Remember back in 2009, when President Obama and his team told us that we needed to squander $800 billion on a so-called stimulus package.
The crowd in Washington was quite confident that Keynesian spending was going to save the day, even though similar efforts had failed for Hoover and Roosevelt in the 1930s, for Japan in the 1990s, and for Bush in 2008.
Nonetheless, we were assured that Obama’s stimulus was needed to keep unemployment from rising above 8 percent.
Well, that claim turned out to be quite hollow. Not that we needed additional evidence, but the new numbers from the Labor Department re-confirm that the White House prediction was wildly inaccurate. The 8.2 percent unemployment rate is 2.5 percentage points above the Administration’s prediction.
Defenders of the Obama Administration sometimes respond by saying that the downturn was more serious than anyone predicted. That’s a legitimate assertion, so I don’t put too much blame the White House for the initial spike in joblessness.
But I do blame them for the fact that the labor market has remained weak for a lengthy period. This chart, which I just generated this morning on the Minneapolis Fed’s interactive website, shows employment data for all the post-World War II recessions.
The current business cycle is the red line. As you can see, some recessions were deeper in the beginning and some were more mild. But the one thing that is unambiguous is that we’ve never had a jobs recovery as anemic as the one we’re experiencing today.
Job creation has been extraordinarily weak. Indeed, the 8.2 percent unemployment rate actually masks the bad news since it doesn’t capture all the people who have given up and dropped out of the labor force.
By the way, I don’t think the so-called stimulus is the main cause of today’s poor employment data. The vast majority of that money was pissed away in 2009, 2010, and 2011.
Today’s weak job market is affected by things such as the threat of higher taxes in 2013 (when the 2001 and 2003 tax cuts are scheduled to expire), the costly impact of Obamacare, and the harsh regulatory environment. This cartoon shows, in an amusing fashion, the impact of these policies on entrepreneurs and investors.
P.S. Click on this link if you want to compare Obamanomics and Reaganomics. The difference is astounding.
P.P.S. Obama will probably continue to blame “headwinds” for the dismal job numbers, so this cartoon is definitely worth sharing.
P.P.P.S. Since I’m sharing cartoons, I can’t resist recycling this classic about Keynesian stimulus.
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Isn’t the reason given for stimulus spending being theoretically helpful something along the lines of, “the government knows the economy well enough that it can direct the money where it needs to go,” at least in part?
If so, doesn’t the later rationalization that “the stimulus failed because we didn’t understand just how bad the economy was” at least partially undermine the theoretical foundations justifying stimulus spending?
To be fair this is the other recessions weren’t due to financial bubbles popping. But that doesn’t mean that he’s off the hook for the factors cited in this article. We have to liquidate the malinvestment and that is going to stink. At the same time, we need to reduce regulatory and tax burdens as much as possible.
Not necessarily. You may have a skill that is hard to find. But, if that is your criteria for “on the mend” after this continuing series of poor job reports, you are not paying attention to what is going on around you with everyone else.
I will take the fact that I have had recruiters contacting me as a sign that things are finally on the mend. If you want to hate, then that is your prerogative. But don’t try to take away credit for an improvement to the economy that is helping fellow Americans.
Obama doesn’t really care about his jobs record. He doesn’t really care if the economy’s in the dumper.
Let’s compare Obamacare to Stalin’s collectivization of agriculture: each was a takeover of a massive segment of society. Stalin used the kulaks as his scapegoat for taking over agriculture, and Obama used doctors and insurance companies as his scapegoat for taking over medical care.
But the aim in each case was to bring society under the brutal, iron control of the regime. Stalin starved and executed millions of peasants to achieve totalitarian control over agriculture. He wasn’t worried about the people’s welfare.
And Obama is not worried about the people’s welfare, or about the economy. CONTROL– that’s what totalitarian control freaks are interested in. Our Mussolini for Morons is no different, except in the utter stupidity and fatuity of his acolytes and followers.
The Fundamental Theorem of Keynesian Stimulus Spending
Government to its citizens: “If you don’t spend your money we will reach into your pocket and spend it for you.”
Corollary: “If you don’t have any money to spend, we will borrow it on your behalf so we can reach into your pocket and spend it for you.”
The Untold: “We will spend this money not on what you would spend it on, but on what we think you should spend it on. We (government) do not actually produce anything, so this spending will do almost nothing to improve your long-term national productivity – the source of your prosperity. But you can resume being productive once we finish using your money to dig a giant hole and then fill it back in.”
Corollary to The Untold: “The bigger the recession, the bigger we must dig the hole before we fill it back in.”
Conclusion: “After we finish all of this spending, the economy will naturally – this is self-evident, isn’t it? – be right back on its feet humming along as if nothing ever happened.”
What is there to question about that line of reasoning? Don’t you see how that would create lots of jobs?
The downward slope from peak unemployment in the actual UE data looks pretty close to the modeled result. Does this mean their forecasting is good for something, or is this just an easier part of the curve to predict?
The amazing thing to me is that no matter how many times a Keynesian stimulus fails, the Keynesian answer is always “We needed a bigger stimulus”. It is impossible to falsify Keynesian Economics to ts proponents. Keynesian Economics is an infinite series converging on catastrophe.
Nothing. The man would have done a better job had he done NOTHING.
I’m with Daedalus – the full chart would show “without stimulus” south of 6%, instead of 8.2%.
Worse indeed.
I think it is a mistake to leave out the ‘without stimulus’ prediction line.
Although the WH can always just say their prediction was wrong, I think it is useful to understand they made the case that the stimulus would make things better. In fact, and per their own estimate of ‘without stimulus’ unemployment, it made things worse.
I think it would be pretty linear to make the case they ‘thought’ stimulus would reduce unemployment by x%, in fact, it added y% to unemployment.
Wait, are you trying to tell us that menacing a weak economy with stratospheric levels of taxation, regulation and arbitrary, lawless Executive decrees isn’t helpful? Do you have any idea how racist that is? [/prog]
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