Why is this post-recession recovery different?

Today’s chart comes via the blog Cafe Hayek, run by George Mason University economists Don Boudreaux and Russ Roberts. It shows how the recovery from the recent recession (December 2007-June 2009) has been positively dismal.

Unlike after any other recession (except the recession in the early 1960s), the ongoing recovery has had quick increases followed by quick decreases in overall employment. And, remember, these figures are only compiled among those people seeking jobs actively. People without jobs who aren’t looking for work don’t count.

My colleague Bill Bergman also shared with me this chart, which has been called “The Scariest Jobs Chart Ever.”

You can clearly see the depth and length of the unemployment that followed the 2007 recession. The only steep blip is when the federal government hired many thousands of people temporarily to conduct the census. The employment trend line is rising, but very slowly, and much slower than after previous recessions.

Why might this be the case? There are many theories. Some say it’s because the government hasn’t spent enough money to employ people. This approach is justified by citing the work of mid-20th century British economist John Maynard Keynes. Keynes theorized, by creating any jobs at all for an unemployed workforce, those newly-employed workers would be able to buy things again, thereby jump-starting the economy. Politicians today call this “investing in the future” because they are able to choose how to employ the jobless to fulfill their various priorities for the economy, whether infrastructure, education, energy, whatever.

The main competing theory was presented by Keynes’s friend and intellectual rival F.A. Hayek. Hayek argued a recovery in employment would only occur once some people (entrepreneurs) discovered what other people wanted to buy. As companies produced more goods or services to satisfy the demands of others, they would hire more employees. Hayek argued the government was incapable of discovering what people needed or wanted, and so just employing the jobless to do any old task–even an important one such as education–would be a waste of resources.

Which theory is right? Economists, politicians, pundits and citizens have this argument every day. The argument continues because it’s impossible to prove the current recovery would be “better” either if the government had spent more or it had spent less.

We at the Coalition to Reduce Spending buy Hayek’s argument. We recognize politicians want to be seen by the public as “doing something” to help the country, and the easiest tool they have is massive sums of money, both collected from taxpayers and created by the Federal Reserve. When government uses scarce resources, however, it removes those resources from other uses. In government’s top-down approach, it assumes it knows the most effective ways to spend money, which, when we hear of all the wasteful spending in Washington, D.C. we know intuitively that just isn’t true.

Since 2007, the government has tried that approach and with meager results. The government is now deeply indebted and digging deeper into the hole every day. Some day its bills will have to be paid. In the meantime, many people are still struggling without jobs.

At the Coalition to Reduce Spending, we advocate a bottom-up approach, where people discover the best ways to serve each other and have the resources to do so. We advocate a different program to jump-start the economy, one that returns the power to individuals to find what people want and need and make it for them. We advocate reduced spending across the board so the economy can truly get back on track and people are doing jobs that are truly valuable to others.

You see, reducing spending isn’t only a mathematical necessity. Not only is government spending too much for the American people to support, but it is undermining the economy itself.

Why is this recovery different? The answer is because we’ve dug-in our heels and trusted the people who run our government to do the right things. But they have failed, not because they’re bad people, but because they alone are incapable of planning the economy for growth. The task of planning the economy belongs properly to everyone, acting in ways small and large, for themselves and others.

This is why the Coalition to Reduce Spending exists, and why we hope you’ll join us.