This is the title of John T Harvey’s latest post over at his Forbes blog. This is an issue over in the States at the moment, but over here in Britain we have also had it drummed into us that economic recovery can only be private sector led, and the Government’s only role in reducing unemployment should be to prepare the unemployed for work (of course, even this function has been sub-contracted to the private sector through the Work Programme). Not only can the government create jobs, that is exactly what it should do, and I gave details of a potential policy here that would do just that.
This is another one of those ideas that should be common sense, but sadly isn’t. Here a couple of extracts from John’s post, but please read the whole thing. :
“A recurring theme in the Presidential Debates has been the role of the government in the economy. There are obviously many complex issues involved and a number of tradeoffs and caveats exist with any policy. That said, however, the assertion that the government cannot create jobs is ridiculous. It is a function of a biased definition of “job” designed to decide the question even before it has been asked.”
And regarding the idea that all public sector jobs exist because of tax appropriated from the private sector:
“Not only do your taxes go to pay the salary of the fireman, but, when he spends it, his salary contributes to your wages. So who is supporting whom–is the government dependent on taxation of private sector salaries, or are private sector salaries dependent on sales to government institutions and employees? Obviously, they are largely interdependent and rely on the continuation of the flow between them. Largely, however, but not completely, for if one of the two can act with autonomy, it is the government. At the federal level, we can spend in deficit indefinitely and without fear of default (see It is Impossible for the US to Default), meaning that the government can spend even without tax revenue, and its spending can create private sector sales–and jobs.”
alittleecon 