Sham Stimulus
Can we get a refund?
The government has overstated by thousands the number of jobs that it has created or saved with federal contracts under the president’s $787 billion recovery program, according to an Associated Press review of data released in the program’s first progress report.
The discrepancy raises questions about the reliability of a key benchmark that the administration uses to gauge the success of the stimulus. The errors could be magnified Friday when a much larger round of reports is released. It is expected to show hundreds of thousands of jobs repairing public housing, building schools, repaving highways and keeping teachers on local payrolls.
The White House seized on an initial report from a government oversight board weeks ago that claimed federal contracts awarded to businesses under the recovery plan already had helped pay for more than 30,000 jobs. The administration said the number was evidence that the stimulus program had exceeded early expectations toward reaching the president’s promise of creating or saving 3.5 million jobs by the end of next year.
But the 30,000 figure is overstated by thousands - at the very least by nearly 5,000, or one in six, based on AP’s limited review of some of the contracts - because some federal agencies and recipients of the money provided incorrect job counts.
The review found that some counts were more than 10 times as high as the actual number of jobs; some jobs were credited to stimulus spending when, in fact, none was produced.
Now, I’m no economist, but I can’t understand how gov’t (over) spending grows the economy. Explain how, for example, taking money from Jim, who works at, say, Harley, and giving it to, say, West Allis, to pay a new firefighter, Fred, grows the economy. You’ve taken money from Jim, so he can’t spend it on what he wants, and given it to Fred to buy what he wants. Zero sum game. But I suppose when your ultimate goal is to control people, cutting taxes and letting people choose what to do with their own money seems like a bad idea. Jim may not spend his money on something that will help you get re-elected. But Fred may feel beholden to you to keep his job. I’m just sayin’....
Posted by .(JavaScript must be enabled to view this email address) on October 29, 2009 at 1952 hrs
Now, I’m no economist, but I can’t understand how gov’t (over) spending grows the economy.
Ever hear of the multiplier effect?
Posted by .(JavaScript must be enabled to view this email address) on October 29, 2009 at 2003 hrs
Ever hear of the multiplier effect?
Yeah. Except it turns out there’s no evidence that stimulus spending typically provides a multiplier greater than 1.
Posted by .(JavaScript must be enabled to view this email address) on October 29, 2009 at 2126 hrs
It’s opinion Tony and like you, everyone has one.
Any comments on today’s GDP numbers.
Got anything original or are you still relying on somebody else to do your thinking for you?
I would have thought you would be smart enough to keep your tail between your legs after the ignorant BS you continued to spew last fall.
Guess you can’t fix stupid!
Posted by .(JavaScript must be enabled to view this email address) on October 29, 2009 at 2137 hrs
You seem a little emotional this evening. Everything ok?
Posted by .(JavaScript must be enabled to view this email address) on October 29, 2009 at 2146 hrs
Tony Turner: The commenter with a heart.
Posted by .(JavaScript must be enabled to view this email address) on October 29, 2009 at 2201 hrs
Is that misdirecting or projecting Tony?
Sleep tight.
Posted by .(JavaScript must be enabled to view this email address) on October 29, 2009 at 2202 hrs
PJR, the multiplier for goverenment spending is FAR lower than that of private investment. I grabbed a handful of studies randomly from the web, and the most rosy scenario showed a multiplier of 1.4 for government spending versus 3.0 for private investment. And as Tony correctly points out, many studies suggested a negative multiplier for government investments, due to their effect on private demand. Either way, the dollars would have done far more good left in the economy. The far harder challenge is going to be finding an economist that thinks the stimulus package was a good investment.
However my opinion aside, your retorts were out of line, uncalled for, and for the most part out of character. I think you owe Tony an apology.
Posted by .(JavaScript must be enabled to view this email address) on October 29, 2009 at 2209 hrs
and for the most part out of character.
So much for your abilities as a judge of character.
Posted by .(JavaScript must be enabled to view this email address) on October 29, 2009 at 2244 hrs
I’ve got an idea, pjr.
Let’s ask Christina Romer about the multiplier effect, after all, she’s President Obama’s head economic advisor.
http://www.forbes.com/2009/01/07/romer-obama-stimulus-oped-cx_dh_0107henderson.html
Oh, wait… that was BEFORE she was subject to political considerations… now I understand how the multiplier effect works. Multiply hope x change divided by special interests and you get $787 billion.
Take that number, add pixie dust and unicorns, and you get millions in admitted (and expected fraud).
Add that to the thousands of overstated jobs created (or saved - can’t forget saved) and you get modest quarterly growth that would have happened regardless of the so-called stimulus; especially considering only a tiny fraction of the stimulus dollars have actually gone out the door with the rest being held until 2010 which is coincidentally an election year.
I am shocked that Congress and the President would play political games whilst people are out of work. They basically planned on the recession lasting 12 months longer and decided the political win was more important.
Nice bunch out there. Thanks.
Posted by .(JavaScript must be enabled to view this email address) on October 30, 2009 at 0808 hrs
Ok PJR, if you insist, I stand corrected. While your retorts were still uncalled for and rude, I guess that as you state, it was within the norms of your character. Obviously, being a jerk is something you are very proud of.
Posted by .(JavaScript must be enabled to view this email address) on October 30, 2009 at 0940 hrs
The multiplier effect was to 20th century economics what the ether was to 17th century physics: an artificial, arbitrary and unproveable concept created to explain away the obvious flaws in a favored theory. In the 21st century neither is taken seriously.
Posted by .(JavaScript must be enabled to view this email address) on October 31, 2009 at 0915 hrs
OK, pjr, in my example of Jim and Fred, explain to me how taking a dollar from Jim and giving it to Fred multiplies anything. And make no mistake, deficit spending does, in fact, take Jim’s money. Not even lefty fuzzy math can explain that, cuz it’s non existant. However, if you permanently cut Jim’s taxes, he may decide that now he can afford to make payments on a new Accord, and buys a car, that, unlike the idiotic “cash for cheaters, er clunkers” program, he would not have bought. Economy grows, everyone wins (except pols that use tax money to buy votes and influence). Like I said, I’m no economist, but I do possess common sense. No offense meant.
Posted by .(JavaScript must be enabled to view this email address) on October 31, 2009 at 1129 hrs
Curt,
the multiplier for goverenment spending is FAR lower than that of private investment.
But you recognize that there is a concept known as a multiplier right?
Tom on the other hand, did not seem to be familiar with it.
Now, I’m no economist, but I can’t understand how gov’t (over) spending grows the economy.
And no Tom I am not going to even try to explain it to you here.
Maybe BBBro would like to, as usual he has it all figured out.
By the way BBB, I take ether very seriously, you should try it.
Pubbie you continue to be an incoherent and unconvincing political hack, keep it up.
Posted by .(JavaScript must be enabled to view this email address) on October 31, 2009 at 1324 hrs
Or maybe you’re unable to? I get the concept of multipliers, but you obviously don’t understand the concept that gov’t can not create wealth. Unless in your pink glasses view of the world Cuba is a wealthy country. But why bother with the facts, just keep up your lefty babbling.
Posted by .(JavaScript must be enabled to view this email address) on October 31, 2009 at 1509 hrs
I get the concept of multipliers,
From your declaration of of your overly simplistic example in #1 as a zero sum game I doubt it, but I’ll take your word for it.
but you obviously don’t understand the concept that gov’t can not create wealth.
Really?
Where is it in this thread, or any other one for that matter, that I contend govt can or can’t create wealth?
Just for grins why don’t you define “wealth” and what the “the facts” are?
Looking forward to your reply.
Posted by .(JavaScript must be enabled to view this email address) on October 31, 2009 at 1858 hrs
Since you apparently slept through high school economics, I’ll try to explain. The hardest part is trying to frame it in a way a third grader will sort of comprehend. If you still don’t get it, just nod your head and fake it. Increasing wealth is, generally, defined as growing the GDP (Gross Domestic Product-your homework assignment is to look up the definition). Taking money from from me, in taxes, and giving to you, as welfare, stimulus,etc does not grow the economy, and growing the economy is what is refered to as the “multiplier effect”. However, if a private bussines takes some sand, for example, and refines it and processes it into, say, electronic chips, they have increased it’s value, and hence increased the GDP. It really should not be that difficult. And since you started the “multiplier” conversation, I, apparently mistakenly, assumed you could recognize the thread. My bad.
Posted by .(JavaScript must be enabled to view this email address) on October 31, 2009 at 2145 hrs
Yes PJR, I understand the concept of a multiplier. I’ve been a financial analyst for 20 years, and taught economics before that. And while the concept is a bit fuzzy, and the multipliers that are calculated are kind of soft numbers, the multiplier for government spending is always a fraction of that for private spending, which makes government spending as economic stimulus just plain stupid.
That money will ALWAYS produce more weatlh, jobs, etc…if left in the economy than if spend by the government.
Posted by .(JavaScript must be enabled to view this email address) on November 01, 2009 at 1728 hrs
I’ve been a financial analyst for 20 years, and taught economics before that.
Well Curt if that is true, I cannot wait to hear your prescription for how we are going to avoid taking a 20-40% haircut in our disposable income/consumptive ability in the future no matter what the govt does or doesn’t do.
Thank the deity of your choice and the 1st amendment for giving you the opportunity to so totally out yourself as a moron.
Please don’t hold back let’s hear it.
Personally I think that Tom, Fred and yourself are, at best, some poseur high school students who don’t have a clue.
Prove me wrong.
That money will ALWAYS produce more weatlh, jobs, etc…if left in the economy than if spend by the government.
Besides the obviously painful grammatical errors in this assertion, how does the govt spend money outside the economy?
Imbecile.
Posted by .(JavaScript must be enabled to view this email address) on November 01, 2009 at 2021 hrs
pjr,Arguing with a liberal is like trying to explain algebra to your dog.
No matter how well you explain it, or how nice you are to him, he still doesn’t have a clue.
All a dog knows is that when you pet him it sure feels good.
I don’t remember where I got this quote, but it seems to fit.Posted by .(JavaScript must be enabled to view this email address) on November 01, 2009 at 2106 hrs
What fits Tom is that you still think algebra is anything more than simple arithmetic, get back to me after a couple of semesters of calculus and stats.
You guys are really excellent conservative prototypes.
Presumptive, 2 dimensional and all bark and no bite.
Woof, woof.
Posted by .(JavaScript must be enabled to view this email address) on November 01, 2009 at 2128 hrs
I explained it several times. Even the most liberal studies show the goverment multiplier to be a fraction of the multiplier in the free market. Others show government spending to have a negative multiplier. If we take the most liberal studies as gospel, the money we spend on the stimulus (lets say 800B) might create 1.2T of echo spending…which might even return a small bit of that to the treasury. The same money, as a tax cut would have had a multiple of perhaps 2.4T creating twice the economic impact, and returning a bit more to the treasury. I for one would have done neither. The stimulus packages didn’t create demand. They did move some demand around. Perhaps a small stimulus for PR purposes might have been acceptable, The same money just left in the treasury would not have created any multiplier. But the multiplier works both ways. The money we now have to suck out of the economy to pay that bill, will have a much higher mulitplier than any government spending. Just like buying on a credit card. Making some liberals feel good for a few months, left our children with an awful credit card balance, that will dampen growth for generations.
I really am done arguing this point. I will admit I’m no PHD economist. I did tutor it in college for years, but typically just the lower level classes. But you’ve yet to put up even a bad argument as to why the stimulus money was well spend. Throwing out a term, (the mulitiplier) and using that as your reason, really doesn’t cut it. I think the term is a simplistic, hard to measure metric. But even at that, if you buy it as a valid concept, it would always show that governement spending as a stimulus is always a poor idea. The multiplier effect is the bais for supply side economics and lower tax rates, not the opposite.
I’ve yet to read one respected economist that thinks the stimulus package was good policy, but somehow your opinion , supported by no facts or arguments is supposed to sway us. And I apologize in advance for any grammar errors. I don’t proofread random blog postings. Nor do I dwell on them in other peoples arguments. If picking on some grammar mistake is the best you can do to refute an argument, you really don’t have much do you.
Posted by .(JavaScript must be enabled to view this email address) on November 02, 2009 at 0313 hrs
I’ve yet to read one respected economist that thinks the stimulus package was good policy
Seriously? Start with Paul Krugman. His NYT columns are hardly his best work, and you might disagree with him politically, but he is a Nobel Prize winner (the kind given out by the real Nobel committee in Sweden and not a bunch of Norwegian politicians) and one of the most significant and respected economists of our time. And he would tell you the only problem with the stimulus is that it wasn’t big enough.
Maybe you should read some more?
Posted by Recess Supervisor on November 02, 2009 at 0431 hrs
RS, you know better than to throw out Krugman. Not a week goes by where the Public Editor at the NYT doesn’t have to make a correction or a clarification on his liberties with facts.
Moreover, he won his Nobel for his work in International Trade from the early 90’s. Few practicing economists give Krugman any credence when he opines on domestic economic issues and since he joined the NYT his work on international trade issues has fallen off to the point he does the bare minimum to stay tenured at Princeton (or wherever he “teaches”).
Bare in mind that in the third week of January, 2001, he started predicting a significant recession based on liberalized economic policies (largely because it fit his politics). Sure, he gets to claim he was right, but what kind of prediction takes 8 years to materialize - especially coming from an economist that SHOULD know how business/recessionary cycles work.
When the NYT brought him on baord, he sacrificed his academic credentials at the alter of political punditry.
You’re smarter than to take that guy’s opinion seriously, anymore than you take Glenn Beck’s opinion seriously.
Posted by .(JavaScript must be enabled to view this email address) on November 02, 2009 at 1109 hrs
Publius, I don’t disagree with you that Krugman’s column is hackish. I was simply refuting the sort of typically broad, unfounded assertion that seems to thrive here among certain commenters. Curt suggests that no respected economists agree with Obama’s stimulus approach. You and I can both recognize that’s a load of crap regardless of whether or not we agree with those economists.
Posted by Recess Supervisor on November 02, 2009 at 1429 hrs
I would counter, Recess Superviser, by writing that Curt’s assertion that empirical studies show a multiplier of around 1 is correct. That is to say the multiplier doesn’t exist even if one buys into the all the assumptions about the nature of money and its’ creation inherent in the multiplier theory in the first place.
Absent the multiplier, support for the stimulus approach is based on politics, not economics.
Posted by .(JavaScript must be enabled to view this email address) on November 02, 2009 at 1440 hrs
Recess,
I do stand corrected. Black and white assertions (no respected economists) are almost never correct. But the consensus is the stimulus has had little if any effect on the economy, and that the effect it has had was simply that of infusing that much cash into the economy. With a multiplier of 1, the spending creates no sustainable growth, and simply adds to the deficit, which becomes a drag on the economy.
I hated Bush and his reckless spending, but he was an amateur spender compared to Obama. Most of the stimulus package was pure politics. Perhaps a smaller, more targeted stimulus package might have made sense. If the politicians needed to do “something” they at least would have done less harm. I wasn’t big on tax cuts to stimulate the economy at that point either. It is a downturn, tighten your belts and move on. Adding to the deficit in either case is simply adding to the drag on any recovery.
Posted by .(JavaScript must be enabled to view this email address) on November 03, 2009 at 1618 hrs
@Curt: I suspect we’re both pretty offended by the levels of spending that occur at the federal level. I wasn’t sold on the stimulus either, and if it had to be done, I would’ve preferred to see the bulk of that deficit spending funneled towards infrastructure projects that will benefit Americans well into the future - roads, alternative/renewable energy, etc. It only seems fair that if we’re going to ask future Americans to pay for this stuff, we should at least buy things they’ll be able to use.
I, however, find the spending habits of Bush and the GOP Congress far more repugnant than that Obama and the Democrats. It’s not what they’re spending on - it’s that Democrats seem to recognize that ultimately someone has to pay for the things that are being proposed. We can all think what we want of health care reform, for instance, but we can at least recognize that the Democrats are trying to pay for it, a concept that forever eluded GWB and his GOP cronies in the Congress.
We’ve spent nearly $1 trillion since 2001 on wars in Iraq and Afghanistan - wars initiated by the GOP. Republicans enacted Medicare Part D - the largest entitlement program in two generations - without giving any real consideration to its cost. They were just desperately looking to take an issue away from the Democrats. And that’s something that conservative and moderate Republicans were equally responsible for (207 GOP votes in the House didn’t all come from one or the other).
We can argue to no end as to what government should spend its money on. But once the decision to spend is made, we should all support government honestly funding its priorities.
Posted by Recess Supervisor on November 03, 2009 at 1805 hrs
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