Keep Government From Killing the Economy

Based on the “analysis” of the reasons for today’s stock market rally, one gets the idea that there isn’t a level-headed business reporter left on the job. For instance, two Associated Press reporters wrote, “Wall Street extended its gains into a second session Friday as investors looked past another bleak jobs report and hung their hopes on Washington’s ability to help the economy.” Worse still, they quoted a “senior market analyst” with a Chicago investment company, who said investors are hoping today’s unemployment report is bad enough that it goads lawmakers into swift action on the stimulus plan.

Unfortunately, this fellow’s ideas probably represent a larger share of the investment community’s thinking than I care to admit. Even stock brokers, when battered hard enough, begin to believe the government can solve economic problems. It can’t. But people become deluded into thinking that it can.

Today’s Labor Department report showed employers cut 598,000 jobs in January, the most since late 1974. Unemployment rose to 7.6 percent, the highest since late 1992.

Exactly three months ago I wrote in my newsletter to watch for days when the stock market reacts positively to bearish news. It will be a signal of a market that is attempting to reverse a downtrend. Today was such a day. There are few things more bearish to the economy than a sharp rise in unemployment.

Straight thinkers understand that it is business that creates jobs, and it can only do so by surviving today to expand tomorrow. Business is in survival mode. By laying off hundreds of thousands of people today it will hopefully survive to thrive tomorrow.

Government never has created a non-government job, and it never will. But it is difficult to convince people of that. Like the elderly woman I heard on the radio this week who claimed Franklin Roosevelt ended the depression within a year after taking office. Upon further questioning she said her father, who was unemployed, got a job when Roosevelt created the Civilian Conservation Corps. She considered him employed at that time, although he was doing essentially meaningless tasks on make-work projects. It took years for him to find a real job. But she was convinced the Depression ended in 1933 with the arrival of the CCC. She could not have been more wrong.

Today we are fortunate to have global high speed information technology. Otherwise we would not know that within the past few weeks China’s manufacturing sector has improved, orders for cargo ships for hauling ocean freight are on the upswing, and values for base construction materials such as lumber and copper are moving up. The global economy is in the process of slowly healing itself of a viral infection economic physicians are powerless to treat. Vigilance is necessary to keep the government’s “economy doctors” from committing malpractice in the meantime.