Half the Story

Is all you get from this N&O article discussing the jobs that will be "created" in NC from the federal spending bill.

The White House estimated that the $787 billion stimulus package that President Barack Obama signed into law Tuesday afternoon would create or save 105,000 jobs in North Carolina over the next two years.

To the N&O's credit, however, is the fact that they include this major caveat in the second paragraph:

But the math behind those estimates is a patchwork of best guesses, historical analogies and academic theories.

That probably should be the end of the article, as the estimates are admittedly unreliable. But the article continues with some critiques of the estimates, with noted area economists saying they think the estimates might be a little high. I think the estimates are a little high too.

By 105,000.

Why? Government does not "create" jobs.

It can merely reallocate labor and resources to politically-favored projects away from production geared towards meeting consumer preferences. In other words, resources are directed by political ends rather than by individual needs.

Something else missing from this whole "stimulus" debate is the long-term effects of such legislation. Of course, we all know that government debt will skyrocket - to be paid back most likely by a combination of the printing press (devaluing the dollar, i.e. inflation) and tax hikes. Both of these will unquestionably harm economic progress in the future.

Furthermore, what happens when the dust settles on all of these government projects? Government projects are pure consumption of resources, not investments in wealth-generating endeavors. That means that tons of steel, concrete, wood, and countless other resources holding together those government buildings will not  be available for private investments. It is private investments that create jobs, and provide for productivity gains that increase wages.

Moreover, once the "stimulus" projects are completed, labor and other resources that were employed supporting the government projects, both directly and indirectly, will need to be redirected by the private sector.

Necessary during this reshuffling period will be a loss of jobs and a time of idle resources. It will take time for the construction workers, tractors, cranes, etc. to be put to use in new combinations and locations by various entrepreneurs attempting to respond to new and changing consumer needs. Likewise, the additional waiters, grocery clerks and other workers that were hired in response to the temporary influx of money into the local economies hosting the public projects will find themselves unemployed. The short-term activity created by government projects will thus be followed by a further rise in unemployment and reduction in output.

It is all of these unseen effects that the "reputable national economists" don't take into consideration when making bold assertions about job creation.