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Can the Government Do Anything About Unemployment?

Sigma Investment Counselors

September 26, 2011

Yes, but there are some difficult and potentially contentious hurdles.

In the interest of perspective, it would be helpful to consider the public and the private sectors separately. The Federal Government, through State or local governments, could simply begin hiring, or provide funding for non-federal hiring. The problem with this approach is that it requires higher revenues, read taxes, or increased deficit spending, and is, therefore, not sustainable. Think Greece.

Sustainable job gains require a growing economy, which, arguably, can best be pursued by the private sector. Entrepreneurs have the ideas and abilities to spur economic activity. Historically, entrepreneurs have been an important engine for job creation, e.g., Henry Ford, Bill Gates, and Steve Jobs.

Government has limited influence on private sector employment decisions. However, on the margin, government can act as a helping hand or a hindrance. Too often it serves as the latter. Perhaps the best strategy may consist of simply getting out of the way. There is an old Chinese proverb, “Give a man a fish and you feed him for a day. Teach a man to fish and you feed him for a lifetime.” Still valid after a thousand years, however, today our prospective fisherman would need licenses and permits, would have to address myriad regulations such as emissions, endangered species, and OSHA (to mention a very few).

This is not the time or the place to rehash the desirability of all of the regulations that govern even the smallest corner of economic activity. But it might be a good time to suggest that implementing and creating new government regulations should be tempered with moderation and a sense of timing. Job creation has often been stated as a government priority, but continues to take a back seat to other agendas. The unemployed cannot hire expensive lobbyists, are not part of an organized group, and do not represent a defined voting block. The import of these components places this group at a significant disadvantage. Cynical? Yes. True? You decide.

Consider this; prospective legislation is scored for financial cost prior to congressional action. Why not look at the effect on employment too?

Walter J. Kirchberger, CFA

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