The IUSB Vision Weblog

The way to crush the middle class is to grind them between the millstones of taxation and inflation. – Vladimir Lenin

More jobs have been lost with the “stimulus bill” than Obama said we would lose if it wasn’t passed.

Posted by iusbvision on June 10, 2009

Its true. Now the administration is coming out with new rosey job forcasts because the old ones proved to be a joke, read about it HERE in the Wall Street Journal. Here is an exerpt:

“You created a situation where you cannot be wrong,” said the Montana Democrat. “If the economy loses two million jobs over the next few years, you can say yes, but it would’ve lost 5.5 million jobs. If we create a million jobs, you can say, well, it would have lost 2.5 million jobs. You’ve given yourself complete leverage where you cannot be wrong, because you can take any scenario and make yourself look correct.”

Now, something’s wrong when the president invokes a formula that makes it impossible for him to be wrong and it goes largely unchallenged. It’s true that almost any government spending will create some jobs and save others. But as Milton Friedman once pointed out, that doesn’t tell you much: The government, after all, can create jobs by hiring people to dig holes and fill them in.

If the “saved or created” formula looks brilliant, it’s only because Mr. Obama and his team are not being called on their claims. And don’t expect much to change. So long as the news continues to repeat the administration’s line that the stimulus has already “saved or created” 150,000 jobs over a time period when the U.S. economy suffered an overall job loss 10 times that number, the White House would be insane to give up a formula that allows them to spin job losses into jobs saved.

“You would think that any self-respecting White House press corps would show some of the same skepticism toward President Obama’s jobs claims that they did toward President Bush’s tax cuts,” says Mr. Fratto. “But I’m still waiting.”

Special thanks to Hotair.com for the video link!

UPDATE: RNC Chair Micheal Steele saw the video as well and responded:

2 Responses to “More jobs have been lost with the “stimulus bill” than Obama said we would lose if it wasn’t passed.”

  1. Aluceo said

    HOW THE STIMULUS PLAN HAS BEEN WORKING ALREADY AND WHY IT IS BOUND TO GATHER PACE

    The stimulus plan in of itself has halted the dramatic plunge in business and consumer confidence with the very likely threat of an economic depression earlier in the year, and businesses and consumers taking a less weary and more upbeat attitude to the future. Maybe more than anything else this will be the most significant impact of the stimulus package in the long-run enabling a spectacular recovery from the real possibility of depression before its passage. Businesses and consumers have become more and more confident that spending from the stimulus in the upcoming months will provide a solid environment for economic activity thus encouraging investment, reducing the pace of job losses and encouraging consumer spending. In other words, the stimulus package has avoided “a cycle of economic downturn to depression” and is now about to engender “a cycle of economic upturn to recovery”.

    The stimulus package cash handouts and other social initiatives have played no minor part in lessening the burdens on individuals of the economic downturn and the consequent increase in the number of people unemployed thus palliating the effects with regards to mortgage, health coverage and consumer spending.

    The stimulus package has halted the lost of jobs in the areas of education and other state level services and enabled States to avoid budget bankruptcy (caused by the fall in revenues due to the economic downturn) with the result of avoiding indirect job losses in the private sector as well.

    The stimulus package is bound to lead the way for new jobs creation to be followed suit by direct private sector investments with the consequence of increasing spending in the economy and accelerating economic recovery. It should be noted that jobs created by the stimulus will have a multiplier effect in the creation of jobs by private enterprises.

    Perhaps more fundamental for long-term economic recovery, given the areas of investment of the stimulus package (infrastructure, energy and green jobs, education. etc.), it is the type of government investment required for renewing long-term economic growth. As was the case with FDR’s New Deal in the 1930s and Eisenhower building of interstate highways and investment in the sciences in the 1950s, the stimulus package is bound to restructure the foundation of the US economy within which private enterprise will thrive.

    The fundamental element in the criticisms levied against the stimulus package that it will increase the US deficit is the total disregard by most critics of what would have happened without the stimulus with respect to avoiding the real threat of a depression, raising business and consumer confidence and restructuring the economy. Thus providing a good foundation for real growth in the long-run (boostered by the Stimulus and led by private enterprise) with economic growth by itself and healthcare reform allowing for deficit reduction in the long-run.

    While the Stimulus Package has often come under this one-sided criticism of increasing the US deficit, such an argument can only be credible to the extent that it elicits how the results mentioned above which have been obtained (and are to be obtained) by the Stimulus Package could have been attained otherwise. Most critics of the stimulus package seem to think that this economy which was at the very brink of collapse simply avoided a depression by some miracle and that by the same token recovery is bound to occur by magic. To the extent that their arguments fail to answer these fundamental facts about avoiding a depression and beginning a recovery, to that extent, such arguments can hardly be considered credible.

    Actually, the initial impact of the stimulus for private enterprise and consumer confidence has been “anticipatory” in that it arrested a situation where the trend of business and consumer confidence was heading the economy to a depression. That is why the statistics point to the fact that business and consumer confidence stop plunging after the stimulus plan was passed and the stock market has been “going north” since then. It is the anticipation of the impact of the stimulus plan that has stabilized business and consumer confidence, heading off the real prospect of a depression. In other words, the stimulus package first impact was to act as the brakes for an economy that was heading to a depression disaster.

    http://www.rususa.com/money/finance.asp See link above for the effect of the stimulus plan on the stock market immediately after its passage in mid-February 2009: the NASDAQ, Dow Jones and S & P 500 have made a dramatic U-turn upward since March 2009.

    The reason for the high job losses is very simple. Those jobs were going to be lost anyway as business and consumer confidence entered a vicious cycle to depression following the failure of the financial system – these job losses arose out of lack of confidence in the financial system. Actually, the stimulus role at the onset more than any immediate spending in the economy itself has been to provide assurance to consumers and businesses that government will spend in the economy thereby upholding consumer and business confidence and avoiding the real prospect of a depression. So the stimulus first role has been “anticipatory” in forestalling a depression.

    Believe it or not, it is not out of the question that without the stimulus plan we might have been talking now about the loss of not 1.6 million jobs but 5 or 6 million jobs at the trend at which consumer and business confidence went on falling before its passage. See link on the rise of consumer confidence since the stimulus plan was passed in mid-February 2009.
    http://www.market-harmonics.com/free-charts/sentiment/consumer_confidence.htm

    Actually, the word “stimulus” here can be misleading in that it underemphasizes the effect of the stimulus in arresting a grave and downward spiral of the economy and rather draw focus mainly on creation of jobs which is the second and yet to fully come dimension of its impact.

    Let’s imagine that the stimulus plan was to be suspended now. What will happen is that the anticipation consumers and business had about its boosting effect on the economy will die out, and this of itself will create uncertainty and may well lead to a new downward spiral. The Stimulus has a double effect with respect to recovery and job creation. Perhaps the lesser acknowledged effect is the confidence created in the economy for private enterprise and consumer consumption. In fact, this indirect effect will be the strongest push for economic recovery and job creation. Then there is the direct effect of the Stimulus Package spending and its multiplier effect given the areas of expenditure (education, infrastructure, green jobs, etc.)

    While critics are pointing to the fact that unemployment is already at 9.4 percent compared to the prediction of 8.8 percent for 2010 made by the Administration, many forget that Economics like Meteorology or Earthquake Prediction for that matter is “no Physics or Maths”. What ultimately matters is the bigger picture and trends. Going by the job loss figures for March, April and May (652000, 504000 and 345000 respectively) the argument made by the administration definitely holds. In fact, the Fed, the Treasury as well as other institutions involved in the prediction of economic data tend to revise their figures quite often. What matters is the trend and bigger picture.

    The Stimulus is rather like a project but in this instance a massive and complex national project. A project can be broken down in two broad categories: design and execution. At the design stage (the first few months of the Stimulus), everything is being organised and put in place administratively with relatively little being carried out. The upcoming months will be the period when the massive spending and investments will be executed at an exponential rate. In fact, 1 billion dollar is already being allocated each day for Stimulus projects.

    In layman’s terms, the Stimulus is needed for the simple reason that with the failure of the financial system, businesses and consumers were less willing (uncertainty) and less able (banks failures and failure to provide credit) to produce and spend in the economy implying that companies sold less goods and services than usual and so the companies had to lay out workers who in turn bought less and so the cycle goes (and this might just as well have led to a depression).

    What the stimulus is meant to do, and is doing, is to incite and give businesses and consumers the confidence to keep on producing and spending respectively for the upcoming spending in the economy it is to generate exponentially. Initially by giving tax breaks, benefits, spending to maintain teaching and social services jobs and then spending on stimulus projects contracts given to companies which are then encouraged not to lay off workers. All these with the consequent multiplier effect in the economy.

    Companies and consumers effectively bought to this idea once the Stimulus bill was enacted and kept on producing and consuming respectively in anticipation that upcoming Stimulus spending will maintain a stable economic environment from which recovery is possible. Hence the reason why the stock market and consumer and business confidence started rising. This effort was accompanied by the bank bailout and efforts to provide credit to consumers and companies.

    It is effectively because the Stimulus Package is real, a commitment of 787 billion dollars by the US government for real economic projects, that consumers and businesses bought to the scheme and started acting in a positive manner in anticipation of its positive impact in the upcoming months (the Stimulus Package direct impact should enter in full force by the fourth quarter). In fact, many economists have even argued that the amount provided for the Stimulus should have been much more higher.

    As a final note, I’ll argue that irrespective of party creed, it will seem to me that the criticism levied against the Stimulus is much more of a “political vogue” (and has nothing to do with “realistic” economics) naïvely taken up by the media which tend to operate on the basis of “two sides to any story” (not a criticism though). The milestone which any such critical arguments has to overcome is to answer the question: how could a depression be avoided and a recovery started following the failure of the financial system?

    [Aleceo,

    Presuming the argument you make is correct, then why could not the administration geniuses take what you said here into account in making their numbers? Why did they make a predictions that were light years off track?

    There are three areas that you went wrong that I am going to take the time to point out.

    First: Most of what you typed here are not real arguments, they are proclamations that have little to no fact backing them up and it is likely that I as the editor will be the only one who will read the massive wall of text you just posted.

    Second: having read the official summary of the stimulus bill from the CBO, most of it stimulates government, the money to the states is tied with very expensive unfunded mandates so after two years when the stimulus money is gone the states will have to raise taxes or let people go. Remember the photo op Obama had with with the 25 police officers who got hires as a result of the stimulus? The media is reporting that most of them will have to be let go when those funds run out.

    Third: You stated that arguments critical of the stimulus package are politically vogue and have nothing to do with realistic economics. Having been told directly by PhD’s in economics that I am a bit of a prodigy when it comes to economics, when it comes to strict economics your argument has several problems.

    1. Small business creates over 70% of all new jobs, only slightly over 3% of the stimulus bill was targeted to help small business. So to say that the stimulus package is a “jobs bill” is a folly on its face.

    2. Governent spending is not new money that amounts to a creation of wealth, it is borrowing money from the people or printing it that either has to be taken out of the economy plus interest later, or just printed up, both of which are inflationary and raise interest rates in an already very credit tight market. The administration stated goal has been to losen up the credit markets but anyone but a marxist economist could have told you the actions they have taken would have had the opposite effect, and they have. Government borrowing has been sucking the world credit to the point where America is in danger of losing its AAA credit rating and if that happens it will have economic consequences that most Americans will feel immmediately.

    Link: https://iusbvision.wordpress.com/2009/06/07/ap-big-government-spending-programs-are-turning-out-to-have-the-opposite-effect/

    3. When an economic crash happens, people stop spending and save money and horde it, eventually people start to spend that money when things are a little less volitile and consumers spend a little more. This ALWAYS happens unless things fall to the point of the Great Depression. So a slight increase in consumer confidence was going to happen anyway stimulus package or no.

    4. As far as some return in the stock market, this ALWAYS happens after a big crash because the stock in many companies after a big crash is left undervalues. There is even a term for this , its called a “bear market recovery”. If you are so confident that government intervention increases investor confidence, could you explain why the world is starting to balk at buying our debt, could you explain why most individual investors do not want GM and Chrysler stock?

    5. As far as undermining investor confidence, the Obama Administration said that it had to spend billions in Chrysler and GM so that they would not go bankrupt, well they did (wrong again), and then the Obama Administration illegally meddled in the bankruptcy by trying to put the unions firts in getting money and stock from the bankruptcy and put the secured bond holders last. The law demands that secured bond holders get paid first and unsecured debtors get paid last. This is why the Indiana Pension Fund sued to stop Obama from doing this. Who is going invest6 in a company, who is going to buty their bonds so they can finance projects when the Obama Administrations is trying to illegally stick it to those who buy those bonds? How does that increase investor confidence?

    To conclude I will state that big government stimulus bills do not work well because at almost every level the money is spent for political reasons and not economic ones, which is no surprise because 49% of the money spent by FDR during the Great Depression was spent in swing states. Non military production growth in the non-agriculture private sector continued to decline under FDR and did not start to turn around until 1946 when government spending started dropping.

    People like me predicted that the administration’s rosey forcast numbers were way, way off, heck even the CBO did, so if the stimulus and those behind it are such economic guru’s how come we were right and they were wrong?

    In the end the economic indicators dynamic, it is old hat to point at a bear market recovery or one economic endicator like consumer confidence (which is still bad but has improved) and wipe your feet on them as an endorsement of your policy. When 8 of the top 10 economic indicators are way up as they were during the Reagan recovery get back to me. By the way, Reagan’s detractors always look to the two indicators that still had trouble as thier “proof” that the economy was bad under the Reagan Recovery, they just ignored the other 8, which is sort of what you are doing here. – Editor]

  2. G-MAN5284 said

    So as long as someone (anyone) is working, Obama can claim that that person’s job is a saved job? Give me a break. How stupid do they think we are?

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