The White house has released estimates of the fiscal stimulus’ impact on the economy through June 2009. At best, those estimates show that the fiscal stimulus has been a colossal waste of tax dollars.
The White House claims that growth rates are persistent: the negative real GDP growth prior to 2009 Q2 would have continued indefinitely if it were not for wise fiscal policy. That claim is ridiculous, and inconsistent with the rest of their calculations, but I will put that to the side until later this week. Another future topic is the private consumption impact of all of this, conspicuously absent from the Administration’s analysis.
For now, let’s take the Administration’s estimates literally:
- More than $100 billion worth of stimulus spent in 2009 Q2 (p. 5)
- 597,000 jobs would have been lost in Q2 — that’s the purported “momentum” from the last quarter (pp. 8, 11)
- In fact, 436,000 jobs were lost (p. 9), so we have to thank the White House for the 161,000 that were not lost
- The same logic for real GDP: it would have fallen at a -3.3 percent annual rate (p. 12), but in fact it fell at a -1 percent (p. 12) annual rate, so we have to thank the WH for the -2.3 percent further negative annualized growth rate that would have occured without them.
- Recall that a 2.3 percent annual growth rate actually refers to about 0.6% growth rate from one quarter to the next. So what the WH is saying is that we owe 0.6 percent of 2009 Q2 GDP to their policy, which is about 20.3 billion dollars.
So, from the jobs perspective, we just spent $100 billion of taxpayer money (not counting the economic damage done to raise this money) to supposedly create 161,000 jobs: that’s $621,000 per supposed job!! Can we agree that creating a job is wonderful, but not worth $621,000?!
[OK Keynesians, I know that you’re going to claim that those jobs are going to last a lifetime, so actually $621K is cheap … get real! You will also claim that those 161,000 jobs will beget still further jobs, kind of like rabbits mating in the forest. Anyway, my next post will address this head on.]
From the GDP perspective, we just spent $100 billion of taxpayer money (not counting the economic damage done to raise this money) to supposedly raise GDP by $20.3 billion. That’s the kind of public sector productivity we’ve come to expect!
NEXT: let’s look at consumption, and unpack the “supernatural spiral of spending” that stimulus advocates would have us believe.