'Offset by jobs lost'

Nevada needs jobs.

Therefore, who wouldn't sympathize with the unemployed construction workers who marched on the Legislature in Carson City on Wednesday saying something needs to be done to create jobs.

But their proposal to create 100,000 jobs by floating a $1 billion bond to construct public buildings and infrastructure, then paying for it all with either a quarter-point hike in the sales tax rate or raising property taxes an additional 10 cents per $100 of assessed value, is not feasible.

Such Keynesian stimulus schemes have been tried since the Great Depression with varying degrees of counterproductivity and futility. The stimulus spending of the past two years has had little impact on the economy, instead moving money from one pocket to another.

"Every dollar of increased government spending must correspond to one less dollar of private spending," University of Chicago economist John Cochrane says. "Jobs created by stimulus spending are offset by jobs lost from the decline in private spending. We can build roads instead of factories, but fiscal stimulus can't help us to build more of both. This form of 'crowding out' is just accounting, and doesn't rest on any perceptions or behavioral assumptions."

When those roads are completed and the keystones laid, the jobs will be gone, but the debt will remain, draining money that could have been invested, saved or spent on private goods and services.

In this volatile economy, many businesses are hanging by a thread, keeping employees on the payroll by living off of savings, hoping against hope that the turnaround will come before the savings account is exhausted. Any increase in taxation that takes more money from the private sector could reach the tipping point at which the would-be entrepreneur shrugs and surrenders.

As Arthur Laffer points out in a recent Wall Street Journal op-ed, Ronald Reagan slashed regulations, lifted price controls and cut income tax rates. From December 1982 to June 1990, 21 million jobs were created. That many jobs have not been created in the past 20 years, Mr. Laffer says.

Stimulus works only when it provides incentives for private-sector businesses to risk their own money for a chance to make more money.