Saturday, March 24, 2012

Five Stimulus and Jobs Bills: Measuring the Abysmal Keynesian Results

'Even before the 2010 midterm elections, with Democrats controlling massive supermajorities in both the House and Senate, President Obama had passed five stimulus and jobs bills. If you add up the promises, he boldly promised well over 5.5 million jobs “created or saved.” But reality turned out very differently: There were 2 million fewer people working in September 2011 than when Obama took office. On top of that, population growth by itself should have generated more than 3 million new jobs.'

'By the end of the summer, in August 2011, the unemployment rate was still at 9.1 percent. It was no longer possible to claim the Stimulus had worked well. Obama claimed that the sluggish economic growth wasn’t the fault of his own economic policies; it was the fault of other circumstances that he had no control over. It was either events outside the United States or the irresponsible political behavior of others in Washington. Obama claimed:

"In the last few months, the economy has already had to absorb an earthquake in Japan, the economic headwinds coming from Europe, the Arab Spring and the [rise] in oil prices—all of which have been very challenging for the recovery. But these are things we couldn’t control. Our economy didn’t need Washington to come along with a manufactured crisis to make things worse. That was in our hands. It’s pretty likely that the uncertainty surrounding the raising of the debt ceiling—for both businesses and consumers—has been unsettling, and just one more impediment to the full recovery that we need."

There are a couple of problems with his argument. Economic growth had already ground to a halt during the first three months of 2011—with GDP growing by just 0.1 percent. This was well before the Arab Spring, the renewed debt crisis in Greece and other countries, and the July and August 2011 debate over the debt ceiling. And whatever the impact of the March 2011 earthquake, its initial impact during the first quarter in the United States would have been very limited. The president also blamed Republicans for not passing his new legislation when they took over the House of Representatives in January 2011. But with Democratic supermajorities in both the House and Senate for the two previous years, it is pretty hard to blame for the slow growth in the first half of 2011.

In addition, it seems a little hard to blame the Japanese earthquake for our poor unemployment rate when the Japanese unemployment rate fell and ours rose in the five months following the earthquake. Nor is it clear how we can blame “economic headwinds” from Europe when our unemployment rate from January to August 2011 rose while it fell for European countries such as Germany, Italy, and Sweden and stayed the same in France.'

'No matter how you cut it, 3 million jobs have not been added since the recession ended. The recession officially ended in June 2009, and at that time 130.49 million people held jobs according to the Bureau of Labor Statistics’ Establishment Survey. The numbers for September 2011 show 131.33 million, an addition of just 840,000 jobs. But with the working-age population having grown by 4.6 million people in the same period, this should be viewed as a miserable failure. Furthermore, out of the 840,000 additional jobs, the vast majority—540,000—were merely “temporary help” service jobs.' - Debacle: Obama's War on Jobs and Growth and What We Can Do Now to Regain Our Future, Grover G. Norquist and John R. Lott, Jr.

The entire excerpt from the book Debacle: Obama's War on Jobs and Growth and What We Can Do Now to Regain Our Future can be read at the following link:

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