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> Government cannot create jobs.

This is nonsense. The government can fund projects that create jobs. Do you have any idea how many small businesses out there make their money solely from servicing government contracts?

Just as an example, I worked at a small software consulting firm during the middle/end of the dot com boom. We were a project shop. The contracts we worked on for the state allowed us to stay in business and weather the dot com bust. In the process, we brought in and trained about a dozen 'blue collar' type workers to do project management, account representation, and basic html and coding. As a result of that government money, those people got a new career path and ten years later the bulk of them are working at other companies making 6 figure salaries. Tell me the government didn't receive a huge return from their investment on that.

>> Government cannot create jobs.

>This is nonsense. The government can fund projects that create jobs.

There's no evidence this is a net creator of jobs, though. There's a lost opportunity cost to take into account here.

There's also no evidence that keeping taxes low (the opportunity cost) creates jobs. Just look at our employment performance over the last decade

Where are taxes low? Certainly not where I live.

>Government cannot create jobs. It can make the cost of doing business less expensive by lowering taxes, or it can make the profits of a business higher by providing incentives. But for your average small business, those kinds of changes add up to much less than one person's salary, so it makes very little difference.

It can also use monetary and fiscal policy to stimulate demand, increasing the amount of work that needs to be done and resulting in more hiring.

It can also use monetary and fiscal policy to stimulate demand, increasing the amount of work that needs to be done and resulting in more hiring.

A government can certainly use monetary and fiscal policies to stimulate demand and create more work, but that does not necessarily result in more hiring.

For one thing, when there is a surplus of goods (and there frequently is late in a recession and shortly thereafter) the initial demand will be met by that surplus rather than any additional production. Even when that surplus is exhausted, additional demand may be met through through automation. Also, if an industry as a whole thinks that this demand will be short lived, it may choose to either raise prices or simply permit some of that demand to go unmet rather than make large capital expenditures to increase production.

Also, normally when a country is trying to "create jobs", its goal is to create jobs for its own citizens. In an increasingly global economy, stimulating demand may increase imports without increasing jobs in the target economy.

So, while increasing demand may help create jobs, it also may have limited impact and that impact may take a substantial amount of time to be felt.

Even when that surplus is exhausted, additional demand may be met through through automation.

This is exactly what happened in our current recession.

http://research.stlouisfed.org/fred2/series/GDP

http://research.stlouisfed.org/fred2/series/PAYEMS

http://research.stlouisfed.org/fred2/series/DGORDER

http://research.stlouisfed.org/fred2/series/IPDCONGD

http://research.stlouisfed.org/fred2/series/DMANEMP

If I do some work and grow some food from seeds, I have created actual value by my work. Monetary and fiscal policy does not do this. It creates or destroys currency, thereby either diluting or concentrating the value of dollars, creates temporary incentives to borrow or lend, which will be offset by the inevitable bounce-back. The end result is just a temporary fluctuation.

There's a great podcast about this exact topic by Planet Money: http://www.npr.org/blogs/money/2011/04/05/135151990/the-tues...

One of the best Planet Money episodes I've heard. Summary (from memory): the one and only way government can create jobs is to invest in infrastructure. Everything else is hot air.