Construction Industry Forecasts

It is not more jobs that the economy needs but the results of the added jobs – goods and services that people will buy voluntarily without a federal subsidy or tax credit. This obvious point has been lost in our obsession with jobs in the last few years. We have borrowed heavily to pay for jobs that produce very few goods or services that anyone will voluntarily buy.  This defines the 2009 stimulus plan which was a laundry list of everything special interest groups wanted but had not been funded because legislators judged that their value was less than their cost.

Long term, beyond two years, the economy is not better off because we gave raises to public employees during the recession, maintained public jobs that were immediately cut when the stimulus funds were exhausted, built facilities whose funding requests had been previously rejected, subsidized green energy and spent more than a $Trillion to maintain people in homes that they could never afford. There is nothing inherently wrong with any of the public efforts. But they are consumption spending. We deluded ourselves into thinking that they were investments with a payback.

Now it is time to redirect the jobs creating efforts away from questionable long term payoffs from being greener or more diverse to work that we know will quickly yield salable products without subsides to create or operate them or mandates to buy them. This means permanent tax rate or tax base cuts that change incentives to consume and invest.

The difference between sustainable jobs that produce salable product and jobs that only provide income to needy or favored people is now being recognized in Washington. Few members on Congress are still willing to defend the stimulus plan. Instead, they are announcing their support for weeding out pork barrel programs and redirecting federal stimulus to creating private market jobs. This transition will be a long process but it should be enough to permit us to muddle through this year without a second dip in the recession than then achieve stronger growth in 2012 and stronger yet growth in 2013.

As we transition to stimulating private instead of public jobs, public layoffs will continue. The federal government has added 130,000 jobs since early 2010. This will be reversed in the next few years. State and local governments have cut over 400,000 jobs since early 2010. These layoffs will continue for a year. Public layoffs will be accompanied by wage and benefit cuts. Government funded private jobs will also be cutback. Private social assistance, education and healthcare added nearly 4 million jobs in the last eight years. This expansion is now ending.