The Labor Department just released its monthly employment report and the White House is probably not happy.
There are several key bits of data in the report, such as the unemployment rate, net job creation, and employment-population ratio.
At best, the results are mediocre. The unemployment rate generally gets the most attention, and that was bad news since the joblessness rate jumped to 8.2 percent.
What makes that number particularly painful is that the Obama Administration claimed that the unemployment rate today would be less than 6 percent if the so-called stimulus was adopted. But as you can see from the chart, squandering $800 billion on a Keynesian package hasn’t worked.
While that chart is probably embarrassing to the White House, I think the most revealing numbers come from the Minneapolis Federal Reserve Bank’s interactive website, which allows users to compare employment data and GDP data for different business cycles.
I looked at those numbers a couple of months ago, so I could compare Reaganomics and Obamanomics, and the difference is startling. The Reagan policies of lower tax rates, spending restraint, deregulation, and tight money generated much better results than the statist policies of Obama.
The most recent numbers, shown below, aren’t any better for the Obama Administration.
But I suppose the good news is that the United States is not Europe. Government is even bigger on the other side of the Atlantic and many of those nations are in the middle of a fiscal crisis and the unemployment rate averages 11 percent.
Sort of makes you wonder whether there’s a lesson to be learned. Maybe, just maybe, bigger government means weaker economic performance.
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Sean L said “Point me to one single politician that wanted to cut back spending during the boom — which is the correct Keynesian action — and I’ll concede the point.
OK, Australia is in the middle of a mining boom at the moment and EVERY politician is wanting to cut back spending.
I will consider the point conceded then Sean.
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You all have made some good points about Keynesianism. The real problem is not Keynesianism, but Keynesianism as practiced by leftists. Those problems are.
1. Any gov spending displaces private spending. Thus gov spending only stimulates if the multiplier is better than equivalent private spending. Otherwise a better stimulus is temporary tax cuts combined with monetary expansion. Some gov spending, like infrastructure projects, and effective spending on education (not what we are doing today under leftist professors and the teachers unions), may have a multiplier that is better than equivalent private spending. But most gov spending has a lower multiplier, and is a waste. That is what happened with most of the stimulus. Much of it was spent on projects that had a multiplier lower than the average private sector spending that was displaced by it, which makes things worse.
2. According to Keynes, any deficits and monetary expansion incurred during recessions must be repaid by monetary restraint and spending cuts to produce surplusses during booms. The monetary cutbacks and surplusses are absolutely necessary, to prevent runaway debt, prevent inflation, and to cut back gov expansion incurred during recession. This is critical to make room to expand gov again during the next recession without overall gov spending levels getting out of control. But the leftist politicians conveniently forget this part. So they use the accelerator part of Keynes, but completely neglect the brakes, leading to bubbles and crashes.
If our politicians could use Keynes in the disciplined fashion I describe here, it might actualy work. But the leftist dems (and most repubs as well) have already proven they are incapable of this kind of discipline. If you cannot practice disciplined Keynesianism, it if far better to not practice it at all.
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At the beginning of every month, I remind moderates of Obama’s record on employment (not just unemployment) and debt by using the URL http://is.gd/Obama2012 … it tends to wake them up to the B.S. coming out of the White House.
You should post the original full graph drawn by Romer and Bernstein to back the Obama stimulus. You have the line they predicted for with stimulus, but you have neglected to draw the line “without stimulus”, which showed higher unemployment. They prepared their graph by drawing the “without” line from an employment model, and drawing the with line using a figure of 1.5 for the Keynesian multiplier. At the time, I predicted the true Keynesian multiplier was -1.5 (based mainly on the numbers from President Harding’s cutbacks) and so drew my prediction for “with stimulus” an equal distance above their “without stimulus” line to what they had their “with stimulus” line below. My line was
an amazingly accurate prediction of what has happened, thus indicating once again that the true value of Keynesian multiplier is about -1.5.
SRE: Things would be so much better if they had done nothing. Everyone wouldn’t be scared out their minds now, wondering what horrible idea they are going to do next. Let the markets work, and get out of the way.
Like Jeffersonian, I would like to see the chart with the second line. That could be even more devastating to this Administration – things are worse than IF IT DID NOTHING!
Gerry,
Everyone’s a Keynesian when the economy turns south. Spending other people’s money is fun, after all.
Point me to one single politician that wanted to cut back spending during the boom — which is the correct Keynesian action — and I’ll concede the point. But you *can’t* because there aren’t any.
Even “Keynesians” don’t follow Keynes.
Reblogged this on Public Secrets and commented:
The difference in results between Reagan’s limited-government principles and Obama’s statism couldn’t be more stark.
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Just look over the Atlantic at the UK. We tried keynesianism – and it worked, when kept tightly under control. But when it becomes an overblown ideological program…well, just look at our NHS and other public services, for example.
One quibble with your first chart, Dan: You omitted the second projection line that Romer and Bernstein plotted, that of what unemployment would be if the stimulus package hadn’t passed. If you compare *that* trend against what has occurred since, the unavoidable conclusion is that the stimulus not only didn’t do what it was promised to do, but actually made things worse.
Of course, not all of the failure can be hung around the neck of the stimulus. There are also the issues of uncertainty introduced because of Obamacare, meddling in the housing market, the labor market, the student loan market, etc. that are making people hesitant to invest, spend and hire.
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