The Seattle Times Company

NWjobs | NWautos | NWhomes | NWsource | Free Classifieds |

Editorials / Opinion

Our network sites | Advanced

Originally published Thursday, July 7, 2011 at 4:10 PM

Guest columnist

The fallacy of who creates jobs and the 2012 presidential election

Guest columnist Alex Alben suggests the breathless commentary of how the economy will affect the 2012 presidential election misses several nuanced points. Among them is that private industry creates most of the jobs and that government policy influence, while important, is limited.

Special to The times

No comments have been posted to this article.

PRESIDENT Obama and the Democrats have a problem in the 2012 elections relating to the fallacy that the party in power "creates jobs" and therefore should be punished for a high national unemployment rate.

We can trace the roots of this rhetorical canard to the Clinton era, when Democrats boasted that 23 million new American jobs were created in an eight-year span from 1993-2001. Bill Clinton can rightfully claim that fiscal decisions made in the early years of his administration, symbolized by the 1994 budget and tax increases, set a stage for private investment and economic growth. However, job growth of that era had more to do with global business expansion, a booming technology sector and gains in workplace productivity than the decisions made by the man in the Oval Office.

A president has certain economic levers to shape fiscal and monetary policy. Deficit spending by the federal government pumps money into the economy, but doesn't directly lead to sustainable economic growth. The Federal Reserve sets interest rates between banks and can work to expand money supply and restrain inflation, tuning the environment for investment.

The private sector, however, is the seedbed for jobs. Of 153.7 million American workers, according to the Department of Labor, only 2.8 million are federal workers, 3.8 million have state government jobs, and 11.1 million are employed by cities and counties. More than 88 percent of all American jobs are in the private domain.

Many factors influence economic health and hiring decisions in both small and large businesses. Consumer spending, the housing market, foreign shocks, such as wars and terrorist attacks, and the invention of compelling new products all combine to form the soup of economic activity. Job creation reflects the confidence of hiring managers that consumers will continue to buy their products and that more people engaged in making products and services will lead to long-term profit, justifying the additional costs of expanding the labor force.

Yet if job creation is an economic bet made by many thousands of firms trying to assess future economic conditions, why do politicians persistently claim that they are responsible for job growth?

Quite simply, the job creation claim worked for President Clinton in his 1998 re-election campaign and for candidate Barack Obama in 2008. We should note that the U.S. economy also expanded under George W. Bush and 3 million net jobs were created in his two terms, but the country also suffered from 22 months of recession in his 96 months in office.

Obama ran on a platform of job creation, even with the headwinds of the business cycle and the economic meltdown precipitated by the financial crisis at the close of 2008. Asking to be measured by net job creation during any four-year period is a dangerous game and it has come back to haunt our 44th president.

The topic of a president's influence on the U.S. economy begs for a long and lucid discussion rather than the ridiculous banter served up by media pundits, who opine that Obama can't win re-election if the unemployment rate stays above 9 percent heading into November 2012.

Measuring presidential performance by a single statistic ignores both the good and bad decisions made by the Obama administration regarding our auto industry, payroll-tax cuts, unemployment benefits, the bank bailout (and repayment), and stepping in to keep the global financial system from spinning out of control in early 2009.

Historian Thomas Carlyle dubbed economics "the dismal science," yet the field covers the interactions between consumers, companies, traders, bankers, markets, merchants, unions, inventors and laborers that constitute the wonderfully complex set of relationships that make the world go 'round.

If we continue to indulge the overblown claims by politicians that they can do anything more than tinker around the edges of global economic forces, then we only have ourselves to blame for misplaced expectations.

Alex Alben, a Seattle consultant, has served as a senior executive for high-tech companies. His email is


NDN Video