From humble beginnings atrocities begin.  Every action must follow immutable and unalterable laws, consequences follow choices; this article follows the influence of choice pieces of legislation from impetus to current event entanglements.  Only through learning history can proper change produce preferred results.

Modern employment, as we know it, began with a small change from the republic principles of free enterprise morphing into the democratic philosophies of top-down government control.  Soldiers, sailors, marines, and airmen coming home from WWII had left jobs and wanted those jobs back; so, the Federal Government changed policies, wrote legislation, and veteran preference in hiring began.  Sounds good, right?  But by carving out exclusions for veterans, other people wanted to possess special treatment.

What occurred in Federal Legislation has caused some serious problems; the first of these problems began with the altruistic ideal of full employment.  Full employment refers to  “the continuing policy and responsibility of the Federal Government . . . to coordinate and utilize all its plans, functions, and resources for the purpose of creating and maintaining . . . conditions under which there will be afforded useful employment opportunities, including self-employment, for those able, willing, and seeking to work, and to promote maximum employment, production, and purchasing power.”  (Scitovszky, 1946)

The Federal Government in 1945, with enough good intentions to pave a super-highway from New York to Beijing, sought to avoid the natural swings which occur in finance and wrote a bill, eventually entitled the ‘Employment Act of 1946’ to avoid future problems experienced between the prosperous 1920’s and the depression of the 1930’s.   To try to improve financial situations for the Federal Government, employment was considered and tied to economic indicators, suggesting low unemployment equates to higher tax revenues and dollar strength.  This reasoning is valid; however, the consequences spinning off these legislative nightmares are self-defeating.

The next time these economic indicators were reviewed was in 1976 with the ‘Full Employment and Balanced Growth Bill.’  Both of these bills, 1946 and 1976, show tremendous influence from Keynes and his theories of being able to spin into prosperity by incurring unsustainable debt.  Sections 2b and 2c of the original bill from 1945 are crucial to understanding the nightmare problem.  In 1945 the legislators declared full employment is possible for all those who desire it, and proposed full employment through federal government spending.  See the problem, especially in the current fiscal cliff negotiations; the Federal Government has become a consumer of goods and exercises a little known principle “Those who pay, control.”  By becoming a consumer of goods and spending money as a customer, the Federal Government can now demand private enterprise obeisance.

Section 3 of the 1945 version of this legislation requires that the president forecasts and writes a budget to increase or decrease spending based upon unemployment numbers and percentages.  The president must forecast spending on a yearly basis to which Congress must then write the underlying legislation as part of the budgeting process.  The president was made directly responsible for the employment of every person in the US who wanted to work, desired to work, was healthy enough to work, and the legislative bodies would produce the needed bills to make it happen.

Flash forward from 1945 to 2012 and the problem is glaringly obvious.  With a disinterested president failing in his legal duties to propose legislation and forecast employment and spending to the House of Representatives and the Senate, a contentious House and Senate that is more interested in internal politics, divisive sound-bites, class warfare and race games, and world economy fluctuating between dead and dying, the problem with this legislation becomes clear.  There is no control mechanism that compensates for the above.  Dictating through top-down government what businesses need to produce and still call it free enterprise is not possible.  The principle of full employment limits choices by forcing people to become employees through inflation, limiting markets, and the over regulation of enterprise.  These laws do not treat people equally because of the definition of employee, which feeds into the description of full employment.  Ranchers, farmers, and other independents suffer because of these laws and the definitions and classifications of the term ‘employee’ and ‘employment’ including ‘self-employment.’  Making the Federal Government a consumer has failed to provide true economic freedom and prosperity.

The nightmare of compensatory finance, as established by Keynes, is the main problem facing America today.  These two little known bills continue to rob America of greatness, steal future generations of prosperity through debt, and keep the Federal Government wasting tax dollars on frivolous projects.  Full employment is a worthy goal, but it is not obtainable due to the following reasons:  Federal Government spending into debt just to buy goods not used; Federal Government spending simply to keep unemployment numbers low; or Federal Government spending to soften financial cycles, all of which are unerringly wrong.

© 2012 M. Dave Salisbury

All Rights Reserved

References

Barro, R. J. (2011, August 24). Keynesian economics vs. regular economics. Wall Street Journal. Retrieved from http://online.wsj.com/article/SB10001424053111903596904576516412073445854.html

Sanotini, G. J. (1986). The employment act of 1946: Some history notes. Federal Reserve Bank of St. Louis.

Scitovszky, A. (1946). The employment act of 1946. Social Security Bulletin,

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