Epstein: Deregulate Labor Markets
On the economic front, the good news is that the Dow Jones industrial average is inching back toward 10,000--only 30% off its all-time high. The bad news is that the unemployment rates are inching past 10% with no improvement in sight--unless, we are assured, government intervention can halt the downward spiral.
This point has not been lost on the Obama administration, whose de facto chief economic guru David Axelrod, assures us that "all additional potential strategies for accelerating job creation" are on the table. Axelrod may heed the advice of New York Times columnist Bob Herbert, who invokes Bill Clinton's Secretary of Labor, Robert Reich's fresh ideas for "igniting" job growth. The centerpiece of their program is the labor-market version of Cash for Clunkers: a $3,000 credit to small businesses to create jobs.
This Utopian proposal only makes matters worse. Everything turns on what kinds of jobs are created. Unfortunately, all labor-market subsidies run into two insuperable obstacles in both good times and bad. First, a wily employer could receive a subsidy for jobs that would be created in any event. The transfer payment to the lucky employer thus imposes an additional tax burden on everyone else, without any offsetting gain. Or, worse, the subsidy will create a shiny new job--albeit of little or no social value.