Republican Presidential Candidates and Their Promises for Job Creation

As the Republican candidates for president travel to the early primary states, we are hearing a lot about jobs and job creation. This is natural, considering that president Obama is about to give a major speech on jobs before a joint session of Congress, and the unemployment rate is probably the key issue in the presidential campaign.

As I listen to these candidates, I am becoming somewhat concerned that the Republican rhetoric and criticism of Obama’s economic policies are buying into the theory that presidents are supposed to create jobs. In a free market economy, it’s the private sector that is mainly responsible for creating jobs, with government playing a support role by basically staying out of the way. Unfortunately, the liberal media has been preaching for years that it’s the government, the president and the administration in power that is mainly responsible for creating America’s jobs, and the Republican candidates are playing right into that trap.

The fact is that the federal government has been growing at a very high rate for a long time, and this growth has accelerated during Barack Obama’s presidency. All of this growth adds thousands of new government bureaucrats each year whose main jobs from 9 to 5 every day are primarily to write or to enforce new regulations based on the hundreds of new programs passed by Congress in recent years. We are not going to be able to add the jobs we need to this economy until we turn around the ship of state and start reducing the size of government. That means that the Congress has to start to cut back on government programs and the size of government, and the president has to start cutting back on onerous regulations before any meaningful new job creation can take place. This is going to take a long time!

The current job picture in America is terrible, as most everyone knows. But just how bad is it and how long will it take to fix the problem? As Herman Cain is fond of saying, first you have to define and understand what the problem is before you can put forward a solution. Currently, the civilian labor force is about 58% as a percentage of the entire population, which is referred to as the EMRATIO. This is a very low number, as this percentage has fluctuated over the years from a low of 55% in 1950 to a high of 64.5% in 2000. The low number of 55% represented a time when women were not the dominant force in the economy that they are now, as a larger percentage of women in 1950 chose to be homemakers.

Today, the USA has about the same number of jobs as it had in 2000, but the population is well over 30,000,000 larger. To get to a civilian employment-to-population ratio equal to that in 2000, we would need to gain some 18 MILLION jobs. When the economy does start to grow a small number of jobs per month, millions of discouraged workers will start coming back into the work force, which will keep the unemployment rate at a high level, because the unemployment rate, as measured by the Bureau of Labor Statistics (BLS), is a ratio of the number of unemployed to the total work force population. As these discouraged workers begin to be added to the workforce, because they are now looking for work, they are still unemployed, so they add to the numerator of the unemployment ratio and cause the unemployment rate to increase. A stronger economy will require a higher EMRATIO, and a much lower unemployment rate. An acceptable target for the economy should be our EMRATIO back in the year 2000, which was 64%, and an unemployment rate of 5%. Using those figures, how many jobs must the USA create to get to these targets in a two year period? The answer is that economy needs to generate 352,000 new jobs per month. Considering that in August of 2011, the economy grew by exactly zero jobs, how likely is that? It gets much worse if we would like the EMRATIO to get up to, say 67%. To get to a 4% unemployment rate, a rate that America was experiencing during the George W. Bush years, and a 67% EMRATIO, the economy would need to grow at an astounding rate of 708,000 jobs per month over a 2 year period.

Creating this many jobs per month, on a regular basis, will be a very difficult task. It will take a lot more than another speech by a glib president reading from a teleprompter before a Joint session of Congress. I will address some of the real difficulties of new job creation in a subsequent article.

Are the Republican Presidential Candidates Overpromising on Job Creation?

Yes, I believe they are. Republican presidential candidates are entitled to criticize president Obama for increasing the size of the federal government, imposing onerous taxes and regulations on business, browbeating the Congress into passing Obamacare and Dodd-Frank, among many other negative actions that have slowed down job growth. They are also entitled to criticize Obama for much of the massive spending increases and new debt he has squeezed out of a compliant Democrat Congress in his first two years as president. However, Republican rhetoric is taking the debate well beyond the point of criticizing the negative aspects of Obama’s policies and stating that they really know how to create jobs. Mitt Romney touts his business experience as a job creator, implying that he can create the jobs, as president, that the country needs. Rick Perry proudly claims that Texas has created over a million 1.8 million new jobs, implying that if he were president, he would be able to accomplish something similar on the federal level. And in an incredibly naive statement at a town hall meeting in Greenville, SC, Michele Bachmann claimed that if she were elected president -- “Under President Bachmann you will see gasoline come down below $2 per gallon again. That will happen.” If we do elect a Republican president next year, the nation will expect swift action from their new president on the economy and the jobs front. There will be no more excuses, no blaming Obama, no blaming the “terrible hand they were dealt”, etc. I’m sure that a new Republican president would start taking right steps regarding job creation almost immediately after taking office. But no matter what they do, the math still requires that the US economy needs to start creating hundreds of thousands of jobs per month to even start making a dent in the unemployment numbers. How long will Americans wait for the jobs they believe will have been promised to them? Not very long!

How would Michele Bachmann possibly lower the price of gasoline to less than $2 dollars per gallon, when oil prices are traded daily in a worldwide free market and oil is becoming more of a scarce commodity as each day goes by. By opening up drilling all over the USA and the ANWR? Sure, that will increase the worldwide supply slightly, but not enough to dramatically lower the price of oil, and her promise will certainly remain unfulfilled.

The Republicans are overpromising in an effort to out-do each other in the upcoming primaries. I’m afraid that the eventual nominee in the general election will need to tone down the rhetoric and the promises. If the economy stays about where it is for the next year or longer, the liberal media will continue to beat the drums that the president must do more to create jobs, a task that he can’t possibly accomplish. The Republican nominee should campaign on a platform of reducing debt, limiting government spending, reducing regulations, maintaining the Bush Tax cuts, eliminating Obamacare and promoting policies to increase business investment as the correct solution for creating jobs in the future. The eventual nominee should not proclaim that he or she can create jobs, reduce the price of gas, or make other impossible claims or this nominee will find themselves in the same dire situation that Obama finds himself in today.

Let’s make sure that Republicans do not overpromise and under deliver or the party will suffer greatly in the coming years!


The above numbers and analysis were derived from an article entitled “It’s All About the Jobs… and Gold” written by one of my favorite economic writers, John Mauldin, to whom I give considerable credit in stimulating my continuing interest in all things economic.

 

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