Duh. Now, Let's Get To The Real Issue

Apparently, Obama is trumpeting victory because a company that will recieve a lot of the stimulus money will likely hire more people.

President Barack Obama says Caterpillar's chief executive has told him the company will rehire some laid-off workers if the stimulus bill passes.

The heavy equipment maker announced more than 22,000 job cuts last month as it scales back production amid the economic slowdown.

Seriously, do proponents of the stimulus really think that we opponents don't understand that individual projects funded by this new bill will employ people on the project?  I guess they do, because I had this very argument last night.  So, to clarify my position, I fully understand and comprehend that projects that get additional funding in the new bill will likely employ more people on that project than if they had not been funded by the bill.

The issue is that the $800 billion of "stimulus" comes from somewhere, in this case borrowing paid for by future taxes. At any point in time, there is only so much investment capital out there in the world.  So, the real question is not whether Caterpillar will hire more people if the government throws money its way. The real issue is who won't be hired somewhere else because $800 billion of investment capital that was going to be employed for some private purpose is now going to be spent by the government.

For those who are not confused about this, and want to discuss the multiplier, which is another way of asking how the net gains and losses described above balance, there is a good back and forth here.

One thing this country just seems incapable of considering -- it may be that there is simply nothing the government can do to make this recession better.  Everyone, from consumers to lenders, find themselves overleveraged and new spending is simply going to go down for a while until everyone feels comfortable with their reserves.  The only thing Obama has done so far is, by spreading panic, to increase the size of reserve everyone thinks they need (example here, and my analysis here)

Postscript: Obama's actions  of late are kind of funny.  He has been criticized for lacking experience and having only really demonstrated the ability to campaign well.  So, when things get tough and he starts to come in for some here-to-fore unprecedented criticism, he runs back to what he does best - campaign.


  1. Sam L.:

    And now the CEO says any rehiring is months from now, and more layoffs are likely.

  2. Matt:

    The truth is, the government CAN act to improve the economic climate, although not by the method they're trying. A large fraction of the present crisis is specifically and identifiably of state origin, and _only_ the state can fix that. (The AIG bailout, for example, wouldn't have been necessary were it not for government-imposed changes in accounting rules. The mortgage industry would be in much healthier shape if government weren't constantly sticking its nose in mandating unprofitable and dangerous lending choices. The list goes on. Congress could fix these problems tomorrow, and ONLY Congress can fix them. But they won't.)

    Keeping on the second-highest corporate tax rate in the OECD doesn't help either. Another problem Congress could fix by passing a law, but won't.