Why There Aren't Any Jobs. . .

“That’s funny, they’re dustin' for jobs where there ain’t no jobs.”

-- North by Northwest. . . sort of.

The Democrats are worried. They expected the American economy to start producing jobs galore by this point in the election cycle no matter what they did. They were wrong. The economy has lost 7.9 million jobs since the recession began. Joe Biden says those jobs are gone forever and will never return. And it's hard to disagree: as long as the Democrats are running the show, those jobs won’t return.

Most of these jobs vanished because the economy entered a recessionary period. Recessions are a normal and necessary part of the economic cycle. In recessions, businesses cut the fat out of their operations, consumers retrench and make their own balance sheets more healthy, and poorly run companies go under, freeing up the resources they were wasting for better uses. This usually results in a strong period of growth once you emerge from the recession. Yet, this hasn’t happened.

Part of the reason is that this recession was worse than most. In fact, it was basically a depression. It also had a different character than most recessions because this one was caused by consumers living way beyond their means because a bubble in the housing market made them feel much richer than they actually were, and they spent accordingly. Now that housing prices have crashed, consumers have lost that source of credit and their imaginary wealth. This will take some time to balance out again, meaning prolonged trouble for the economy.

But that’s not the only problem. Over the past two years, the Democrats have piled insane levels of debt onto the American taxpayer. This inflated interests rates, dried up credit, and weakened the dollar. All of this made it more expensive for the already-hurting consumer to spend. The Democrats then enacted a series of tax hikes and new regulations, each of which further reduced the desire of consumers to spend and made it more expensive for producers to produce. They also passed various measure that made credit more expensive. Basically, the Democrats kicked the economy right where it was injured.

What the Democrats were betting on was that the economic cycle was strong enough that whatever they did wouldn’t stop growth from returning. In a growth cycle, that might have been true: their policies would have slowed growth, but might not have stopped growth entirely. But with consumers already on the verge of collapse, this was the worst possible time to impose growth depressing and consumer crushing policies.

And that’s not even the worst of it. The Democrats have added to the misery by talking big but simultaneously trying to remain vague. Indeed, they have outlined an aggressive leftwing agenda in principle, but they have been too afraid to outline the specifics. Even when they have passed bills, they usually kicked the important decisions on the details down the Executive agencies level.

Why does this matter? Because before employers will hire or expand (which leads to hiring), they want certainty. If they don’t know what regulations are coming, then they won’t hire and they won’t expand because they can’t determine if it makes sense to do so. The Democrats’ big, vague talk leaves employers fearful of what is coming and uncertain as to its effects. Hence, they simply won’t hire or expand until they get some certainty. In fact, they’d be crazy to do so. But certainty won't come for another couple years until the relevant agencies issue their regulations.

The Democrats don’t understand this. Indeed, right now they are in a near-panic about the lack of jobs, but they don’t have a clue what to do. Some of them want another stimulus, even as their own side finally admits that the first three or four stimuluses didn’t work -- mainly because they showered money on non-job-producing projects like supporting state debt. Others want a “jobs bill,” which is another name for a stimulus bill. Some just want to put their heads in the sand and blame Bush. . . seriously, they started a new campaign this weekend to blame Bush. Even their friends in the media have dutifully created polls to show that the public blames Bush for the economy.

How sad.

In any event, the Republicans should take a lesson here. When they get back in power, they need to resuscitate the consumer and employers. That means tax cuts, and it means providing certainty so that people can hire or expand with confidence.

In the meantime, enjoy the show as the Democrats run around like maniacs beating a very dead horse.


** Update: Interestingly, after I wrote this, several liberal blogs tried to explain why there were no jobs. The answer they came up with was "after the last 12 months of change, businesses aren't certain yet how the business environment has changed." That's close, but not quite there. The problem isn't that businesses don't understand the last 12 months yet, the problem is they don't know what the next 12 months will look like.