broken window fallacy (1)

 

“No amount of throwing money at such problems (as the $787 Billion Obama stimulus attempted) is going to magic-a booming economy or viable green technology into existence.  No amount of word-magic is going to assure that 8% unemployment will never be reached if real economic principles are ignored.  It is capitalism and inventors that create goods and services and advances technology; NOT the childish dreams of progressive politicos.  In short, Emperor Obama, you’re not wearing any clothes."

 

Rajjpuut

 

 

Common Sense Vindicated AGAIN!

Obama-Stimulus Killed REAL JOBS

 

http://web.econ.ohio-state.edu/dupor/arra10_may11.pdf

 

 

            The (PDF) link above documents a study by economists Timothy Conley and Bill Dupor on the impact of the nearly $800 billion stimulus package passed early months in  the Obama Administration: the stimulus which we were guaranteed would ensure that the nation’s unemployment never would rise above 8%.

            Conley an Dupor’s exhaustive and detailed study (36 pages in summing up) results suggest that the American Recovery and Reinvestment Act of 2009 (ARRA) created or saved approximately 450,000 thousand state and local government jobs and destroyed or forestalled roughly one million private sector jobs.  The common sense verdict that government spending kills private sector jobs was vindicated by the study.  In other words, the most clear-cut principles of good economics from Henry Hazlitt’s Economics in One Lesson still hold true.

 

“The bad economist sees only what immediately strikes the eye; the good economist also looks beyond. The bad economist sees only the direct consequences of a proposed course; the good economist looks  also at the longer and indirect consequences. The bad economistsees only what the   effect of a given policy has been or will be on one particular group; the good economist inquires also what the effect of the policy will be on all groups.”

 

          According to the study, state and local government jobs were saved because the ARRA funds were largely used to offset state revenue shortfalls and mandated Medicaid increases.  Boosting private sector employment seems to have been an afterthought, if it ever occurred to anyone involved with ARRA at all.  The majority of destroyed/forestalled jobs were in growth industries including health, education, professional and business services.

Conley an Dupor suggest the possibility that, in absence of the ARRA, the vast majority of government workers (on average relatively well-educated) would have found private-sector employment had their jobs not been saved.  And across the board roughly 215 such jobs in the private sector were lost or forestalled for each government job saved or created.  Again these findings are consistent with other such studies done in the past four decades.  For example, a study of the impact of the green jobs program in Spain found that the government stimulus (subsidies) cost 2.2 real jobs in the private sector for every new green job created (more on this later).  All of this ties in with the famous Hazlitt “Broken Window Fallacy.”

 

http://www.fee.org/library/books/economics-in-one-lesson/

 

illustrating another common sense adage:  Government cannot create jobs.  When the government (through taxation) seeks to create jobs, these government-created jobs typically cost 2-3 real jobs in the real economy and sometimes more.
            Meanwhile foolish Keynesian economists (excuse my redundancy) such as the New York Times’ Paul Krugman have suggested that the problem with the stimulus is that it wasn’t big enough.  Krugman infamously has never been known to criticize a progressive (we must ‘progress’ beyond the ‘outdated and ill-conceived U.S. Constitution’ in order to ‘progress’ toward our Marxist-Socialist earthly utopia) boondoggle so long as sufficient debt is incurred.  Let us return to the well-documented Spanish green economy example.  In 1997 Spain had the most vigorous economy in Europe with less than 4% unemployment.  When the study was conducted it had the fifth worst and today it has the third worst economy in Europe with more than 20% unemployment.  What happened?  And what does that mean for the United States here and now?

            What happened was Spanish government interference in the up-to-then relatively free market Spanish economy.  Their government decided that 1998 was the time to begin a transformation to a green-jobs dominated lifestyle to ensure that Spain’s economy remained vigorous and strong.  As mentioned, on average 2.2 real jobs in the real economy were lost for every government-subsidized green job created. 

The average cost of each green job in American dollars was $676,000.  But the story gets worse.  Just as in America, the Spanish government is known for counting subsidized jobs of eight-week and four-month duration just as if they were real permanent jobs in the real economy.  At the end of the day the average green job lasted very little time.  Only 10% of them proved permanent.  Thus 22 real jobs in the real Spanish economy were lost for each of the rare permanent green jobs created.  By the way the average green job created paid $10-$14 per hour.  That’s what happened, that’s why Spain is in the doldrums now.  What it means to us, can be divided into two scenarios.

            First of all, some jobs were created in the private sector by the Obama 

stimulus . . . and a whole lot more private sector jobs were lost.  Just as in Spain among all the jobs in the private sector created by the stimulus, a lot of two-week jobs were counted by the Obama people as if they were real bona fide jobs in the real economy.  The only blessing is that a larger percentage of the government jobs created or saved here in America might prove permanent.  Secondly, the Spanish example is right on in another respect:  Barack Obama has promised/threatened to create five million new green-tech jobs in America.  Taking the Spanish example at its face that means the loss of eleven million real jobs in the private sector . . . and eventually it means only half-a-million permanent green jobs created to show for devastateing the economy.  What’s going on in Barack Obama's mind?

            What’s going on is that arrogance, ignorance and childish “word-magic”  have replaced adult common sense.  When we are children we discover that words have power and virtually every child enters a stage where he believes his words are magical and if he can only find the right words, express them the right way, repeat them the right number of times while shaking one’s fist or stamping one’s feet or lying on the ground turning blue . . . OPEN SESAME, Ala Kazam, PRESTO!  We’ll then be able to make the whole world respond to us and bring us what we want.  The green technology that Obama and the lunatic environmental fringe want is not yet available.  No amount of throwing money at such problems (as the $787 Billion Obama stimulus attempted) is going to magic-a booming economy or viable green technology into existence.  No amount of word-magic is going to assure that 8% unemployment will never be reached if real economic principles are ignored.  It is the sweat and effort and risk-taking of capitalists and inventors that create goods and services and advances technology; NOT the childish dreams of progressive politicos.  In short, Emperor Obama, you’re not wearing any clothes.

 

 

Ya’all live long, strong and ornery,

Rajjpuut

Read more…