650,000 Jobs Saved!

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650,000 Jobs produced by government stimulus plan!

What does this mean for us as taxpayers?  On the surface it sounds great but when we dig deep into the numbers and apply a critical mindset the picture doesn’t look so rosy.  The first problem with these jobs is they are not the kind of jobs that produce a net income to the government.  In fact these jobs are a drag on the economy.  For example hiring a teacher sounds like a great thing we need teachers I love teachers but teachers do not produce income for the government.  A teacher’s salary comes out of the tax pool.  Every teacher’s salary is paid for by people in the community.  We need to pay that salary through collecting taxes from the Wal mart clerk, the realtor, the Blockbuster manager. 

The easiest jobs for a government to create are government jobs.  These jobs take care of important tasks but they do not introduce new money into the economy.  Yes we need teachers; we need Policemen, firemen, road workers, DMV workers, etc, etc, etc.  And when these people are employed they contribute to the community by spending their money at Wal Mart, Blockbuster, and even buy houses which help the economy but since their salaries are drawn from the tax pool they are simply redistributing wealth created elsewhere. 

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When a Wal Mart job is created the tax pool grows rather than shrinks.  Their taxes are a net positive to the system.  There is in a sense wealth created for the community.  Teachers, police and fireman are paid out of the taxes on these private sector jobs.

The numbers are now out on the Cash for clunkers program.  The program generated approximately 690,000 sales.  150,000 of which were estimated to occur specifically because of the program.  In other words 150,000 cars were sold that otherwise wouldn’t have been.  The average cost per extra vehicle sold equals out to 24,000 dollars spent by the government per sale.  The government not only doesn’t have that extra money lying around but they in fact had to borrow it.  So the taxpayer is now paying interest on a program that helped 690,000 of our citizens (assuming that none of these applications were fraudulent) save 4,000 dollars on a car that will increase gas mileage an average of 10 miles per gallon per vehicle.  We know that a lot of these trade ins weren’t actually the daily drivers of the people who traded them in but let’s just discount that for a moment and give them the benefit of the doubt.  I am not sure what the environmental impact is of prematurely committing 690,000 vehicles to the grave but I suspect it probably equals out the mileage difference in the vehicles.

Now the car companies are experiencing an extremely light quarter following the new car buffet hosted by the government last quarter.  The slow quarter will probably dampen some of the enthusiasm of economists who were very happy to put all that extra black ink into their reports for the last quarter.  The bottom line is the government has spent billions of dollars so that they could show one quarter of growth in the middle of several dismal quarters.  The money spent will be an additional burden on our kids and us for years to come.  If you happened to be one of the 690,000 that took advantage of the program than you have realized the best benefit of this program a free $4000 dollar check.  By the way that $4000 counts as income and you will be taxed on it.  Oh and if now you have a car payment and you didn’t before I really must question if you are really that much better off?  Sure it is fun to drive a new car but if you commute 20 miles a day you will save approximately 4 gallons of gas a week at 3 dollars a gallon that is 12 dollars a week or 48 dollars a month.   You can go ahead and subtract that from your new car payment to help you calculate just how far ahead you aren’t.

I suspect the real winners in this program were the fraudsters that had checks mailed to them without turning in any cars or substituting other junkers for the true trade ins.  The government supposedly collected 685,000 cars there is no word on what happened to the other 5000 cars that are missing.   And no one has an estimate on how many cars were swapped. 

The bottom line is there is no real growth even if we take all the government numbers at face value.  The growth is artificially created but no real wealth is created.  The real way to grow the economy is to grow the private sector.  You have to put programs in place that encourage private sector growth not government growth or you are just increasing the burden on the engine of the economy.  You can only push this so far until the entire system collapses.  We need a government that understands wealth creation not one that pats itself on the back for handing out our money to people brought under their umbrella.  We need to increase our production the best way to do that is to lower energy costs, encourage factory production, we need to build things, create things, make things better, you build wealth through improving efficiency the fewer people it takes to create any particular thing frees workers up to produce something else.  This leads to short term layoffs but long term economic growth if other factories and businesses utilize the available work force to create something new.  We cannot sustain our economy entirely by having the government hire more people it just isn’t going to work.