Quarter-Million Dollar, Disappearing Jobs

Written in a few hours by sixteen people, and hurling a Trillion in borrowed funds and interest at politically favored programs, unions and projects, The Stimulus is promoted as a bold, urgent offensive  to “create or save” 3 million jobs.  If you dare to question this baseless assertion you’re accused of being “against jobs.”one-stimulus-job

Even though the Administration has offered no valid economic evidence, lets assume for the sake of discussion that the $787 Billion blitz will, somehow, create three million jobs.   That works out to an average cost of almost $262,000 each, for jobs that will pay an average of around $50,000 per year.  If you think that doesn’t make sense, you‘re right.  But the absurdly high cost per job is only the beginning of this rolling disaster.

Obama and his supporters try to counter Americans’ visceral distrust of rapidly growing government power by asserting that there will be more private sector than government jobs. It is true that, for example, retrofitting government buildings with “green” gear  will be done by private contractors who will hire the workers (inflated, union wages required).  But these jobs will exist only because Congress has appropriated Nine Billion Dollars.  When the work is completed these jobs will disappear unless Congress is prepared to kick out another Trillion Dollars in borrowed “stimulus” every year or two.  So in reality, they are government jobs, and are unsustainable without continuous, massive government borrowing.

Real private sector jobs, on the other hand are self-sustaining and don’t require periodic infusions of cash from outside sources.

For an example of what genuine, private sector job creation looks like consider Microsoft. Bill Gates and Paul Allen started Microsoft in 1975 by inventing an operating system called BASIC.  They invested virtually no money, only their time.  They then sold copies of BASIC and invested the revenue to build their company  After two years of selling products and reinvesting the profits, the new company was able to support Gates, Allen and nine employees.

A decade later Microsoft had grown to 1,800 employees by reinvesting profits.  In 1987 they brought in money from outside sources for the first and only time, by selling 3 million shares of stock to investors for $65 Million.

Today, Microsoft has 91,000 employees, or one for every $714 put into the company by those investors.  Even if we subtract the 5,000 layoffs Microsoft plans over the next 18 months, it comes to $756 per job.  And, these layoffs will be more than two decades after that investment.

Genuine private sector jobs are self sustaining because they are funded by customers who voluntarily exchange the resources to pay employee salaries, for the products and services those employees produce.

Along the way, this  enterprise provided technology that made possible tens of thousands of new businesses, employing several million more people in self-sustaining jobs.  Microsoft has paid hundreds of billions in corporate income tax, and it’s employees have paid hundreds of Billions more in personal income and payroll taxes.

Microsoft is, of course, an unusually spectacular example of business success.  But it’s only one of millions of businesses that provide permanent,  self-sustaining jobs.

  • Joe the Plumber can expand his business and hire one or two additional workers by buying a truck and a set of tools for about $20,000.  Over the life of the truck the plumber’s work will generate enough revenue to pay his own wages, replace the truck when it’s worn out, and a profit margin for the business.
  • A technology business can expand and hire a person by investing $1,500 in a computer and a desk.

But any jobs that develop from the Obama stimulus bill will be temporary, government funded jobs with no self-sustaining component.

The bottom line:

A  private sector job is self-sustaining and can last many decades.  A $262,000, Obama-Stimulus, government job will disappear in less than two years.

Any government program that purports to be about creating jobs should be a serious effort to hack away some of the kaleidoscope of government imposed costs and barriers to business activity and job creation.  It’s just plain dumb to divert the resources that can create many permanent private sector jobs to fund fewer, temporary, governent jobs.

2 Comments so far

  1. aaa again on February 24th, 2009

    There are many economists who believe that a key reason Japan was never able to break out of its no growth mode after 1990 is this very issue. Japan implemented 10 different “stimulus” packages.

    As one Japanese economist noted, ‘it did no good to hand people a job digging a hole and then filling it. The only portion of the stimulus that worked was that which had some form of investment aspect.’

    Needless to say, you won’t find much of that in the current US bill.

  2. Chuck on February 24th, 2009

    Do you live on Mars?

    Your “private sector” is in the toilet!

    Get a clue! The people depend on our Government to step in and do something when the private sector you worship refuses to step up to the plate and take some responsibility.

    The private sector isn’t hiring anybody. It’s laying people off by the millions, while Wall Street CEOs retire with Billions of taxpayer dollars.

    Your private sector is a bunch of crooks! They got us into this mess and its going to take government, under the steady hand of Barack Obama, to get us out.