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Friday, 31 August 2012 15:00

Romney’s Impossible Mission: Create More Jobs

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Republican presidential candidate Mitt Romney promised August 30 to create millions of jobs — 12 million of them, in fact — if he is elected president in November. He said:

What America needs is jobs. Lots of jobs.…

I am running for president to help create a better future … a future where everyone who wants a job can find a job.…

His five-point plan consists of attaining energy independence by the year 2020, strengthening the educational system, forging new trade agreements with foreign countries, cutting the deficit with the ultimate goal of balancing the budget, helping small businesses, and repealing ObamaCare. With the possible exception of “helping small businesses” — whatever that means — nothing in his plan addresses the issue of job creation.

The key issue isn’t job creation but wealth creation. Nothing in his platform talks about making it easier for employers to create more value by making it easier for them to make profits. As Dwight Lee, business school professor at Southern Methodist University, wrote:

The purpose of all economic activity is to produce as much value as possible with the scarce resources (including human effort) available.…

There will always be jobs to do far more than can ever be done. So creating jobs is not the problem. The problem is creating jobs in which people produce the most value.

Lee tells the apocryphal story of an engineer traveling in China who observed a large crew of men building a dam using just picks and shovels. When he asked why they weren’t allowed to use heavy earth-moving equipment which would have completed the project in just a few weeks rather than the months the project was taking, he was told that using that equipment would cost many of the men their jobs. The engineer responded, "Oh! I thought you were interested in building a dam. If it’s more jobs you want, why don’t you have your men use spoons instead of shovels?"

Jobs are merely the end result of an economy becoming more productive and more profitable and are not an end in and of themselves. More jobs will be created only after the economy is allowed to become more productive and profitable, not before.

When Peter Schiff, a successful entrepreneur and president of Euro Pacific Capital, testified before the House Subcommittee on Government Reform last year, he outlined exactly what was needed to allow the economy to thrive, and in the process, exposed why Romney’s “five-point plan” is doomed from the start.

First, interest rates are much too low. Those low rates are punishing capital and preventing investors from accumulating it and being able to invest it profitably. Savers are being punished along with those retirees who were anticipating higher returns on their savings. Schiff said, "We need to move from a 'borrow and spend' economy to a 'save and produce' economy. This cannot be done with ultra-low interest rates.'

The prime enabler of low interest rates is the Federal Reserve. Ben Bernanke assured his audience on August 31 in Jackson Hole that he is determined to keep short-term interest rates low for an extended, indeterminate period of time in order to stimulate economic growth. The failure of such a move is obvious but misses the point: Nowhere in Romney’s plan is there any mention of the Fed’s complicity in destroying the capital incentive. Instead, he has promised to fire Bernanke.

Second, according to Schiff, massive cuts in government spending must be taken immediately, along with simplifying the tax code:

Our current tax system discourages the activities that we need most: hard work, production, savings, investment, and risk taking. Instead it incentivizes consumption and debt.…

High marginal income tax rates inflict major damage to job creation, as the tax is generally paid out of money that otherwise would have been used to finance capital investment and job creation.

Nowhere in Romney’s “five point plan” is there any mention of such an effort. Vice-presidential candidate Paul Ryan makes passing reference to it in his “Roadmap,” but Romney has successfully distanced himself from such a strategy.

Thirdly, regulations gushing out of governmental agencies such as the EPA, the Department of Labor, and the like are suffocating entrepreneurs. Said Schiff:

The act of becoming an employer should be made as easy as possible. Instead we have made it more difficult. In fact, among small business owners, limiting the number of employees is generally a goal. [Emphasis added.]

This is not a consequence of the market, but of a rational desire on the part of business owners to limit their cost and legal liabilities. They would prefer to hire workers, but these added burdens make it preferable to seek out alternatives.

Where in Romney’s plan is any mention of out-of-control regulations emanating from such agencies? Observers say a better question to ask might be: What could he do about it if he were president? Civil servants serve for life, by law. Politicians come and go.

Perhaps the most effective way to reduce unemployment, especially among young people, is to abolish the minimum wage. As Schiff so elegantly expressed it:

Setting the wage at $7.25 simply means that only those workers who can produce goods and services that create more than $7.25 (plus all additional payroll associated costs) per hour are eligible for jobs.

Those who can't, become permanently unemployable.

And yet one searches in vain for any mention in Romney’s plan of this obvious move that could begin to reduce unemployment almost immediately.

It becomes obvious that Romney’s plan is for political consumption only. Analysts believe he’s hoping no one notices that his plan to put 12 million people back to work lacks any credible strategies for doing so.

Photo of Mitt Romney at Republican National Convention: AP Images

6 comments

  • Comment Link Lene Tuesday, 04 September 2012 01:35 posted by Lene

    Communist governments "create" jobs people. In a free country the "Market" creates jobs!! Crony capitalism taking money from taxpayers and handing it over to special interests. I hear alot of crony talk from Romney. Doesn't sound like he plans on shrinking the size and scope of government much either. He has already said he wants to "replace" Obamacare but the funny thing is that he wouldn't be repealing a thing really and his other talking points are just like Obama's. You know..Mitt once said, "I'm a big believer in getting money where the money is and the money is in Washington" then he goes on to talking about having to have connections there. LOL. I heard nothing about cutting spending!

  • Comment Link Frank M. Pelteson Saturday, 01 September 2012 12:27 posted by Frank M. Pelteson

    What no one, including Peter Schiff, president of Euro Pacific Capital, understands is what the John Birch Society understands. Although Peter Schiff tries to influence Congress with the true remedy of economic recovery, the remedy is being deliberately prohibited by the INSIDERS in order to lower the standard of living of the United States so as to “harmonize” it and merge it with Third World Nations under under the United Nations in the New World Order. This can only be understood if people were to read books like Shadows of Power (https://www.jbs.org/shop/books/shadows-of-power ) and None Dare Call it Conspiracy (https://www.jbs.org/shop/none-dare-call-it-conspiracy ). One can conclude that Mitt Romney is promoting the goals of the INSIDER CONSPIRACY explained in these books. The solution is to create widespread understanding of the existence of the INSIDER CONSPIRACY and then expose it to the light of day.

  • Comment Link sirbourbon Saturday, 01 September 2012 10:06 posted by sirbourbon

    Minimum wages are ther domain of the person doing the hiring and the person agreeing to do the work not government. Perhaps we could even say that its the business of the families of both parties involved or their friends but that's as far as it goes.

    Think about it: 536 people sitting in DC pass a law forcing 300 Million people to comply with a fascist rule like minimum wage and cool aid drinkers like Herman believe that minimum wages laws make somehow help the poor. The writer points out that these laws keep the poor from getting a job.

    These types of laws that interfere in the market illegally are not designed to improve the lives of workers but to destroy them.

    Inflation of the currency is already destroying the purchasing power of $7.25 an hour as soon as the minimum wage is set by the 535 congressmen and the president. The wealth of the worker has been pulled from his paycheck before he cashes it at the bank by the inflationary policies of the Federal Reserve.

    The minimum wage laws are nothing but politicians' ploys to get elected by pretending that they care for the poor. As economist walter Williams points out why not set the minimum wage at $100 dollars an hour. Of course that would show the sham of the minimum wage law!

    If congressmen really cared for the poor they would End The Fed!

    As long as dummies that vote continue to believe that minimum wage laws work magic and continue to hate the "profits" that employers earn they will continue to be deceived by politicians with their cheap tricks.

    What are "profits" but the wages that the entrepeneur earns for creating a business. Without profits his doors will closs. The businessman has to overcome tax laws and regulations. When his business grows the unions begin to create issues demanding even higher wages and benefits that he may not be able to afford.

    But the pressure to stifle wealth creation in America begins with majority votes in both houses in congress! The pressure to end minimum wage laws placed on congress would have to be significant. But all it would take is to convince 218 of them that their wages as a congressman would be terminated at the next election unless they did away with them.

  • Comment Link Tionico Friday, 31 August 2012 18:30 posted by Tionico

    attaining energy independence by the year 2020, DISMANTLE THE EPA, GET THEM OUT OF THE WAY OF COAL, NEW OIL, NUCLEAR. OPEN SHALE, BUILD KEYSTONE. END ALL GOV'T FUNDING OF "CLEAN" AND "RENEWABLE" ENERGY. WHEN PRIVATE ENTERPRISE FIGURES THEM OUT, THEY WILL BUILD IT AND MAKE PROFITS. GOVERNMENT IS NOT NEEDED AT ANY LEVEL. strengthening the educational system DISBAND THE FEDERAL DEPT OF EDUCATION, ENTIRELY. END FEDERAL INVOLVEMENT IN STUDENT FINANCING.. THAT HAS BLOATED COSTS, forging new trade agreements with foreign countries WE DON'T NEED AGREEMENTS, WE NEED TO GET RESTRICTIONS OUT OF THE WAY. WHOEVER HAS WHAT WE NEED OR NEEDS WHAT WE HAVE, AT THE RIGHT PRICE WILL TRADE WITH US., cutting the deficit with the ultimate goal of balancing the budget DUMP AT LEAST HALF OF FEDERAL DEPARTMENTS, END WAR ON DRUGS, AND SPYING ON EVERY AMERICAN, GET RID OF CORRUPT TSA AND DHS, END ALL SUBSIDIES,STOP FEDERAL INVOLVEMENT WITH LOCAL LAW ENFORCEMENT AND MILITARISING LAW helping small businesses GET RID OF RULES THAT SQUEEZE THE LITTLE GUYS, END CORPORATE INCOME TAX, TAX ONLY INDIVIDUAL PROFITS TAKEN OUT OF BUSINESSES, and repealing ObamaCare THIS NEEDS TO HAPPEN ANYWAY, BUT HE WON'T.

    What jhope is there this big government guy will do any of the above? There WAS one candidate who had pledged to DO all of the above and more, but he was considered "unelectable"... and now is not even on the ballot.

  • Comment Link Christopher Herman Friday, 31 August 2012 18:08 posted by Christopher Herman

    *groan* Here we go, "abolish the min wage"...I'm sure some business owners would LOVE to do that. Assuming that ever got passed (it won't) it would only make workers poorer - business profit would increase, but the effects of the Fed inflation would continue.

  • Comment Link REMant Friday, 31 August 2012 16:24 posted by REMant

    As I understand and wrote here I think yesterday, the story is not apocryphal but attributed to Milton Friedman, but, in any case, refers to Keynes' comment that digging and filling in ditches would be productive. Schiff, is, of course right. Bernanke should have jacked up interest rates in 2007 instead of lowering them, just as Volcker did. Whether it would have ameliorated the crash is anyone's guess, but it surely would have speeded recovery. The minimum wage also holds up price levels. Despite several days of oratory, no one really knows where Romney/Ryan really stand on the important issues. Perhaps in office they would be sensible, but many thought that of George Bush.

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