More proof that government spending doesn’t do much for job creation.
One reason unemployment continues to rise may be that stimulus funds did not target high-unemployment states.
You don’t say.
3 thoughts on “The Failed Stimulus”
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That’s completely ass-backwards wrong. Those states are the sucktastic leaders of unemployment because they had the most people employed in the industries which got destroyed in the crash. Real estate and financials had way, way too big a piece of the economic pie than they should have, and automotive manufacturing in Michigan was just waiting for a straw to break its back.
This current crisis is a structural readjustment of the US economy away from real estate and finance and away from California and Michigan. The faster that happens the more quickly we will get recovery.
But where the stimulus is spent is irrelevant, because it’s all useless (to the economy; not to politicians) pork. It does nothing to help the necessary structural readjustment. If the stimulus had gone to worker re-education in Florida, Nevada and Arizona, or was spent on moving trucks getting people out of Michigan and California and down to Texas, then maybe it would have actually lowered the unemployment rate. But it would never have been spent on that, so it doesn’t matter where it was spent. It’s just a non-correlated variable.
My take is that in a few years, we’re going to see a new academic fad, the exploration of why Keynesian economics failed in this particular period. There will be some group that will claim that we didn’t spend enough or we failed to give enough chances to Keynesian approaches. But I suspect the general consensus will simply be that Keynesian economics is overrated. That past instances of claimed success are due to a combination of the placebo effect and that the economy recovered despite the Keynesian effort.
My take is that this is the first real test of Keynesian economics on a Depression-scale recession. And it’s ]turning out not to be the cureall sung of in legend.
Karl,
No mystery. Keynesian economics argues that inputs are the same, regardless if the stimulus is from a tax cut or increase government spending. The new complexity economics argues that how the money is spent is critical. If applied to projects that are investments, improving or building roads that reduce the cost of shipping, it has greater impact then simply funding existing jobs from a different source.
If I was spending the money I would have focused on the American Society of Civil Engineers to do list on restoring the nation’s crumbling infrastructure. Not only would that be an investment in the future, as was the original construction of that infrastructure, it would also target the industry with the greatest job lost, construction, at 1. 6 million jobs lost. It wouldn’t solve all problems, but it would be a much better use then it is now.
Thomas Matula