Thursday, October 29, 2009
A Little Stimulus Arithmetic
As is my wont, I was listening to Rush Limbaugh today as I ate my Arby's sandwich. (I always get the Market Fresh ones; my body is a temple.) He was complaining about some news story in which the Obama administration's claimed 30,000 jobs "created or saved" by some stimulus spending turned out to be inflated by at least 5,000. (I think the GAO did an audit of the claim, but I could be mistaken.)
So then Rush starts wondering aloud how many jobs he could have created with a trillion dollars. (His answer was two: He'd pay himself all but $100,000, and then hire an assistant.)
This got me thinking: How many people are unemployed right now? The BLS says 15.1 million. I know that's a bogus figure, but I'm just making a point here. (In any event the number would have been lower back in January when they were debating the stimulus.)
If the government had taken the $787 billion "stimulus" package and just written checks to all 15.1 million of the officially unemployed, that works out to $52,000 per person. So the government could have literally provided every single one of them a nicely paying job for a full year. The official unemployment rate right now would be 0%, instead of 9.8%.
I'm actually not criticizing the government right here. Instead, my target is Paul Krugman. How in the heck can he have such a messed up system, where he thinks $787 billion is woefully inadequate to restore full employment? I'm not relying on any multipliers in the above--I just showed you could overnight restore full employment by spending $787 billion.
Am I missing something here? I know, I know, in the world of the Keynesian model and Okun's Law, blah blah blah. Part of my point is that that analysis can't possibly be right. Why would it take a lot more money to "restore full employment" than it would take to restore full employment?
So then Rush starts wondering aloud how many jobs he could have created with a trillion dollars. (His answer was two: He'd pay himself all but $100,000, and then hire an assistant.)
This got me thinking: How many people are unemployed right now? The BLS says 15.1 million. I know that's a bogus figure, but I'm just making a point here. (In any event the number would have been lower back in January when they were debating the stimulus.)
If the government had taken the $787 billion "stimulus" package and just written checks to all 15.1 million of the officially unemployed, that works out to $52,000 per person. So the government could have literally provided every single one of them a nicely paying job for a full year. The official unemployment rate right now would be 0%, instead of 9.8%.
I'm actually not criticizing the government right here. Instead, my target is Paul Krugman. How in the heck can he have such a messed up system, where he thinks $787 billion is woefully inadequate to restore full employment? I'm not relying on any multipliers in the above--I just showed you could overnight restore full employment by spending $787 billion.
Am I missing something here? I know, I know, in the world of the Keynesian model and Okun's Law, blah blah blah. Part of my point is that that analysis can't possibly be right. Why would it take a lot more money to "restore full employment" than it would take to restore full employment?
Comments:
Bob,
Check the calorie count on those market fresh sandwiches at Arby's. Most of them are between 690 and 880 calories.
- Charles M.
Check the calorie count on those market fresh sandwiches at Arby's. Most of them are between 690 and 880 calories.
- Charles M.
# posted by 
: October 29, 2009 at 11:01 PM
: October 29, 2009 at 11:01 PM
That suspicious sandwich story sounds a lot like Tyler Cowen's story about how he saw two political ads even though he wasn't realy watching television.
On the stimulus. I have never understood the point Krugman and others make for that very reason. However, I think the key is that you are thinking about it from a rational point of view when you should view the stimulus from a political one. Creating the jobs for all the unemployed was never to point- the point was to find a way to steer money to selective interests, and secondarily to people in general (the reason that funds were spread to both the employed and unemployed).
Of course, I realize that you were being sarcastic and understand it all.
On the stimulus. I have never understood the point Krugman and others make for that very reason. However, I think the key is that you are thinking about it from a rational point of view when you should view the stimulus from a political one. Creating the jobs for all the unemployed was never to point- the point was to find a way to steer money to selective interests, and secondarily to people in general (the reason that funds were spread to both the employed and unemployed).
Of course, I realize that you were being sarcastic and understand it all.
# posted by : October 29, 2009 at 11:52 PM
: October 29, 2009 at 11:52 PM
I like Yancey think the reason is probably political rather than economic. Any 'recovery' achieved on this basis would just be too obviously a sham and you could never get the public to buy it. It is like being confused why a bank robber took all these back streets and kept doubling back on himself rather than just take the direct route to where he stored the loot.
As Yancey pointed out it would also have the drawback of giving money to regular people and not to favored interested or toward favored policies.
As Yancey pointed out it would also have the drawback of giving money to regular people and not to favored interested or toward favored policies.
So, have we decided that Krugman and the Keynesians are liars and frauds rather than noodle-brains?
# posted by : October 30, 2009 at 9:30 AM
: October 30, 2009 at 9:30 AM
I think what may be even more baffling is what you find when you run the calculation on the jobs they've claimed to save/create so far with the spending. My math-on-the-fly isn't too sharp, but it looks to me like we've poured about 26 million dollars into each saved/created job on average. Somehow I don't think those jobs pay quite that much.
The Blackadder Says:
If you paid people $52,000 to be unemployed, wouldn't you end up with a lot more unemployed? Heck, I'd do nothing for that.
If you paid people $52,000 to be unemployed, wouldn't you end up with a lot more unemployed? Heck, I'd do nothing for that.
# posted by : October 30, 2009 at 1:06 PM
: October 30, 2009 at 1:06 PM
Check the calorie count on those market fresh sandwiches at Arby's. Most of them are between 690 and 880 calories.
That explains a lot.
That explains a lot.
That's what I've been saying about the stimulus, too. If the purpose is actually to "create jobs", then it's obviously a huge waste of money. Which means - shockingly - that the White House is probably lying to us.
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