Obamanomics and The Stimulus Plan - Part 1

Let's talk a little bit more today about what impact the President's stimulus plan has had on the economy. As you may recall from yesterday, the AP and the White House were in a little bit of a spitting match about what numbers were valid to use with the White House promising to produce newer, more accurate results by yesterday, which they did.

The new numbers claim that Obama's stimulus plan has created or saved almost 650,000 jobs according to a new AP article by Matt Apuzzo and Brett Blackledge. The White House obviously thinks this is great news but, as always. let's do a little math. If the stimulus plan did indeed create/save 650,0o0 jobs and we divide that estimate into the estimated amount of the stimulus plan that has already been spent, $180 billion or so (see yesterday's post for the details), then each job Obama claims to have created or saved was done at a cost of about $277,000 per job! There is no way we can get out of the recession with these kinds of programs if it needs over a quarter of a million dollars to create one job. And remember, the 650,000 estimate is Obama's number, not some sandbagged Republican number.

What is even worse, according to the AP article, the White House still has not gotten all the kinks out of the estimation process:

• Despite earlier identification of a double counting, the jobs saved claim from the Palm Beach County, Florida water department is still was doubled from an actual of 57 jobs to a reported 114 jobs.
• Some programs that got money from the stimulus package continued to use the money for pay raises and not job saving, incorrectly listing those who got only a raise as a job saved.
• According to the article, there are still dozens of instances where contractors posted the same number of jobs created or saved on different projects, which resulted in multiple counting of the same employees who were just working different projects.

Even worse, the greatest number of jobs created or saved were in state governments. These state government employees, while they most probably work very hard, do not contribute to the growth of the economy since their wages are paid for by taxing people in the private sector. So saving their jobs is just a distribution of existing wealth via taxation, not from the market or the economy getting larger.

Now, given that the economy has already shed 3 million jobs this year, the Obama supporters could claim that unemployment would be even worse if the stimulus plan had not been passed. Two problems with this line of reasoning. First, this approach was never going to work it if cost over $270,000 to create one job under Obama's plan. Second, and this the real fundamental problem that no one is addressing, government does not create jobs, the private market does. Free people earning and spending their wealth as they see fit is the most efficient, cost effective way to grow an economy. Politicians either do not recall, do not know, or choose to ignore the fact that government does not pay for anything. It merely takes wealth via taxation from some members of society, individuals and businesses, and redistributes it to other members of society including a cut for itself.

Thus, to say this plan using government money "created" a job is a bogus argument since the money used to create this job will not be used to create another job that was the result of the free market, it was just redirected by the political class. The more Obama uses government money to create these phantom jobs, the less jobs will be created in other sectors of the market where people would have spent the money they earned if it had not been forcibly taken under taxation.

Remember, it was the political class, including both Republicans and Democrats, that got us into this mess in the first place with lax oversight performance of the banking, financial, and housing markets. No member of the political class accurately predicted, along with their respective economists, the largest economic downturn since the Great Depression until it was way too late to do anything. What makes anyone think they can fix the very disaster they caused?

"Love My Country, Loathe My Government" addresses many of these issues, the most important of which calls for a major downsizing of government and the associated taxation so that free individuals can take more control of their financial and economic choices and in the process, create the new jobs and industries that government cannot do by redistributing wealth.

While the above is a common sense description of how the stimulus plan is doomed to failure, tomorrow we will discuss Obamanomics and The Stimulus Plan - Part 2. We will review a Reason Magazine article that asked credible, non-administration economists their opinions of the stimulus plan and hopefully, provide some more detailed explanations of why this and other types of stimulus programs never work, always waste money, inflate the national deficit, and delay the recovery.