Tuesday, September 21, 2010

Some interesting facts about stimulus

Reason magazine have a very interesting article about the effects of stimulus. One of my main criticisms of stimulus (and the whole nonsense of Keynesian economics which gives as fictional multipliers effects, demand deficits and deflationary spirals ) is that the political leaders and supporters of stimulus never let themselves be in a position to be proven wrong. Which is the true sign of an ideologue.

If the economy continues to slump, jobs are shed, GDP falls, then the stimulus wasn't big enough.
If the economy grows, then the stimulus is said to work.

In America, the stimulus isn't working. Sometimes, very vague but optimistic predictions are made as the stimulus is introduced.. and it can be shown that they have fallen wide of the mark when looking back at the data.


My most recent analysis found that the total number of jobs the government attributed to stimulus spending as of April was 682,000. Factoring in stimulus dollars spent up to that point, the average cost of these jobs was $282,000.

That’s a lot of money. Worse, four-fifths of these jobs were in the public sector. This outcome is far afield from the administration’s original promise that the stimulus would create 3.5 million jobs over two years, 90 percent of them in the private sector.

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The data released by the Bureau of Labor Statistics in June, then, were bad news. (See the chart.) They showed that since the passage of the stimulus bill, the private sector has lost 2.55 million jobs while the federal government gained 416,000.