What creates what?

June 7, 2009

I noticed an article from some months back over at heritage.org.  

Economic Stimulus Pushed by Flawed Jobs Analysis

This part shows exactly, not only why the entire “stimulus” is nonsense, but why the Obama team is leading us on a very dangerous course:

 

To estimate the number of jobs created by increased government spending, Romer and Bernstein multiply the amount of government spending in the stimulus plan by the multiplier discussed above. The outcome is the increase in GDP resulting from the increased spending. They then apply a “rule of thumb” that a 1 percent increase in GDP results in the creation of 1 million jobs. They do not justify this rule by citing any empirical or theoretical research.
The “rule of thumb” is misused because it assumes that increases in GDP create jobs. In fact, the relationship is actually the other way around. Production and work create GDP, so it is more accurate to say that 1 million more jobs produce 1 percent more GDP.

To estimate the number of jobs created by increased government spending, Romer and Bernstein multiply the amount of government spending in the stimulus plan by the multiplier discussed above. The outcome is the increase in GDP resulting from the increased spending. They then apply a “rule of thumb” that a 1 percent increase in GDP results in the creation of 1 million jobs. They do not justify this rule by citing any empirical or theoretical research.

The “rule of thumb” is misused because it assumes that increases in GDP create jobs. In fact, the relationship is actually the other way around. Production and work create GDP, so it is more accurate to say that 1 million more jobs produce 1 percent more GDP. [emphasis mine]

 

This is Keynesian fallacy in a nutshell.  It is completely backwards analysis to economics, that if we simply spend and “increase GDP” – through artificial means (government expenditures) – jobs will be created.  Employment is the result of production, and production creates GDP.  It’s going to be a very long and painful road.  Sadly, they are choosing this path.

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How’s that stimulus going?

June 7, 2009

jobsgraph

This graph might look familiar.  It is in the “secret” (well, the title at the top says “embargoed until Jan. 10, 2009.  So you now it has to be important.) The Job Impact of the American Recovery and Reinvestment Act.  

So, if I can make out exactly what is suppose to happen, without the stimulus, unemployment should have been 9%, but not until 2010.  Hmmm…what is it now???

According the BLS, it’s already 9.4%.  Oh, and that would be WITH the stimulus.  Of course, the “good news” is that the job losses were not as bad.  See, were already “saving” jobs.

But in reality, the destruction is only beginning.  Rather than letting the malinvestment work its way out and letting the economy recover, then generate real wealth and real growth, all we’re getting is government fueled destruction.  

The fed has been printing madly, the government has been borrowing and spending wildly, and the economy has been collapsing.  The freefall will only continue.  But of course, the enlightened will only see this as a call to do more.  The problems, we will be told, were that were that the fed didn’t print enough, the government didn’t spend enough, and the public didn’t spend enough.

What got us into this calamity will never be addressed.  What will never be accepted is the truth, that the boom was artificially driven by monetary expansion, that tremendous wealth and resources were diverted away from productive ventures.  Those with full responsibility will never accept their roles, and will only clamor for more control, more power, and a correspondingly greater loss of freedom, liberty, and prosperity.

The only thing a stimulus package does is stimulate the growth of government.

Maybe that was the plan all along?


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