Wednesday, January 20, 2010


You Get What You Pay For?

Someone help me out here. Krugman discusses a CBO report on government job creation efforts. If you look at the chart he reproduces, you see that the single most effective program of job creation--where the unit of measurement is "Years of Full-Time Equivalent Employment per Million Dollars of Total Budgetary Cost"--is "Increasing Aid to the Unemployed."

Now what in the world does that even mean? On the one hand, it seems like the very worst thing you could do to create jobs would be to pay people for not having a job. Note, that consideration alone doesn't mean unemployment checks are a bad thing, but they certainly don't "create jobs."

So I am thinking what that ranking really means, is that if you spend $1 million on expanding unemployment relief programs, then the recipients get more take-home money for their "job" of being unemployed, than if you spend $1 million on green jobs and then count how many more people have jobs making solar panels.

I'm not being sarcastic, I really think that's what this CBO report means. Can anyone confirm or deny?

Glancing at the report, it sounds like the "aid to unemployed" is being accounted for in a standard Keynesian fashion.

Basically: The unemployed are going to spend this aid, since they don't have much income - so the multiplier will be high on this income, and we'll see lots of GDP and lots of new jobs from that. The report even says...

"Both policy options [extending unemployment benefits, and subsidizing health insurance for the unemployed] could dampen people’s efforts to look for work, although that concern is less of a factor when employment opportunities are expected to be limited for some time."

So, the idea is really just to hand one set of people a bunch of money so that they'll spend it - creating jobs for other people.
Lucas, ah OK, that makes "sense."
Maybe they mean that the greatest number of jobs has been created in actually administering the aid to the millions of unemployed. Making checks, writing checks, asking the people in the unemployment line if they've looked for work, etc.
Lucas, I believe that you've identified the fraud of our system. Money gets created (printed) and distributed to feds, welfare cases, corporate handouts, wall street, politicians, gov't grant winners, military contracts...essentially all elements that one can define as, unarguably, government-related. Then, all of the rest of the suckers, who believe they actually participate in a free market, benefit from the economic transactions that these elements participate in. In the end, can it really be at this level of weapons-grade bullshit?
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