Cutting Government Spending Creates Jobs
WWII officially ended (All theaters) on 9/2/1948. Between 1948 and 1952, over 15 million soldiers returned to the workforce. What happened to them? How were they employed? It would appear that unemployment remained well under 4% from 1948 (the earliest year that data was available from BLS.gov) through 1954, except for a 2 year period that averaged 5.6%, with a very brief peak of 7.9%. Considering the huge amount of new jobs that would have been required to employ such a deluge of returning soldiers – this seems to be rather astonishing. Bush and Obama spent trillions in stimulus, and were unable to create a single net job, and in fact lost many millions of jobs. So what was different after WWII?
Let’s also examine Tax rates… clearly the impressive job creation was not a result of tax cuts.
So what else could it be?
Austrian economists know that government cannot create something without first taking it from someone else. So let us examine total government spending… After WWII, there’s a dramatic cut in spending levels – from around 52% of GDP down to 22% in just about 2 years. It looks like the way to create jobs – is to stop confiscating the people’s money and wasting it on government spending, which is inherently non-productive, wasteful and kills jobs.
So it would seem that the Keynesian Economists (like Obama) are completely and utterly absurd in their belief that government spending can create jobs. It also would seem that Chicago school economists (Supply-siders, Republicans, Laffer, Friedman) who claim tax cuts alone are responsible for creating jobs – don’t quite have the whole picture.