Thursday, January 7, 2010

Government Spending Creates Stimulus - Debunked

'Nuff Said.

I love the last paragraph:

"H. L. Mencken once wrote that "complex problems have simple, easy to understand, wrong answers." He may as well have been referring to the idea that Congress can foster economic growth simply by "injecting" money into the economy. Government stimulus spending is not a magic wand that creates jobs and income. Repeated failed attempts in America and abroad have shown that governments cannot spend their way out of recessions. Focusing on productivity growth builds a stronger economy over the long term--and leaves America better prepared to handle future economic downturns."

1 comment:

Nick Rowe said...

Do the math. For the price of the $787 billion "stimulus" package, the federal government could have hired about 4 million workers for two years at $50,000 a year salary with full benefits (100% of salary).

I chose $50,000 because that's approximately the US median wage. If we paid these workers only $25,000 we could have hired 8 million people for two years or 4 million people for four years.

I don't know what that army of workers would do, and I would not have approved of such a job creation plan. But those figures serve as a pretty good benchmark of how INEFFECTIVE this stimulus program has been. Not only have 4 million jobs NOT been created (or saved), we've LOST jobs since that bill passed.

The idea of "stimulus" is that by spending money, there will be a multiplier effect on the economy which creates jobs. Economists estimate that less than 10% of the spendulus bill was expected to have any stimulative impact, and that money hasn't even been spent yet.

I'm hoping there are several dozen jobs in Washington DC which are not saved in 2010 and two, in particular, which are not saved in 2012 (along with their staff and cabinet).