Cut Taxes, Cut Spending, Lay Off People, Knee Cap the Economy

May was a particularly arduous month, with personal health issues running rampant. We learned two things: that nurses, male and female, are an awesome group of people, and that I have a particular fondness for hospital cafeteria tuna melts and mashed potatoes.

Our economy seems headed into the hospital as well, what with unemployment ticking up to 9.1% and housing prices reaching new lows. The media, which tends to extrapolate any given moment into a perpetual future, started up with the "Obama may lose his job due to jobs" framing.

In particular, we find that state governments are still massively cutting employee rolls while the private sector does its minimal best to add jobs. Republicans, presidential aspirants and other scavengers (Sarah Palin) have taken to suggesting that the President is failing due to his inability to create jobs. It amuses.

We can remember back to the November 2010 election when it was suggested that a vote for Republicans would be because THEY could in fact get the jobs rolling. The tax cut agreement in December was to be further ammunition towards increasing jobs.

But that's all...wait for it. Nonsense. Even the Republican talking point that the private sector is "unsure" (and therefore not hiring anyone en masse) due to Obama's lack of clarity is nonsense.

Let us remind ourselves of a few things. Neither the federal government nor state governments, can "create" jobs in the private sector out of thin air.  There are three ways the government can impact job growth.

The government at different levels can hire people. At the state level, each teacher or police officer remaining employed or hired becomes a taxpayer, a purchaser at the local level of consumer goods, a discretionary spender, a mortgage payer, and an optimist. Having a job does that.

Second, governments can spend tax payer money on "stuff" purchased from the private sector. Contracts for infrastructure, repairs, goods and other services all make their way out into the private sector, increasing activity demand. You can cut an individual's taxes and he may bank or hoard the difference. Keep the tax rates the same or raise them, and that money that would go unspent by individuals can be forced into the economy by government purchasing.

Finally the government can create an environment conducive to business via fiscal and monetary policies, legal regulations and various other initiatives.

The reality is that Republicans have been working double-time to clip all three methods of government influence and economic stimulation while taking jabs at Obama for not doing anything. By suggesting tax cuts combined with spending cuts (which usually result in layoffs), they are depriving the government of its ability to stimulate demand, while also concentrating severe economic hardship on those who get laid off. At the same time, they are fighting Obama every step of the way on appointments, law and policy that would add clarity and confidence.

The debate over raising the debt ceiling is part of this. They will fight him on raising it, and going forward, use that as a noose around Obama's neck, tarring him as the first president to bring economic disarray to the United States. Fancy that. Never before in modern U.S. history have we seen such a united front of politicians so determined to win power that they will risk the economic health of the nation to achieve such a goal.

Ideally, during a recession it makes far better sense to have targeted government spending to help states and keep a recession from deepening. It also makes abundant sense to reform areas of the economy where rapid cost increases have gone unchecked--the Affordable Care Act starts the ball rolling on health care cost savings and reform.

But most of all, and via reasonable permanent and temporary tax increases, it makes better policy to spread pain among all citizens than lower taxes and inflict maximum pain among a smaller group that gets laid off. An individual still might spend on a certain amount of junk, even if salary were cut 10 or 20%. Take that salary away and not only will that person not spend, but all their bills will go unpaid, their health risks and costs will increase, and they will eventually have a massive cost effect on the surrounding community and financial sector.

We truly wonder if Americans will see through the game that is being played by the Republican opposition. When some Republican blames the current administration for not "creating jobs", hopefully people will cock an eyebrow and wonder why Republicans are talking against their own theology (that the government cannot create jobs). Are Republicans utilizing the power the government does have to support economic growth, or are they standing in the way, hoping division breeds a fire only they can pretend to put out come November 2012 elections?

Here in Arizona fires are raging up north. Our geriatric governor was on scene via helicopter viewing the smoke. One wonders how many people are viewing the smoke, or setting the fires, comfortable enough to let the U.S. economic dysfunction continue in order to make an almost theologically inane political point.