political claims of "job creation"

they did not build that, but they sure will try to claim they did

politicians claiming to have created jobs are always something of a hijacked parade: they find a trend already in progress, jump in front of it, and claim to be the bandleader that brought it into being.

all the parties do this.

it’s a longstanding and trite trick whereby whoever happens to be in office at the time something good happens claims that they created the benefit as though being elected somehow creates omnipotence. (at least until it’s time to pass the buck if outcomes are less than salubrious, then try and find them..)

it’s all part of stealing your baby and kissing your wallet.

but the simple fact is that beyond establishing the basics of property rights and contract enforcement, government does not and cannot create jobs on a net basis. they can only destroy them. at any given point in time and under any given set of circumstances there is some maximum employment rate and free markets if left alone will seek and asymptotically approach it as they engage in pareto optimal transactions seeking to make the best use of scarce resources to expand the production possibility frontier. and government cannot help by trying to change these allocations.

in fact, despite what they panderingly purport: they can only hinder.

they like to play the game of “seen vs unseen” where some program creates some visible job for some person who is proudly trotted out as proof of benefit. but what goes begging is the cost of this because it’s easy to hide/ignore costs if you spread them out over many people each paying a little and likely not even knowing it. the $50k job is “seen” but “unseen” is the fact that there was a $400k deadweight loss imposed on consumers to “create” it and this almost certainly cost many jobs.

longtime gatopal™ mark perry has done lots of great work on this looking at tariffs. trump’s steel tariffs, for example, cost consumers $900,000 for each job created. washing machine tariffs cost $820,000 per job. this is alarmingly typical. and so it goes with all government works programs. they are always net losers. harvard business school did a wonderful study “do powerful politicians cause corporate downsizing” that found that yes, having a powerful politician in your district did indeed cause pork to flow to you but that it crowded out a significantly higher level private investment and resulted in net job losses. (and this does not even take into account the lost growth and jobs from the tax dollars used to fund the pork likely being used for some better purpose by someone else.)

oopsie.

so you should basically ignore all political claims about “creating or having created jobs.” apart from “establishing property rights and contract” and “getting out of the way” there is nothing they can really do in this regard and even getting out of the way is a sort of broken window fallacy whereby those who broke a window claim that your having to replace it is “economic growth.”

now clearly, this is the sort of absurdity than only the more concussed of keynesians would put forward (and often do. paul krugman is famous for claiming one could stimulate the economy by during dollar bills in bottles and paying people to dig them up).

even a small child will recognize that if you take away their cookie and then give it back, you have not made them better off, but today’s crop of politicos and pundits seem to either be less perceptive than toddlers or (perhaps more insulting) willing to bet that you are.

witness aspiring presidential candidate newsom as he puts forward just such claims about “job creation” in full contradiction of not only basic possibility but of fact as well. it’s fine political party allegiance swearing, but as economics, it’s just dire.

this is past even broken window fallacy and into “the guy with his foot on your throat taking it off and asking to be thanked for having restored your breathing” except that, as we shall see, even this fails to hold water when we make apt comparisons as those claiming credit are still more strangling than those they claim to exceed.

but shame is not a big feature of politics these days, so here we go:

here are the fun facts gavin doesn’t want you to know:

there was, in fact, quite a strong jobs signal in the US and it was extremely bifurcated by political party. but his was not the party that looks good as a result.

let’s look:

(all data from the st louis fed FRED database and can be accessed and downloaded HERE)

to start, i picked the 10 most populous states in the US. 9 of them were perfect examples of red or blue with both governor and legislature being one party. 4 were red, 5 were blue, and i threw out north carolina as “purple” because they had a polyglot executive and legislature.

i then pulled data on nonfarm payrolls for each state and indexed them all by setting 3/1/20 to 100 to that we could measure the rate of change from and following lockdowns in comparable fashion.

from that we get this which is hard to read so let’s start pulling it apart.

the drop in employment from march to april 2020 was the sharpest in US history. it varied by state with high correlation to political party in charge. the average red state dropped 13%. the average blue state dropped 17.5%. (35% sharper)

as we move out to june, we can see that the red states also re-opened and recovered jobs more rapidly.

by june, the average red state had recovered 42.7% of its job losses vs only 30.2% in blue.

and as we jump to present day to assess these claims of “job creation” we see that once more, team donkey is lagging by being less able to get out of the way than others.

the average big blue state is a paltry 1.2% higher on nonfarm payrolls than pre covid. the average big red state is up 5.6%. california is up 3.5%, but florida is up 8.

this starts to make the “this is a team blue economic success story” story look pretty untenable.

so:

how can a party claim to be the architect of the greatest jobs expansion in history when the parts of the country controlled by that party are underperforming so badly?

these people are jokers.

they are either fools or trying to play you for one.

neither seems a strong basis for faith in them.