Politicians in Wonderland

Thomas Sowell's picture

There was a recent flap because three different members of the Obama administration, on three different Sunday television talk shows, gave three widely differing estimates of how many jobs the president has created.

That should not have been surprising, except as a sign of political sloppiness in not getting their stories together beforehand. They were simply doing what Barack Obama himself does — namely, just pulling numbers out of thin air. However, being more skilled at creating illusions, the president does it with more of an air of certainty, as if he has gone around and counted the new jobs himself.

The big question that seldom — if ever — gets asked in the mainstream media is whether these are a net increase in jobs. Since the only resources that the government has are the resources it takes from the private sector, using those resources to create jobs means reducing the resources available to create jobs in the private sector.

So long as most people do not look beyond superficial appearances, politicians can get away with playing Santa Claus on all sorts of issues, while leaving havoc in their wake — such as growing unemployment, despite all the jobs being “created.”

Whatever position people take on health care reform, there seems to be a bipartisan consensus — usually a sign of mushy thinking — that it is a good idea for the government to force insurance companies to insure people whom politicians want them to insure, and to insure them for things that politicians think should be insured.

Contrary to what politicians expect us to do, let’s stop and think.

Why aren’t insurance companies already insuring the people and the conditions that they are now going to be forced to cover? Because that means additional costs — and because the insurance companies don’t think their customers are willing to pay those particular costs for those particular coverages.

It costs politicians nothing to mandate more insurance coverage for more people. But that doesn’t mean that the costs vanish into thin air. It simply means that both buyers and sellers of insurance are forced to pay costs that neither of them wants to pay. But, because soaring political rhetoric leaves out such grubby things as costs, it sounds like a great deal.

It is not just costs that are left out. It is consequences in general.

With all the laments in the media about skyrocketing unemployment among young people, and especially minority young people, few media pundits even try to connect the dots to explain why unemployment hits some groups much harder than others.

Yet unusually high unemployment rates among young people is not something new or even something peculiar to the United States. Even before the current worldwide recession, unemployment rates were 20 percent or more among workers under 25 years of age in a number of Western European countries.

The young have less experience to offer and are therefore less in demand. Before politicians stepped in, that just meant that younger workers were paid less. But this is not a permanent situation because youth itself is not permanent, and pay rises with experience.

Enter politicians. By mandating a minimum wage that sounds reasonable for most workers, they put a price on inexperienced and unskilled labor that often exceeds what it is worth.

Mandated pay rates, like mandated insurance coverage, impose on buyers and sellers alike things that they would not choose to do otherwise.

Workers of course prefer higher wage rates. But the very fact that the government has to impose those wage rates means that workers were unwilling to risk not having a job by refusing to work for less than the wage rate that has been mandated. Now that choice has been taken out of their hands, with the hidden cost in this case being higher unemployment rates.

It is of course no secret that there is no free lunch. It is just an inconvenient distraction that gets left out of political rhetoric.

[Thomas Sowell is a senior fellow at the Hoover Institution, Stanford University, Stanford, CA 94305. His website is www.tsowell.com.] COPYRIGHT 2010 CREATORS.COM

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