A Trillion Dollars in Job Destruction
Economists Timothy Conley and Bill Dupor have produced a new study on the trillion dollar stimulus, and reached a few fairly unambiguous conclusions.
Our benchmark point estimates suggest the Act created/saved 450 thousand government-sector jobs and destroyed/forestalled one million private sector jobs.
This is exactly the problem many of use warned against -- that while a trillion dollars of expenditures would certainly employ some people, lost in all the discussions where how many people would have been employed had that trillion dollars been left in private hands. Seriously, the single fact that Obama refuses even to publicly acknowledge that there is an offset on the other side of this ledger is enough, all by itself, to disqualify him from the supposed status of being "really smart."
Further, I warned way back in January of 2009 I looked at the stimulus line item by line item and found very, very little of it was actually the claimed "shovel-ready infrastructure" projects. In fact, most were just bailout payments to state and local govenrments
So do you see my point. The reason so much of this infrastructure bill can be spent in the next two years is that there is no infrastructure in it, at least in the first two years! 42% of the deficit impact in 2009/2010 is tax cuts, another 44% is in transfer payments to individuals and state governments. 1% is defense. At least 5% seems to be just pumping up a number of budgets with no infrastructure impact (such as at Homeland Security). And at most 6% is infrastructure and green energy. I say at most because it is unclear if this stuff is really incremental, and much of this budget may be for planners and government departments rather than actual facilities on the ground.
As of July of that year, we could write that "90 percent has gone to assist Medicaid and to stabilize tottering state budgets. Apparently this trend continued, as the recent study concludes
It appears that state and local government jobs were saved because ARRA funds were largely used to offset state revenue shortfalls and Medicaid increases (Fig. A) rather than directly boost private sector employment (e.g. Fig. B).
This is the real post-election payoff to the SEIU - not visits to the White House, but the sacrifice of two private jobs to save one government job.
ADiff:
Isn't it pointless to speculate about effects "had that trillion dollars been left in private hands", when the fact of the matter is there never was any of that "trillion dollars" taken from private hands....well, at least not at the moment, anyway. Rather it was borrowed from future taxpayers, as it was purely deficit spending.
The analysis here is too simplistic.
May 18, 2011, 11:14 amOrphan:
ADiff - Entirely incorrect.
That money was not transported back in time via time machines, nor were the goods and services it purchased. That money -was- taken out of private hands, albeit not involuntarily; it was taken via the mechanism of investment, and because liquidity is a finite value, it necessarily took investment -out- of other projects.
That's without even considering that by purchasing things, including labor, it drove up (or simply maintained) the cost of goods and services which otherwise private entities would have been able to purchase, and prevented almost-profitable enterprises from surviving, or from being invested in to begin with.
May 18, 2011, 11:47 amAndrew:
http://web.econ.ohio-state.edu/dupor/arra10_may11.pdf
here's a link to the actual study, for those interested.
May 18, 2011, 2:30 pmDr. T:
"... the single fact that Obama refuses even to publicly acknowledge that there is an offset on the other side of this ledger is enough, all by itself, to disqualify him from the supposed status of being “really smart.”"
Obama's failure to acknowledge the "other side of this ledger" publicly could indicate that he is politically smart. Failure acknowledge the "other side of the ledger" *privately* would be evidence that Obama isn't smart. (I already have more than enough evidence to convince me that Obama has only average intelligence, and, unfortunately, economic knowlege that's below average for a lawyer.)
May 18, 2011, 4:25 pmSmock Puppet, Mathematical Economist:
>> economic knowledge that’s below average for a lawyer.
Sorry, only with Democrat Math (aka "Algebro", from the same peeps who brought you "Ebonics") can an imaginary number represent economic knowledge.
:^D
May 18, 2011, 6:17 pmMesa Econoguy:
Almost Dr. T.
As I've remarked before, Obamalini is half-educated; he has studied interventionist public policy, top-down control government, and collectivism, but he has no concept of individual rights or private property/ownership, or anything remotely related to economics and opportunity cost, or tradeoffs.
He has never been exposed to these things, and were he truly intelligent, which he is not, he would have at least sought them out independently, in order to know his enemy, if for no other reason. The fact he has not done so, as evidenced daily by his ignorant economic action and ignorant commentary, is significant.
May 18, 2011, 6:28 pmnapablogger:
adiff and orphan are exactly correct. Warren you have descended into pure ideology. If you are going to criticize something at least understand what it is you are criticizing.
Deficit spending in theory is the same as giving a loan to a business that is not doing well. Your criticism is saying that the loan puts them even deeper in debt and is worse than useless. But not if it bridges them to bigger sales in the future such that they not only save the business but pay off the loan and the interest. That is the exact same theory as Keynesian economics. You might want to read some some time.
May 18, 2011, 8:55 pmSlow on the uptake:
napablogger:
You had me going for a moment there... Very clever.
May 19, 2011, 7:17 amArtD0dger:
You don't understand basic Keynesianism -- see, the economy is like a DeLorean. If you press the accelerator until the spending reaches 88 billion dollars per hour and steer straight towards the poor house, then at the last instant the economy will disappear in a puff of smoke and be transported to the 50's, which everybody knows was the land of jobs and honey.
(Or was that 88 *trillion* dollars per hour?)
May 19, 2011, 7:12 pmSmock Puppet, Mathematical Economist:
napablogger, your ignorance of economics -- even imbecilic, utterly disproven Keynesian economics** -- is so utterly astounding as to render one almost breathlessly confounded as to where to START to point out the flaws in your grasp...
1) The clearest difference lies in the fact that politicians and bureaucrats decide where the money is to go, and not investment experts.
2) Another difference is that all government revenue is, essentially, theft. They take, by force, the money from Peter, and they give it to Paul. Hence, the real comparison would be if the corporate CEO got together with some of his cronies and robbed the investment bank's coffers.
3) Let's presuppose that investment experts actually get into the government bureaucracy and run it "properly". There is still Friedman's problem here about the nature of government spending as a whole:
Milton Friedman points out that all expenditures really come in one of four varieties --
(hopefully this stays looking somewhat tabular, in columns -- if not, copy it and place it in Notepad using a monospace font)
.Class.....I Spend....................On Something......................Example..................
..I........My Money.....................For Me.................I buy myself a new pair of pants
..II.......My Money.................For a Third Party......I buy a co-worker I don't know real well a birthday present.
..III......Someone Else's Money.........For Me.............I take your money and buy myself a birthday present (think "gift certificate")
..IV.......Someone Else's Money.....For a Third Party..........This is everything the government does.
Now, consider ---
For Class I, I have a considerable vested interest in getting the best possible value
For Class II, I still have a substantial vested interest, since I will pay the price...
For Class III, same thing again, since this time I reap the rewards.
For Class IV, though. "It ain't my money, and I'm getting nothing out of it. What the heck do I care?? I'm going to get the easiest thing I can for the purpose at hand...
Anything that makes my "job" (spending money) easier is what I'll get, and I'm not out anything no matter the cost, so what do I care, why would I bother searching for a good deal?
YES, there are conscientious people out there who WON'T think and act that way. I've even been one of them on occasion. We aren't in the majority, though -- Face it -- most people are flat out lazy assholes. That particularly includes government bureaucrats and employees. Watch any government road crew at work if you doubt this.
The investment banker has a VESTED INTEREST in what happens with the investments. It's his money, or his responsibility. If too many investments crap out, he loses his job and/or money
The government bureaucrat? PFeeeehhhh! What does HE care? "Oops, I was wrong. Sorry".
For crying out loud when high-level government bureaucrats don't lose their jobs for making stupid decisions that blow up a billion dollar investment like the Space Shuttle, WTF leads you to the absurd idea that it'll happen when they waste billions of dollars on boondoggles (like, oh, solar power and wind power, or high speed trains)???
Q.E.D., there's a distinction the size of the Grand Canyon between "investment banking" and "government funding".
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May 19, 2011, 8:22 pm** See "Stagflation", a condition absolutely, utterly impossible on the basis of Keynesianism. Not unlikely, <bNOT POSSIBLE. Now go look at America in the 1970s, or Japan in the 1990s. Nevertheless, in the face of obvious facts, Keynesianism remains popular among ignorant leftist dunderheads, foolish quacks, and self-serving charlatans, all of whom care more about government control than they do about Truth.