Milton Friedman demolishes the federal jobs guarantee
You may have heard recently about the federal jobs guarantee. This policy proposes guaranteeing a job to anyone who wants one, at $15 an hour plus benefits, by the simple expedient of having the federal government offer a limitless amount of such jobs.
Needless to say, this is an utterly dreadful policy. And it is not new. Back in 1978, the Humphrey–Hawkins Full Employment Act was passed. In August 1976, the economist Milton Friedman took aim at this proposed legislation in his column for Newsweek
A centerpiece of the Democratic fall campaign is the “Humphrey-Hawkins Full Employment and Balanced Growth Act of 1976.” Support of that bill has become the litmus test of the true-blue Democratic faith of every candidate from Jimmy Carter to the aspirant for dogcatcher.
The present expanded version of the Humphrey-Hawkins bill embraces the earlier Humphrey-Javits bill. It proposes to establish a process of long-range economic planning to achieve “a full
employment goal…consistent with a rate of unemployment not in excess of 3 per centum of the adult Americans in the civilian labor force, to be attained…within not more than four years after the enactment” of the act, as well as a long list of other goodies.
The best critique of this bill that I have come across was published 200 years ago in that great book, “The Wealth of Nations” by Adam Smith…
Wrote Smith: “The statesman, who should attempt to direct private people in what manner they ought to employ their capitals, would not only load himself with a most unnecessary attention, but assume an authority which could safely be trusted, not only to no single person, but to no council or senate whatever, and which would nowhere be so dangerous as in the hands of a man who had folly and presumption enough to fancy himself fit to exercise it.”
Has any contemporary political writer described Hubert Humphrey more concisely?
Not to put too fine a point on it, the Humphrey-Hawkins bill is as close to a fraud as has ever served as a campaign document. It is full of pious promises but contains no measures capable of fulfilling those promises. It would not reduce unemployment but simply add to government employment and reduce private employment, in the process making us all poorer and very likely igniting a new inflationary binge.
How can such a bill do otherwise? Easy enough to say that the government will be the employer of last resort. But where does her government get the money? Ultimately, from you and me, by hook or by crook. If it spends, we don’t. If it employs people, we don’t.
Of course, people on welfare could be relabeled “civil servants assigned to home duty,” thereby reducing recorded unemployment without additional spending. But to do more—and Humphrey-Hawkins promises to do far more—requires more government spending. The extra spending could be financed by higher explicit taxes. In that case, taxpayers would have less to spend and would hire fewer people. The extra spending could be financed by higher borrowing. In that case, the lenders, or the borrowers outbid by government, would have less to spend. Government employment would replace employment in building homes or factories. Finally, the government could print the money, which would tax us indirectly via inflation. We would have more pieces of paper to spend but could buy less. For a time, that could mean more government spending without less private spending, but surely by now we have learned that that is a fool’s paradise that would not last.
Is anyone so naïve as to suppose that the government jobs created will be more productive than the private jobs destroyed?
Why do Democrats believe that Humphrey-Hawkins is such potent political soothing syrup? Do they have such a low opinion of the intelligence of the American people? I do not think so. It is for a very different reason—one that is the source of so many harmful government policies: the visible vs. the invisible effects of government measures.
People hired by government know who is their benefactor. People who lose their jobs or fail to get them because of the government program do not know that that is the source of their problem. The good effects are visible. The bad effects are invisible. The good effects generate votes. The bad effects generate discontent, which is as likely to be directed at private business as at the government.
The great political challenge is to overcome this bias, which has been taking us down the slippery slope to ever bigger government and to the destruction of a free society.
If Friedman or Smith were alive today, they wold no doubt be castigating the “folly and presumption” of those pedaling the latest iteration of this awful old idea.
John Phelan is an economist at the Center of the American Experiment.