Stimulus Is Working, If You Count $621,000 Jobs

The White house has released estimates of the fiscal stimulus' impact on the economy through June 2009. At best, those estimates show that the fiscal stimulus has been a colossal waste of tax dollars.

The White House claims that growth rates are persistent: the negative real GDP growth prior to 2009 Q2 would have continued indefinitely if it were not for wise fiscal policy. That claim is ridiculous, and inconsistent with the rest of their calculations, but I will put that to the side until later this week. Another future topic is the private consumption impact of all of this, conspicuously absent from the Administration's analysis.

For now, let's take the Administration's estimates literally:

• More than $100 billion worth of stimulus spent in 2009 Q2 (p. 5)

• 597,000 jobs would have been lost in Q2 -- that's the purported "momentum" from the last quarter (pp. 8, 11)

• In fact, 436,000 jobs were lost (p. 9), so we have to thank the White House for the 161,000 that were not lost

• The same logic for real GDP: it would have fallen at a -3.3 percent annual rate (p. 12), but in fact it fell at a -1 percent (p. 12) annual rate, so we have to thank the WH for the -2.3 percent further negative annualized growth rate that would have occured without them.

• Recall that a 2.3 percent annual growth rate actually refers to about 0.6% growth rate from one quarter to the next. So what the WH is saying is that we owe 0.6 percent of 2009 Q2 GDP to their policy, which is about 20.3 billion dollars

So, from the jobs perspective, we just spent $100 billion of taxpayer money (not counting the economic damage done to raise this money) to supposedly create 161,000 jobs: that's $621,000 per supposed job!! Can we agree that creating a job is wonderful, but not worth $621,000?!

[OK Keynesians, I know that you're going to claim that those jobs are going to last a lifetime, so actually $621K is cheap ... get real! You will also claim that those 161,000 jobs will beget still further jobs, kind of like rabbits mating in the forest. Anyway, my next post will address this head on.]

From the GDP perspective, we just spent $100 billion of taxpayer money (not counting the economic damage done to raise this money) to supposedly raise GDP by $20.3 billion. That's the kind of public sector productivity we've come to expect!

NEXT: let's look at consumption, and unpack the "supernatural spiral of spending" that stimulus advocates would have us believe.

Comments

[Moon Kil Woong]

You can apply this thinking to TARP, the Bush Stimulus, the Obama Stimulus, and just about any stimulus package out there. The all don't make a lot of economic sense. The only ones that do are when government expends money to increase some productive aspect of the economy like building railroads, improving public transit, building dams, or paying for high speed wireless fireroptic lines or wi-fi accross America (we can dream right). Anotherwords, the stimulus can not just be spending but give us something tangible and lasting in return. That way it doesn't add to inflation if debt was spent to make it (increased money needs a corresponding offet in goods or services so as not to cause inflationary pressure).

Anyway, thanks for the article and making it clearer to people why the government's spending arguments make absolutely no sense at all.

2009 Aug 19 06:58 AM

[Pat C]

What's your plan Mr. Mulligan?

2009 Aug 19 12:35 PM

[kmarkt2]

Mr Mulligan, misses the main purpose when TARP was originally conceptualised by Hank Paulson in the final moments of the Bush Administration. President Obama, has no other option to surrender to Wall Street with a $787 B bailout. Of course, he made a grave mistake - he left the details to Tim Geithner, a Wall Street insider.
Well, we know the kind of leverage that the Goldman Sachs, JP Morgan, re-incarnated Merrill Lynch ], Citi and the other Hedge Funds of Wall Street has in manipulating markets- they need the TARP money to produce magical profits for their bonuses.
So, its completely off the mark, when the calculations as exposed by Mr.Mulligan, allude to creating a shadow value of $621000 per job saved, creating a shadow value in 2009 Q2 GDP to the tune of $20.3 billion with $100 billion factor of production, call debt.
The real computation must come from where in the world did the $trillion of wealth that was supposedly destroyed, go to ? Surely, it has to have gotten somewhere and I suggest, NY Attorney Cuomo should be let loose like a hungry vampire !

2009 Aug 20 03:38 AM