Daniel J. Mitchell

If young people in Europe were a company, I would be telling you to sell the stock.

Why? Well, because politicians want to help them. And, as perfectly illustrated by this Eric Allie cartoon (as well as the cartoon he has at the bottom of this post), government at best unintentionally harms those it tries to help.

To see what I’m talking about, here’s some of what the EU Observer is reporting today.

EU leaders gathering in Brussels on Thursday (27 June) for a two-day summit will again turn to measures aimed at helping young people to get jobs, as unemployment figures soar in southern countries. The summit kicks off at 4.30pm local time with a meeting between leaders, trade unions and employers’ associations, to hear what actions they are taking to boost youth employment. …The European Commission has already drafted a paper on how the EIB could boost its lending powers. Its loans are used mostly by small and medium enterprises, which could hire more young people if they get the money to fund expansion. Under the most ambitious scenario, EIB lending could exceed €100 billion.

How stereotypical. Big business, big labor, and big government are getting together and considering a €100 billion slush fund that will line their pockets.

They want us to believe this will lead to more jobs for young people, but they overlook (and hope we’re unaware of) Bastiat’s warning about the seen and the unseen.

Expanding the EIB will simply divert resources from more productive uses.

So what’s the answer? Here’s what I recommended as part of some speeches earlier this month in Europe.

I began with what should be a common-sense observation that businesses won’t create jobs unless they think new workers will add to the bottom line.

Youth Unemployment 1

I then outlined some of the ways big government undermines incentives to create jobs by making workers more expensive.

Youth Unemployment 2

I also explained that Keynesian spending schemes won’t create jobs.

Youth Unemployment 3

Last but not least, I warned that workers will be less likely to seek jobs if government handouts alter the tradeoff between work and leisure.

Youth Unemployment 4

Regarding this final slide, I shared in my speeches this amazing chart about theanti-work incentives created by the safety net in the United States, as well as some similar startling data from the United Kingdom.

Sadly, none of my audiences included senior European officials. And even if they were in the audience, I doubt they would have learned anything.

After all, why support an agenda of free markets and small government when that would reduce their power and influence?


Daniel J. Mitchell

Daniel J. Mitchell is a top expert on tax reform and supply-side tax policy at the Cato Institute.
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