A Lesson in Wealth Creation

The following is by guest columnist Tim Nerenz.  It is a great rebuttal to democratic Senator Harry Reid's assertion two days ago on the floor of the U.S. Senate that millionaires as job creators are "fictitious."  He said that "like unicorns, they're impossible to find and don't exist."  Tim shows that in Wisconsin many millionaires started out by creating small businesses that grew to large companies that created tens of thousands of jobs.

Downward Wisconsin.

We used to make things here in Wisconsin.

We made machine tools in Milwaukee, cars in Kenosha and ships in Sheboygan. We mined iron in the north and lead in the south. We made cheese, we made brats, we made beer, and we even made napkins to clean up what we spilled. And we made money.

The original war on poverty was a private, mercenary affair. Men like Harnishfeger, Allis, Chalmers, Kohler, Kearney, Trecker, Modine, Case, Mead, Falk, Allen, Bradley, Cutler, Hammer, Bucyrus, Harley, Davidson, Pabst, and Miller lifted millions up from subsistence living to middle class comfort. They did it - not “Fighting Bob” La Follette or any of the politicians who came along later to take the credit and rake a piece of the action through the steepest progressive scheme in the nation.

Those old geezers with the beards cured poverty by putting people to work. Generations of Wisconsinites learned trades and mastered them in the factories, breweries, mills, foundries, and shipyards those capitalists built with their hands. Thousands of small businesses supplied these industrial giants, and tens of thousands of proprietors and professionals provided all of the services that all those other families needed to live well. The wealth got spread around plenty.

The profits generated by our great industrialists funded charities, the arts, education, libraries, museums, parks, and community development associations. Taxes on their profits, property, and payrolls built our schools, roads, bridges, and the safety net that Wisconsin’s progressives are still taking credit for, as if the money came from their council meetings. The offering plates in churches of every denomination were filled with money left over from company paychecks that were made possible because a few bold young men risked it all and got rich. Don’t thank God for them; thank them that you learned about God.

Their wealth pales in comparison to the wealth they created for millions and millions of other Wisconsin families. Those with an appreciation for the immeasurable contributions of Wisconsin’s industrial icons of 1910 will find the list of Wisconsin’s top ten employers of 2010 appalling:

Walmart, University of Wisconsin–Madison, Milwaukee Public Schools, U.S. Postal Service, Wisconsin Department of Corrections, Menards, Marshfield Clinic, Aurora Health Care, City of Milwaukee, and Wisconsin Department of Veterans Affairs.

This is what a century of progressivism will get you. Wisconsin is the birthplace of the progressive movement, the home of the Socialist Party, the first state to allow public sector unions, the cradle of environmental activism, a liberal fortress walled off against common sense for decades. Their motto, Forward Wisconsin, should be changed to Downward Wisconsin if truth in advertising applies to slogans.

There is no shortage of activists, advocates, and agitators in this State. If government were the answer to our problems, we would have no problems. The very same people – or people just like them – who picketed, struck, sued, taxed, and regulated our great companies out of this state are now complaining about the unemployment and poverty that they have brought upon themselves. They got rid of those old rich white guys and replaced them with…nothing.

Wisconsin ranks 47th in the rate of new business formation. We are one of the worst states for native college graduate exodus; our brightest and most ambitions graduates leave to seek their fortunes elsewhere. Why shouldn’t they? Our tax rates are among the worst in the nation and our business climate, perpetually in the bottom of the rankings, has only recently moved up thanks to a Governor who now faces a recall for his trouble.

In 1970, the new environmental movement joined unions and socialists in a coordinated effort to demonize industry. When I was in college, the ranting against “polluting profiteers” was like white noise – always there. They won, and here is the price of their victory: in 1970, manufacturers paid 18.2% of Wisconsin’s property taxes – the major source of school funding - and in 2010 those who remained paid 3.7%.

So who is it that caused the funding crisis in our schools and the skyrocketing tax rates on our homes? It is the same ignoramuses who are sitting on bridges, pooping on things, and passing around recall petitions. The unemployed 26-year old in the hemp hat looking for sympathy might look instead for some inspiration from Jerome I. Case, who started his agricultural equipment business at the age of 21, miraculously without an iPhone 4s.

Mr. Case got rich by asking people what they want and making it for them. He did not get rich by telling people what he wanted and waiting for them to do something about it. If you want to declare war on your own poverty, memorize that.

In the last decade alone we have lost 150,000 manufacturing jobs in this state – over 25%. And it’s not just jobs that have been lost; the companies that provided them are gone. Those jobs are not coming back, no matter how long we extend unemployment benefits pretending they are. The 450,000 people who still work in manufacturing in Wisconsin are damn good it at, but we are now outnumbered by people who work for government. A significant number of the latter are tasked with taxing, regulating, and generally harassing the former. While it is true that many manufacturers chased low-wage opportunities on their own, many more were driven out of the state by the increasing cost of doing business here.

It is a myth that unions improve wages. If you consider only the 1,000 jobs in a closed shop, you might think an average union wage is, say, $30/hr. But if you add in the zero wages of the 10,000 jobs lost in companies chased out by union harassment, the average of all 11,000 union workers is reduced to $2.72/hr. Do you know the average wage of union iron miners in this state? Zero. And the left is fighting hard to keep it that way in Northern Wisconsin - looking out for the working man, they call it.

It is also a myth that free trade causes job losses. Over the past three years, U.S. manufacturers sold $70 billion more goods to our Free Trade Agreement (FTA) partners than we bought from them. Conversely, we suffered a $1.3 trillion trade deficit with countries where no FTA’s exist. I doubt that kids are going to learn that in our government-union monopoly schools – it doesn’t fit the narrative.

No one wants to see another person suffer in poverty, and liberty is the best economic policy there is. The great industrialists of Wisconsin took less than a generation to lift millions up to a life of dignity, pride, prosperity and good will. When enterprise was free and government was limited, we all prospered.

Those great men of industry were not anointed at birth to be rich; they rose from nothing to great wealth through their own hard work and the value they added to their employees and their customers through choice, competition, and voluntary exchange. That is the only sure path to real prosperity; the debt economy is a temporary illusion.

Look again at the list of our famous industrialists and the list of our current employers. Who would you wish your child or grandchild to grow up to be? Who do you think will do more good on this earth – Jerome I Case and his tractors, or
the Coordinator of Supplier Diversity at MPS.

If you chose MPS, then apply now – that job is open, and it pays up to $72,000 plus benefits and early retirement. Go in peace and save the world. Me, I'm going with the tractor guy.

The above originally appeared November 19, 2011 in Moment of Clarity, a weekly commentary by Libertarian writer and speaker Tim Nerenz, Ph.D. Visit Tim's website www.timnerenz.com to find your moment.

Edmund Contoski is author of Makers and Takers, How Wealth and Progress are Made and How They are Taken Away or Prevented.  He blogs at www.amlibpub.blogspot.com

Decline of America's Schools Isn't Just Academic

The decline of American public education, documented by a plethora of objective tests for decades, is so well known it requires no documentation here. What I wish to address here goes beyond the academic failure. It is about the way school regulations now are regimenting all aspects of the children's lives, what they eat and drink—even their play during recess. Predictably, the results are less favorable for the children.

In his book Inside American Education, Thomas Sowell writes:

• They have used our children as guinea pigs for experiments, targets for propaganda.

• They have taken our money, betrayed our trust, failed our children.

• They have proclaimed their dedication to freedom of ideas and the quest for truth, while turning educational institutions into bastions of dogma and the most intolerant institutions in American society.

Schools have become totalitarian compounds, where an autocratic administration arrogates to itself the power dictate whatever it thinks is best for the children, irrespective of the role and rights of the parents.

Remember the campaign to remove from schools vending machines dispensing soft drinks and snacks, a measure that was supposed to help combat childhood obesity? Who could be against that? Are you in favor of childhood obesity? Few people bothered to ask if the measure would be effective or if it was the schools' role to police what children put into their mouths.

Did you think the issue would stop with banning the vending machines? If so, you should have known better. Next was banning children from bringing soft drinks and snacks from home. And school cafeterias had to be prohibited from serving french fries, pizzas, and other items the children like and substituting foods with fewer calories and less salt and sugar.

Earlier this year a firestorm of protest arose when the Chicago Tribune published a story about a school that banned children from bringing lunches from home. Principal Elsa Carmona told the newspaper her intention is to protect students from their own unhealthful food choices. But Susan Rubin, a nutritionist and founder of the Better School Food program, told AOL News, "I get physically sick just looking at it, because it makes me sick that kids are eating this processed crap." The Chicago Tribune reported, “Many students throw away their entrees uneaten and say they would rather bring food from home.” Carmona said, "Nutrition wise, it is better for the children to eat at the school," but children get zero nutrition from food that is thrown away.

Parent Erica Martinez said, "Some of the kids don't like the food they give at our school for lunch or breakfast. So it would be a good idea if they could bring their lunch so they could at least eat something." A spokeswoman for Chicago Public Schools said the decision to prohibit packed lunches is left to the principals, and she was unable to say how many have schools such a policy.

The Chicago Tribune recounted: “Fernando Dominguez cut the figure of a young revolutionary leader during a recent lunch period at his elementary school. 'Who thinks the lunch is not good enough?' the seventh-grader shouted to his lunch mates in Spanish and English. Dozens of hands flew in the air and fellow students shouted along: 'We should bring our own lunch! We should bring our own lunch! We should bring our own lunch!'”

Los Angeles, Fairfax Country Virginia, Washington D.C. and many other locales have banned chocolate and strawberry-flavored milk in schools,claiming white milk is healthier. Chocolate milk has also been banned in Minneapolis even though the product sold to Minneapolis schools had less sugar than other versions and contained only 20 calories more than a carton of regular 1-percent-fat milk. Chocolate milk represented up to 60 percent of the district's lunchtime milk sales.

The ban on chocolate milk ban was intended to give children more benefit from milk, but it resulted in some children drinking no milk. Some mothers say their children won't drink white milk. Worse, school is the only place many kids drink milk at all. The Washington Post reports that removing flavored milk from schools reduces children's milk consumption by 37 percent. The American Academy of Pediatrics and other groups support chocolate milk in schools because of studies showing that flavored-milk drinkers consume more milk than do youths who drink white milk only.

Dairy foods are a major source of saturated fat in the diet, which has been associated with heart disease. But research at Uppsala University in Sweden suggests eating dairy foods could benefit your heart by lowering blood pressure or reducing cholesterol levels, according to Dr. Eva Warsesjo, et. al., in the American Journal of Clinical Nutrition. Warensjo and her team measured blood levels of two biomarkers of milk fat in 444 heart attack patients and 556 healthy controls. The substances, pentadecanoic acid and heptadecanoic acid, indicate how much dairy fat a person has been eating. The people with the highest levels of milk fat biomarkers were actually at lower risk of heart attack. For women, the risk was reduced by 26 percent, while for men risk was 9 percent lower.

There may also be other benefits from chocolate milk. For example, the Minneapolis Tribune reports, “Runners, in particular, seek it after distance events because it provides protein and carbohydrate recovery for tired muscles.”

Why not allow for individual choice? Why does the school have to be so intolerant about chocolate milk? Because the school wants a collective decision, a one-size-fits-all policy that prevents individual choice. Obviously, some children are worse off because of the policy, because they won't drink white milk and overall milk use declines 37 percent. But that is irrelevant to a school administration that assumes the right to sacrifice the interests of a minority for the alleged overall benefit of the group. That issue doesn't come up where individual choice is allowed.

And what is the effect on the children? Are they “learning” from the banning of chocolate milk that their own choices are not to be trusted, that only an outside authority can determine what is good for them? Or that their own interests must be sacrificed for the alleged good of others?

I learned of another illustrative example of a school's collectivist premise from a single mom living in a Minneapolis suburb. She has a 10-year old daughter who, along with her classmates, was told by the teacher that henceforth there would be a new policy at recess. The children would be allowed to play with whomever they chose for the first five minutes of recess. Then a whistle would be blown, and the children would have to stop playing with those kids and play with some others. Five minutes later a whistle would sound and, again, they would have to stop playing and pick new playmates. It was explained that this would be better for the overall group because it would provide “equal opportunity” for kids to play with others. The kids, however, wanted to make their own choices, not do what the teacher thought was best for the group. So they went on strike. When recess came, they all sat down on the playground and refused to play. When the whistle sounded, they ignored it and just sat there. The administration apparently hoped things would be different the next day, but the kids again sat down on the playground during recess. Only this time they brought signs. These had messages such as “No play your way” and “We play our way.”

On the third day, when the administrators saw the kids were prepared to continue their sit-down strike, they announced the school policy wasn't such a good idea after all and would be discontinued.

One victory for the kids! Hooray! They were happier with their own choices.  And if children could choose the milk they preferred, they would be not only happier but healthier.

Obama Against Jobs, Economy, Middle Class, Part 2

The top one percent of federal income taxpayers paid more than the bottom 95 percent, according to the Tax Foundation in 2009, based on the latest figures (2007) available from the IRS at that time.

Note the trends. The share of taxes paid by the bottom 95 percent has been declining for 20 years. The share paid by the top one percent has been increasing over the same period.

In 2007, the top one percent paid 40.04 percent of total income taxes, while the bottom 95 percent paid 39.4 percent. In 2008 the tax returns from high-end filers plummeted, due to the recession, and the top one percent paid 38 percent of all federal individual income taxes, while the bottom 95 percent paid 41.3 percent. These numbers are the latest available from the IRS, based on its updating of 2008 data as of October 2010. Although the top one percent did not pay more than the bottom 95 percent in 2008, the top 5 percent still paid far more (58.7 percent) than the bottom 95 percent (only 41.3 percent.) By contrast, the top 5 percent paid only 21 percent of individual federal income tax receipts in 1980 and 22.67 percent in 1985.

Yet we hear Obama demanding higher taxes on the wealthy to make them pay their “fair share.” Isn't their huge share of the tax burden already more than fair? According to the Tax Foundation, “We rely more heavily on the top 10 percent of taxpayers than does any nation and our poor people have the lowest tax burden of those in any nation.”

Aside from the question of “fairness” and a man's property right to what he earns, Obama tax policy displays an ignorance of private wealth in job creation. The wealthy are the job creators. That's how most of them became wealthy. Only a small percentage of the wealthy inherited their wealth. Let me give you a few examples of wealth creation—and job creation.

Steve Jobs died recently. His genius created the Apple computer, the iphone, the ipod, itunes, and the ipad. He started his company with partner Steve Wozniak as a small business in a garage. No government stimulus or subsidies from taxpayers. When he died, Apple Inc. was a thriving company with 46,000 employees.

Earl Bakken and his brother-in-law set up shop in a garage in northeast Minneapolis a mile from my home. They called it Medtronic and began repairing medical equipment. This led to the first wearable heart pacemaker. Pacemakers had already existed, but they were bulky, relied on external electrodes, and had to be plugged into an AC wall outlet. Earl developed a pacemaker powered by mercury batteries that provided a 9-volt DC pulse and could be worn.

In 1960, with its experience in early pacemakers, Medtronic acquired the exclusive right to the implantable pacemaker invented by Drs. Chardack and Greatbatch. The company's sales increased, it hired more people, and erected a new building to house the expanding corporation. But in 1962 it was on the brink of bankruptcy. The company obtained a $100,000 bank loan, attracted money from a venture capitalist, and in 1963 was back on track financially. In 2011 the company, now a broadly diversified medical innovator, introduced 60 major new products, had $15.9 billion in revenue (43 percent from international business) and had more than 40,000 full-time employees.

Sergey Brin and Larry Page were two graduate students at Stanford University with an interesting idea for retrieving the endless amounts of information available on the internet. They struggled to find financial backing without success until they met Andy Bechtolsheim, a founder of Sun Microsystems, who recognized an opportunity where others didn't. He quickly wrote a $100,000 check to an entity that didn't exist yet. That was the start of Google Inc., which then opened its first corporate office in a friend's garage. In 2011, Google had 31,353 full-time employees and a net worth of $190 billion.

These are the “millionaires and billionaires” whose taxes Obama wants to increase. Wouldn't the country be better off with more money in the hands of successful companies and venture capitalists rather than turning more of it over to the government in taxes? Last month Obama said “if you've done well...then you should do a little something to give something back.” Give something back? These inventors and entrepreneurs generated wealth and jobs because they improved our lives, not because they “gave something back.” They already gave the public things of greater value to people than the wealth they received in return. They were benefactors of humanity, created jobs, extended and enriched people's lives, and advanced the nation's economy far more than government could with all the taxes it collected—or could collect—from them. Medtronic has lengthened the lives of millions of people. Google has saved hundreds of billions of hours in research. The benefits society received were of greater value than the money the inventors, entrepreneurs, and investors received or the public wouldn't have bought their products. Higher taxes will inhibit further such progress in the future.

Notice that Apple, Medtronic and Google each began with two-man partnerships in a garage. True small businesses. The U.S. Small Business Administration says small businesses employ over half of all private sector employees, pay 44 percent of U.S. private payroll, and have generated 64 percent of new jobs over the past 15 years. They produce 13 times more patents per employee than large patenting firms, make up 97.3 percent of all identified exporters and produce 30.2 percent of known export value.

According to the Tax Policy Center, most small businesses report their income on personal tax returns. A small business can have as many as 499 employees. So it is not unheard of for small businesses owned by middle-class Americans to have an income over $250,000—which would mean paying higher taxes under Obama's proposal. Though this would apply to only 2.5 percent of small businesses, that small percentage comprises 894,000 small businesses that would pay higher taxes on the owners' personal tax returns.

It is significant, too, that if a private company, whether small or large, fails, it is a loss only for those who voluntarily invested in the company. This is a sharp contrast to the recent example of Solyndra, the maker of solar panels, which received $535 million from the federal government. Solyndra's bankruptcy was a $535 million loss for the taxpayers.

Solyndra is an important example not only because it is one a many solar companies that have now failed and was praised by Obama as “leading the way toward a brighter and more prosperous future.”  More importantly, it is representative of a long string of “green” policy failures for decades. In my book MAKERS AND TAKERS: How Wealth and Progress are Made and How They Are Taken Away or Prevented, I included a quotation that I had dug up from 1995. It was by John A. Hill, who had been a deputy administrator for the Federal Energy Agency, the predecessor of the U.S. Department of Energy:

The government has spent more than $100 billion over the past 35 years for clean coal technologies, solar energy, conservation and synthetic fuels; none of these programs added one viable technology to the commercial marketplace.

Sixteen years after Hill wrote that, the trend continues. The federal government is still pouring billions of dollars into such losing ventures to try to prove the “green dreams”—and vote-getting schemes—of politicians are superior to economic and scientific realities. And the failures still keep coming.

Obama's views on government economic stimulus might have been different if he had been willing to learn from Japan's experience. The Japanese economy crashed in 1990. Japan passed 10 stimulus bills between 1992 and 2000. It spent massively on infrastructure, building bridges, roads, ports, airfields—even sidewalks—as well as supplying huge subsidies to the biotech and telecommunications industries. Japan's unemployment rate is now more than two and one-half times what it was in 1992. It has never been that low since, and in the last twelve years—even during the best years before the current recession—it was never less than one and one-half times the 1992 level. Japan's stock market (Nikkei average) remains more than 75% below its peak two decades ago.

Japan's Nikkei 225 Stock Average

Two decades of massive deficit spending failed to restart the once-mighty Japanese economy. Instead of boosting economic growth, the government's spending spree boosted the nation's debt. In 1990, Japan had a debt-to-GDP ratio of 60 percent. Now it is 200 percent. This is the highest of any developed country and probably the highest anywhere in the world. It is far higher than that of Greece, which has caused so much concern. However, Greece's problem is more immediate because 90 percent of its public debt is held by foreigners, while 95 percent of Japan's debt it held domestically.

No country has more completely and energetically put the economic policies of John Maynard Keynes into practice for longer than Japan, and the results have been disastrous. The Japan analogy is especially appropriate because two of the people who urged Japan's stimulus programs were subsequently chosen by Obama for his administration. Larry Summers, formerly at the Clinton Treasury, became assistant to President Obama for economic policy and director of the National Economic Council. Timothy Geithner, current treasury secretary, was in Japan during the collapse and claims the problem wasn't that Japan spent too much but that it didn't spend enough.

Obama favors the Keynesian spending policies that Franklin Roosevelt employed to try to pull the nation out a the Great Depression. They didn't work then, they didn't work in Japan, and they aren't working now—as demonstrated by Obama's last ($800+ billion) stimulus program. After six years of FDR's New Deal policies, the unemployment rate in 1938 was 19 percent—more than double what we have today. Late in FDR's second term, his Treasury secretary Henry Morgenthau wrote in his diary: “We have tried spending money. We are spending more than we have ever spent before and it does not work....After eight years of this administration we have just as much unemployment as when we started....And an enormous debt to boot.”

History repeats itself.

Obama Against Jobs, Economy, Middle Class, Part 1

Of course, Obama says he is for those things, but his actions work against all of them. Ben Franklin said, “Experience is a dear teacher, but fools will learn at no other.” Obama has learned nothing from the Keynesian experiences of the U.S. or other nations. He hasn't even been able to learn from the already evident failure of his own Keynesian policies. For him, it is as though economic history never existed. He fits Nobel Prize-winning economist Friedrich Hayek's observation that the most orthodox disciples of Keynes have consistently “thrown overboard...all that used to be the backbone of economic theory, and in consequence, in my opinion, to have ceased to understand any economics.”

Obama claims we need a $447 billion spending bill to create jobs and stimulate the economy. He has learned nothing from the results of his earlier $800+ billion stimulus. It and other federal spending produced a massive increase in the money supply, as shown here, yet were ineffective in stimulating the economy or job growth. Unemployment remains stubbornly at 9 percent.

Below is a graph that shows how ineffective the massive government spending by Obama has been. You can see that the “recovery”—if you can call it that—has been far weaker and slower than previous recessions that didn't have such stimulus spending.

Here's another chart that should have been a teaching experience for Obama—if he had been willing to learn:

 Source: Bureau of Labor Statistics: “The Job Impact of

the American Recovery and Reinvestment Act” [Stimulus Act]

The chart shows (red line) the administration's projection that the stimulus program would hold unemployment under 8 percent. Instead, unemployment actually rose higher than it would have been without the stimulus. Yet Obama now insists on more of the same failed policy.

The idea that government spending would stimulate the economy was the brainchild of John Maynard Keynes. He claimed spending was the driver of the economy and that government spending produced a “multiplier” effect as the dollars were, in turn, spent again and again throughout the economy. He had no evidence to support this. (Keynes' biographer Hunter Lewis says Keynes “wasn't particularly interested in evidence.”) But the idea sounded superficially plausible enough to provide intellectual cover for what Franklin Roosevelt—and many politicians since—wanted to do anyway: massive spending for political and ideological purposes.

But Keynes was wrong. The multiplier didn't work as he supposed. Instead of ending the Great Depression, massive government spending extended it by several years. Nobel Laureate Robert Lucas and Leonard Rapping conclude that on just the basis of Federal Reserve Policy, the economy should have been back to normal by 1935. Economics professors Harold L. Cole and Lee E. Ohanian state: “We have calculated on the basis of just productivity growth that employment and investment should have been back to normal levels by 1936.” FDR's New Deal policies prevented that recovery. And Obama's policies are having the same adverse effect on the economy today.

The Obama stimulus bill was based on a Keynesian multiplier of 1.50, meaning the GDP will increase by $1.50 for every additional dollar of government spending. This was voiced repeatedly by the Obama administration, but there is no evidence that multiplier is valid. If the multiplier really were larger than 1.0, the GDP would rise even more than the rise in government spending! The U.S., Greece and other spendthrift countries wouldn't be going broke—they'd be getting richer the more they spent! The reality is that the multiplier is always less than 1.0. The money that is spent over and over in the private sector from the government programs is always less than the cost of the programs.

Harvard professor Robert J. Barro has done extensive research on Keynesian multipliers. A recent study by Barro and Charles J. Redlick found a multiplier effect of 0.4 to 0.7. The late Gerald W. Scully, a professor of economics at the University of Texas at Dallas, analyzed federal outlays and GPD 1947-2007 and found a multiplier of only 0.46.

Then there is the work of a trans-Atlantic team of four economists, John F. Cogan and John B. Talyor of Stanford University and Tobias Cwik and Volker Wieland of Goethe University. They found the Obama administration's outmoded Keynesian models yielded estimates for stimulus growth six times as large as they could produce under modern Keynesian simulation.

A study by Harvard's Alberto Alesina of 91 fiscal stimulus programs in 21 developed countries 1970 to 2007 found tax cuts were more stimulative than government spending. Mr. Alesina even found 107 periods since 1980 when governments quickened economic growth by cutting deficits. His findings are just the opposite of Obama's program of stimulus spending and increased deficits.

A 2009 study by the World Bank and Harvard University of economic growth and entrepreneurship found lower tax rates on firms are powerful spurs to job growth and business start-ups.

The Keynesians implicitly assume that government can allocate resources more effectively and efficiently than the private sector. This is laughable. They argue that the multiplier effect allows money to recirculate through the economy multiple times. But if the same money were not initially preempted by government stimulus spending, it would be spent multiple times by the private sector, too—and more effectively. What makes the economy grow is not transferring more money to the government to spend but leaving it in private hands, where savings and investments are used to make workers more productive. The research by Barro and Redlick found that if government spending is funded by taxes, the multiplier is -1.1. In other words, if the government raises taxes by $1, the economy will shrink by $1.1.

Christina Romer, in a study with her economist husband David before she became Obama's economic advisor, found multipliers from tax cuts “have very large and persistent positive output effects.” They concluded that tax cuts have a multiplier of about 3.0. This means one dollar of tax cuts raises GDP by about $3.

Brian Wesbury, former chief economist for the Joint Economic Committee of the U.S Congress writes, “If you take a look at the U.S. economy since 1960, the larger the government share of GDP, the higher the unemployment rate. In other words, when it comes to jobs, government spending has a multiplier of less than one—government spending destroys jobs.”

Now you know why the three charts above show the Obama approach to creating jobs and promoting economic growth has been such a failure. They reflect Obama's conviction, voiced December 8, 2009, that we “must spend our way out of this recession."  His new proposal for tax increases and $447 billion more in federal spending shows he hasn't learned a thing.  Nor have those who still support him.