As Obama called for passage of those bills, he also responded to a recent Republican push to require him to approve the construction of the Keystone XL pipeline from Canada. "However many jobs might be generated by a Keystone pipeline," he said, "they're going to be a lot fewer than the jobs that are created by extending the payroll tax cut and extending unemployment insurance."
He can get away with saying something so obviously wrong because Washington D.C. is in the thrall of the Keynesians: a bunch who mistakenly believe that consumer spending can create jobs. This is a fallacy that was debunked over a century ago by John Stuart Mill.
Demand for commodities is not demand for labor.In buying commodities, one does not receive wages. What one pays and receives in the purchase and sale of commodities is not wages but product sales revenues.
The payroll tax cut and the continued unemployment benefits will almost certainly result in the sale of consumer goods by the same amount. But that spending will not cause a single job to be created -- not one, zip, zero, nada, zilch. Labor is not hired by consumer spending but by capital and capital is formed only by a conscious decision by an entrepreneur to save some of his proceeds and spend it on the operation or expansion of his business.
Though his sales may rise appreciably, he may still, because of doubts about the future, fail to invest in expansion. He may take his profits and invest them elsewhere or spend them on consumer goods himself. The decision by consumers to increase their spending and the decision by entrepreneurs to hire more employees are two completely separate economic processes. Though hiring new employees, whether previously unemployed or whether lured away from another employer by higher wages, will increase consumer spending, it bears repeating that the opposite will not.
The pipeline, on the other hand, is an expenditure of capital. Its construction will undoubtedly create construction and engineering jobs for thousands upon thousands. And the spin-off benefits to suppliers of raw materials, machinery and other capital goods will be substantial. Now, it's transparently obvious that Obama is rejecting the pipeline to placate environmentalists, but that he can announce such foolishness about job creation with a straight face and no questioning from the press is a testament to the low level of economic thinking in the country today.