they pay in property taxes for 25 years.” The word “blight” is to developers as the word “candy” is to children. Except that children have to work a little sometimes to get their candy. However, blighting some land only requires some fancy English language tricks and a stroke of the corporate welfare pen. Here’s what Sen. Morgan Carroll had to say in the Denver Post about this scheme,

It does not pass the straight-face test for the blighted designation… It’s a financing game to get public subsidies for a project that might be wonderful if it were privately financed.

Sen. Carroll hits it out of the park with, “if it were privately financed.” You know, I remember a time when companies would raise money the old-fashioned way – through bank loans. And, now I know I’m showing my age with this one, through private investors. Crazy right? Corporations used to raise capital through means that do not take taxpayers hostage. Not anymore. Now when a project isn’t profitable enough to catch the attention of folks who want to make investments with their own money (to earn a little profit), corporations go to city councils and pitch unprofitable ideas to be financed off the backs of the residents. If banks say no, governments say yes.

Beware of the terms, “incentives,” “grants,” “urban-renewal,” “blight,” “public-private partnership,” and “public investment.” They are all euphemisms for the taxpayer funded corporate welfare gravy train.

Here’s what senior fellow Randal O’Toole has to say about this Gaylord project in the Denver Post earlier this month: Taxpayers Should Reject TIF.

Oh Diana. We know economics isn’t one of your strong suits, but at least think a little harder before you parrot irrational talking points. Like the good Keynesian she is, Congresswoman Diana DeGette continues to push the popular and fallacious narrative of debt ceiling default. Here is what she had to say in the North Denver Tribune,

To avoid defaulting on our obligations and sending the world economy into a tailspin, we must raise the debt limit by August 2nd.

I talked about this last week and made the point that although this false narrative is winning the popularity contest, it is still magnificently illogical. The strategy of, let’s call them “defaulters,” is to scare the daylights out of the American public with talks of an impending economic doom if we don’t raise the debt ceiling. It’s quite likely you’ve heard a dozen catastrophic doomsday scenarios from various political pundits and politicians. Diana DeGette takes the typical doom and gloom talking points, but adds her own unique twist: asserting “defaulters” as mature adults looking for compromise, and the opposition as immature little children holding onto to principles with deadly consequences.

For example, are you “serious” and “mature” like Diana?

If they resisted the extreme urgings of some in their party to hold out for unpalatable concessions on budget cuts, serious policymakers in the center could hammer out bi-partisan solutions and mature policy decisions.

Apparently, I’m neither serious nor mature. In fact, I think it’s very unserious of Diana to suggest that we balance the budget without touching the 2 biggest items in the budget: Social Security and Medicare. I bet the immature folks over at Reason Magazine would agree. They’ve been hammering back against this silly narrative for awhile now and just released a short and completely unserious video, “3 Reasons Why the Debt Ceiling Debate is Full of Malarkry.” Gosh, if only they knew about the mature adults taking a serious position on this issue.

In the la la land of Washington, DC, the secret password has been “debt ceiling” for weeks now. The August 2nd deadline is fast approaching and talks of raising the roof (or ceiling if you prefer), are still raging on with no deal in sight. Because the two sides cannot come to an agreement, we’ve seen the art of the narrative played to perfection by the Obama administration. They’ve made it so that every time someone says the secret password (debt ceiling), they must also say “default” within one or two sentences. By ingraining this one-two punch into the minds of the public, the White House has successfully utilized the fear card. “You don’t want to let us borrow MORE money? How does the United States government defaulting sound to you?” Or, “You want to CUT spending at a time like this? You must want full economic armageddon!” …And so on according to the mainstream narrative.

This economically ignorant line has been parroted from every corner of every media outlet in existence. I dare you to browse the web or flip on your TV or radio and not hear someone say “debt ceiling” and “default” within 3 minutes. But at least we have our own paper of record, the Denver Post, to relieve us of this ignorance… right?

If the debt ceiling isn’t addressed by Aug. 2, there is a great chance that the United States of America, the richest country in the world, would default on its obligations.

NO! NO! STOP! Tell me that’s a typo. That’s gotta be a misprint right guys?

Of course it isn’t. It’s not a misprint, it’s Wednesday’s editorial. Where does a guy have to go to get some sanity around here? Isn’t it obvious that if the debt ceiling is not raised we’d prioritize paying our bills? Okay, so we can’t borrow any more money. Fine. How about we prioritize our debt payments at the top of list – as the first things we pay with the money we have. Then after that, we move on to the most essential functions of government. By the time we run out of money, we’ll have not funded some bottom of the barrel government bloat – like the latest green energy scam or some other wasteful corporate welfare. This is exactly the action that any normal person would take if faced with the same situation. We’d prioritize our obligations by importance and necessity, and when we finally got down to luxuries such as those sports tickets we wanted or that sweet cordless drill, guess what? We couldn’t buy it.

We wouldn’t just throw our hands up in the air say, “I guess I can’t eat now!”

For some much needed sanity on the issue, I found this article on the Mises Institute website titled, A Short History of US Credit Defaults. After going through some earlier defaults in our country’s history, it concludes with this passage about our current situation:

In this event, it is unlikely a default will occur. Historically, governments prioritize debt service above all other expenses. If the expansion of funds via debt becomes impossible, the Treasury will cease paying other expenses first, starting with “nonessential” discretionary expenditures, and then move on to mandatory expenditures and entitlements as a last resort. In extremis, what will happen is that all the losses will be foisted onto the Federal Reserve. The Fed holds something on the order of $1.6 trillion in debt issued by the Treasury of the United States. By having the Federal Reserve purchase blocks of Treasury debt and defaulting on these non-investor-held securities, the United States can postpone a default against real investors essentially forever.

Thank you to the Mises Institute and to anyone else who is not perpetuating this myth. Even better than not perpetuating this silly ignorance, would be to advance a better, more truthful narrative. How about this one?  How about we all jump on the “lower the debt ceiling” bandwagon! Take that!

The Colorado Springs Gazette is about as solid on economic issues as a newspaper could ever get. With Wayne Laugesen at the helm of the editorial page, it’s no surprise. However, something must have slipped through the cracks over on the news side this weekend when reporter Emily Wilkins wrote on food stamps in the Springs. The article focuses on the fact that although many people are eligible for food stamps, only about 40% actually apply for them – despite our persistent unemployment and down economy. Great right? Well, not according to Emily Wilkins. Instead of praising folks for not going on the dole, she laments this fact. The article paints the picture that it’s unfortunate that many of the folks eligible for food stamps in the Springs are choosing to either hunker down, take responsibility, and work hard through this tough time or rely on private charity for help (or both). I happen to believe quite the opposite. Like Seth Richardson in this fantastic Broadside blog response, the nearly 60% who are not taking more money from taxpayers should be commended.

What’s more, the article espouses an egregious economic fallacy: that taking money from taxpayers and giving it to a select group of people to buy food promotes “job growth” and helps “economic development.” Worse still, the article goes on to explain that the unused dollars from the majority who do not apply for food stamps “translate into wasted dollars that would otherwise spur economic activity.”

Let me get this straight. The money that was not taken from taxpayers by force and transferred to people who did not earn it, sits idly and unused? The taxpayers who earned the money would have put it in their mattress? They would not have purchased anything with the money? They would not have invested it? But through the magic of government transfer, the money in the hands of the food stamp recipients creates “economic development?” So the government transfer itself creates growth? Is that it? I don’t understand because it makes no economic sense.

The next time Emily Wilkins wants to write anything on economics, she ought to ask at least one of the many economically literate people in the Springs. Her story offered no alternative perspective, just the pro-government transfer, economically devoid perspective. She could have asked her colleague Seth Richardson. Or the always venerable Sean Paige. Or even better, she could have consulted Colorado Springs’ resident economist Paul Prentice. Not only is Paul a senior fellow with us at Independence, he’s part of the faculty at the Mises Institute and co-founder of the Pikes Peak Economics Club. Perhaps those credentials were too lofty for such an article. Maybe next time she’ll contact someone with 5 less economics degrees than Paul Prentice. Like me.