Even assuming public sector jobs in education, healthcare, infrastructure and policing are unproductive, if we are to look at private employment, there appears to be similar results.
The slowing of both public and private employment growth in early 2012 as the stimulus is withdrawn is another indication of employment effects of the stimulus.
My response is immediately after the post you linked to.
The slowing of both public and private employment growth in early 2012 as the stimulus is withdrawn is another indication of employment effects of the stimulus.
So the stimulus only works as long as money keeps getting pumped in. What kind of stimulus is that?
One that creates zillions of jobs and prevents people from sitting on the couch unemployed deteriorating their job skills. What kind of argument is that?
But those zillions of jobs [which is an absurd exaggeration] only last as long as the stimulus lasts, by your own admission. So that basically we are talking about charity, to people whose so called “jobs” are not productive enough to pay for themselves.
I mean, if someone offered me a “job”, paid for by taxpayer money, to read comic books, that is not a job at all, as you will be the first to agree. It is a free ride. And you are saying that all the stimulus jobs are of that nature.
Actually, Brad DeLong, looking at the long term effects of unemployment on skill deterioration, argued that the stimulus will easily pay for itself in tax revenue alone. The worse the recession and unemployment gets, the worse job skills and competitiveness atrophy- that’s not an argument for withdrawing policies which reduce unemployment.
It is impossible for a stimulus to “pay for itself” in tax revenue. Let’s say $100,000.00 was spent getting one “job” to one person. The person will give back part, but not all, of that money in taxes. Say he gives back a third. So 100 grand was taken away from the taxpayers, and 35 grand is given back. Net loss to the taxpayer, 65 grand.
But wait! It gets worse. As you have freely confessed, that so called “job” is a one off thing. The moment the so called stimulus money stops rolling in, that job disappears.
Not only that, but this 100 grand could have been used by the people it was taken from by force to “stimulate the economy” on their own, hiring people for productive jobs. We know these alternate jobs would be productive, because people are actually willing to voluntarily pay for them.
Worse still, the problems you introduced, atrophying skill set and competetiveness, are being aggravated by that mis-spent 100 grand, by your own admission. For you have told us that those phony stimulus “jobs” are not viable. Meaning the guy getting that stimulus money was wasting his time doing something nobody is willing to pay for [unless forced to by having money taken away by the govt]. Instead of actually getting a useful productive job, and learning the skills to hold it down, he has learned how to something nobody will pay for.
Brad Delong is a misguided soul who endorsed Barak Hussein Obama for president.
He is also intellectually dishonest, as shown here: https://wiki.freecapitalists.org/wiki/Brad_DeLong
Do you work for thr govt, mustang? Have you been “educated” in govt schools?
You don’t have to read the paper, Dave. But the fact that jobs disspear when the stimulus is withdrawn doesn’t indicate that those jobs are unproductive, only that those resources could only be put back into use through stimulus and lay idle otherwise.
Actually, a large part of the stimulus consisted of tax rebates and direct transfers to low income individuals to allow them to spend money. For instance, the medicaid transfers simply allowed more people to purchase healthcare.
The reason why people aren’t paying for these things is that cash is hoarded during a liquidity trap, as businesses stop investing due to self-fulfilling economic expectations. Stimulus gets the economy going again, allows people to spend, and provides many unemployed with at least some employment opportunities.
Gosh, with the way this mustang19 troll goes on about the stagnation of the free market, it’s a miracle we even made it to electricity.
I dunno mustang, your assumptions are so far removed from mine that I doubt we can see eye to eye.
For instance, you really think people are hoarding cash? Who has cash to hoard? Everyone is broke, including the banks who are sitting on a trillion dollars of cash because they owe 3 trillion in debt.
Anyway, don’t bother answering, because it will be way over my head, or rather way to the side in a parralel universe.
I do appreciate the civility of the discussion, and ty for that.
You’re welcome, and I enjoyed the discussion too.
Some evidence on cash hoarding. It’s possible for banks to literally “hoard cash”, or stash a bunch of dollar bills in a safe, but it’s basically an issue of liquidity preference, or the degree to which banks prefer to hold positions they can easily withdraw from. During the crisis, banks moved assets out of high-returning investments and into low-returning but liquid ones because they expected the economy to tank.
As monetary and fiscal stimulus improved the economic outlook during late 2009- early 2010, banks began to put money back into investments, and economic growth returned.
Now, however, it’s slowing up again as the deficit gets cut. Deficit reduction may reduce debt in the short term, but in the long term it slows the recovery and imposes substantial cost on the economy by prolonging the recession. At least there is enough monetary stimulus to improve expectations somewhat, otherwise investment could still be falling.
The reason why government jobs doesn’t work is that the government must force taxes upon the people to create those jobs. Money taken away from people and put into another program is pointless, isn’t it easier to just leave the people alone and let them spend their money however they want? More taxes means less money in people’s hands, and that money is often misallocated by the government for it is not competitive as a private entity. Less taxes means more money into people’s hands, which can be used more efficiently than the bureaucracies in government. How do you know that some men in washington know where to put these government jobs in better than the free market?
They don’t and that is why economic planning by the government and its allocation of government jobs fails.
The economy is too complex for a group of men to plan, we are the economy, the economy is not like an engine in which you can fine tune, one cant simply use an equation, put in numbers, then get out the plan for the next year, it is more organic.
Our actions and what we think a good is worth, and how we trade with each other is what drives the economy. How can anyone think that a group of men in the government can plan an economy, yes human action can be predictable sometimes, but a group of men in government can’t predict EVERYONE’s desires to be able to plan an economy.
This is why when the government creates a boom by manipulating money, it is unsustainable (ex- alot of people invest and build houses, just to find out that no one really can pay for them anyway) and thus creates a bust (the market is trying to correct the artificial errors created by the government, which lured the people into malinvesting).
Examples of “broken windows” is war, the government destroys people and in turn needs to tax its own people to make more weapons to destroy more people. Its pointless since if the government didnt destroy people (war) in the first place, it would have much more resources without going to war.
Ex- I spend 10 bucks repairing a computer i purposefully broke. Now im down 10 dollars. If i didnt break the computer, wouldnt i have 10 dollars to spend? Buy some food or upgrade my computer?
Same can be applied to wars, and government programs/taxes
Perhaps those skills/jobs were meant to deteriorate during the purging of malinvestments that is the recession.
Studies showing that handouts pay for themselves in tax revenue later are merely reflection of the Ponzi scheme of paying old liabilities with new debt (money) – kicking the proverbial can down the road. I’m sure handing me out my Ferrari, Porsche, and 100ft sailing boat would also prove to ‘pay for themselves’ later, too. Let’s do it for purely patriotic and charitable reasons – to end the recession and put people who will build them back to work so they can buy even more stuff and pay taxes on their wages!
Keynes rocks!
I always like reading your posts, Z. Medicaid and foodstamps is not much of a Ferrari. And I don’t think skill deterioration is ever a good thing. But, like you said, maybe everything will just blow the fuck up one day if Ron Paul is not elected president.
What is the negative multiplier to represent government confiscation (taxation)???
IF there is a positive multiplier to government spending (dollars being introduced) in the economy, reason dictates that there be a negative multiplier applied to taxation (dollars being removed).
I know that my question assumes a Keynesian fallacy. BUT, how can I believe in a positive multiplier for spending, if I don’t also believe in a negative multiplier for taxation.
Mustang, read this testimony (pdf) given by Prof. Herbener in Congress yesterday on the subject of money. Very powerful.
That’s exactly the case, and that’s why Obama wants the payroll tax cut. The positive multiplier on spending items, though, is generally a lot more than the negative multiplier on taxes used to pay it back.
Thanks for the link, z1235. This stuff has been talked about in the other thread (like the time preference thing). But wow, he actually spoke to congress. I think that’s pretty rare for an Austrian. That’s like a Marxist making a speech at the Fed.
Frank Shostak on the “multiplier”. As he concludes, stimulus is just a euphemism for depletion of the capital stock, nothing more. The Keynesians keep trying to pull the rabbit out of the hat but, at the end of the day, it’s always just a guise for either credit expansion or depletion of the capital stock - ABCT shows why both always occur together.
Clayton -