What creates what?

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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