Guaranteed Bankruptcy

National Review Online

Saturday, April 28, 2018

Three Democratic senators eyeing the 2020 presidential campaign have in recent weeks floated the idea of a federal “jobs guarantee.” They want to offer dignified, useful, and well-paying jobs for Americans who have fallen on hard economic times. The media are taking them seriously. They shouldn’t. These proposals are deeply incoherent, and the notion of the government’s guaranteeing people a job is anathema to American principles.

The proposals vary in structure. Senator Bernie Sanders wants to enforce the program across the country, while Cory Booker wants to test the idea with a pilot program in 15 localities. But the idea has been gestating in hard-left academic circles for years. Generally, under a jobs-guarantee program, anyone could go to the government and receive a job. Employment would be offered in fields such as infrastructure, child care, health care, and environmental conservation, would include full health benefits, and would pay in some variations $12 an hour, in Sanders’s and Booker’s, $15 an hour. The jobs are supposed to be low-skilled (so anyone can do them), socially useful (so the program is politically palatable), able to grow and shrink with the business cycle (so new employees can easily be integrated when the private sector turns down yet leave when it picks up), and independent from existing government work (so as not to undercut existing public employees).

But there are obvious and ineluctable trade-offs between these desiderata. It is difficult to imagine that a large federal program that provides a socially useful service would be permitted to shrink if its employees want to take higher-paying jobs, for instance.

Right now, 50 million Americans make less than $15 an hour. If Sanders’s proposal were to become law tomorrow, what would happen? Tens of millions of Americans would take government jobs, leaving their former employers in the private sector in the lurch and hampering productivity. Some private employers surely would raise wages to compete with the government. Yet many of the jobs-guarantee plans would index government wages to inflation, potentially causing an inflationary spiral as private employers face pressure to continue paying workers more for their labor. A way out for the private sector would be to invest in automation, a good in itself, but surely an unwelcome unintended consequence for supporters of these proposals.

Then, there is the cost of the program, sure to be outlandishly high. Perhaps that is why no jobs-guarantee advocate has given a credible estimate of the price tag. One group of economists writing for the liberal Center on Budget and Policy Priorities says the cost would be hundreds of billions of dollars per year. But their assertion that the program would not crowd out any private employment is so incredible that it verges on academic malpractice. Meanwhile, both Booker and Sanders have demurred on the question of cost.

In short, the only thing this program would truly guarantee is an expansion of the power and size of the federal government at the expense of sound economics.

This is not to deny that worklessness in America is still a problem: Unemployment is low, but so is labor-force participation. There are creative policies that might help lower- and middle-income earners, such as beefing up the earned-income tax credit, that deserve consideration. Then, there is the jobs guarantee, a half-baked attempt at dirigisme that, if implemented, would have woeful consequences. We find the credulous media coverage of these plans irresponsible and preposterous — much like the plans themselves.