76-06-A4
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Unemployment and Inflation IV[edit]
Transcript[edit]When Jimmy Carter moves into the White House next month, he must turn his attention quickly to unemployment and inflation. Let's look at a few of the ways he might try to solve these problems, starting with two he has already mentioned: Federal job programs and tax cuts. Federal job programs are supposed to solve unemployment by putting more people to work for the federal government. We know the new jobs will be non-essential, or else they long ago would have been justified to a liberal Congress as normal budget expenditures. Moreover, we are already paying $82 billion for five million federal employees to push paper and people around. That's a terrible price -- $1600 a year for the average family -- to pay for Washington bureaucrats. What's worse is that it's an inflationary price because federal workers, in contrast to privately employed or even local government workers produce few goods and services. More often than not, federal regulations and the bureaucrats who administer them restrict productivity, and monies spent for non-productive or anti-productive labor is, by any economist's definition, inflationary. The added costs of new federal job programs will simply fuel the fires of inflation, eventually producing even more unemployment as more people join the labor force to try to meet the rising cost of living. The President-elect has also talked about tax cuts as a way to stimulate investment in the economy, increase productivity, and reduce inflation. Lord knows I'm for tax cuts; always have been and always will be. One of the high points of American history was when Thomas Jefferson announced, in his second inaugural speech, that he had been able to end all federal taxes on the citizens. I doubt if Governor Carter is thinking about that much of a tax cut. In fact, if it's a selective one time cut he's after, without a corresponding cut in spending, those on the receiving end will either sock the money away in savings, reduce their debt or increase consumer demand without there being a corresponding production increase. All that spells more inflation. Tax cuts can work to curb inflation if they involve across-the-board indexing of the tax brackets, so that they offer incentive for greater production and capital investment. When the new President sees that federal job programs and short-range cosmetic tax cuts won't work, what next? Well, there's always the liberals' favorite economic tool: wage and price controls. I'll talk about them next time. This is Ronald Reagan. Thanks for listening. |
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