Looks like one of the staff writers at The Onion may be an economist: Revamped WPA To Create 50,000 New Jobs By Disassembling, Reassembling Hoover Dam
This especially made me laugh:
Other public works projects currently underway include the bulldozing of libraries, the burning of national forests, and the defacing of public murals, which will be followed by a massive plan to rebuild libraries, revive national forests, and repaint public murals.
Most people doubt Congress’ ability to spend money wisely. The stimulus has given them some proof:
-$800,000 for an African genital-washing program.
-$700,000 to create computer software that can tell jokes.
–$40,000 for ten trash bins.
-$1.6 million to irrigate a golf course inTexas.
-Thousands of dollars to replace – twice – a sidewalk “that doesn’t front any homes or businesses, and leads into a ditch”
–300 truckloads of oyster shells.
Bonus non-stimulus spending: “[T]he Census spent $23,000 on a totem pole in Alaska. Census representative Hector Maldonado says the agency thought it was a great idea. The plan was to increase participation in Alaska, but despite the totem pole, participation dropped in the state by two percent from the last census.”
A new NBER working paper from Atif Mia and Amir Sufi finds that the Cash-for-Clunkers program didn’t work. Here’s part of the abstract:
We find that the program induced the purchase of an additional 360,000 cars in July and August of 2009. However, almost all of the additional purchases under the program were pulled forward from the very near future; the effect of the program on auto purchases is almost completely reversed by as early as March 2010 – only seven months after the program ended. The effect of the program on auto purchases was significantly more short-lived than previously suggested. We also find no evidence of an effect on employment, house prices, or household default rates in cities with higher exposure to the program.
In other words, cash for clunkers didn’t change how much people spent. It only changed when they spent. Sales were higher than normal during the program, and lower than normal after.
As the data come in, they are proving what theory predicts: fiscal stimulus doesn’t work. President George W. Bush tried Keynesian stimulus in 2001. It didn’t work. He tried again in 2003. It didn’t work then, either. President Obama’s stimulus programs aren’t faring any better. It’s time for a different approach.
Telling the truth to one’s superiors is hard. Especially when the stakes are high. Christina Romer comes to mind. Brilliant economist. She’s done excellent work on the role of monetary policy during the Great Depression.
A partisan Democrat, she was summoned to Washington soon after President Obama’s election to advise him. All of a sudden she endorsed the Bush-Obama views on stimulus. This is a 180 degree turn from her previous views. Romer’s own academic research shows that fiscal stimulus’ effects are too small to do measurable good.
Romer the economist believes that most business cycles have monetary causes. Not fiscal. Monetary. Romer the economist had been very consistent in expressing that view. But that view changed as soon as she arrived in Washington and Romer the economist transformed into Romer the political advisor. Suspicious.
This is not a new phenomenon. Politicians from both parties have been using economists for as long as economists have let themselves be so used. Politicians love the air of legitimacy that pointy-headed academics can give to their proposals. And economists love the sudden rush of attention and name recognition — and the professional prestige that will long outlast the current administration. They are happy to sell out. Or is it buying in?
That thought was sparked by reading about F.A. Hayek mourning the death of some of his colleagues’ integrity back during the Reagan years:
“You can either be an economist or a policy advisor.
I have seen in some of my closest friends… how a few years in government corrupted them intellectually and made them unable to think straight.”
–Cato Policy Report, Vol. 5, No. 2, February 1983.
Posted in Economics, Stimulus
Tagged christina romer, f.a. hayek, fa hayek, fiscal stimulus, hayek, monetary policy, Political Animals, romer, speaking truth to power, Stimulus
Through June, the government spent about $620 billion of stimulus money. The Obama administration claims that the spending has saved or created 2.3 to 2.8 million jobs.
For the sake of argument, let’s assume those job creation numbers are true. In fact, let’s pick the rosiest number — 2.8 million jobs.
At a price of $620 billion, that comes out to $221,428.57 per job. Startlingly inefficient.
Now consider that that $620 billion had to come from somewhere else. Some of that money came from taxes. That leaves less money left over for consumers and businesses to spend. Some of the stimulus money was borrowed. That leaves less capital for private companies borrow.
The private sector tends to spend less than the government to create a job. Since stimulus spending is spending more money to create fewer jobs than the private sector, it is actually causing net harm to the job market.
In place of the spending stimulus, I humbly offer a deregulatory stimulus. CEI VP Wayne Crews and I offer some specific proposals here.
$150,045 of stimulus money is being spent to restore a bridge that doesn’t connect to any roads and ends in an 8-foot drop.
Stimulus backers claim that the project created 1.9 jobs. That’s $78,971.05 per job created. That’s not a very good deal. Especially considering that no jobs were created on net, because that $150,000 was taken away from somewhere else in the economy.
Without the stimulus, that money would have been spent in other ways. Given that most jobs cost less than $78,971 to create, it may well be that the bridge restoration project meant fewer jobs were created than if the government had just left the money where it was originally — your pocket.
Some of the stranger governmental goings-on I’ve dug up recently:
-It is illegal to deface milk cartons in Massachusetts. The punishment is a $10 fine.
-If you aren’t quite sure about the definition of “children’s product,” a proposed regulation would clear that up. Here’s a small sampling: “A determination of whether a product is a ‘children’s product’ will be based on consideration of the four specified statutory factors as further described in the discussion and examples provided in this interpretative rule.”
-The federal government has an Advisory Committee on Immunization Practices.
-The government spends $23m per year on the National Agricultural Library.
-Wondering what the prevailing consensus is surrounding trailer homes? Check out the government’s Manufactured Housing Consensus Committee.
-Stimulus money is being used to replace peoples’ mailboxes – in some cases against their will.
-Eat your vegetables: The federal government has a Dietary Guidelines Advisory Committee.
–Seasteaders take note: the federal government has an Outer Continental Shelf Policy Committee.
-$110,000 in stimulus money was spent on an industrial-grade, automated pizza oven.
-It is illegal for a 9th grader to have a mustache in Binghamton, New York.
Posted in regulation, Spending, Stimulus
Tagged binghamton, dgac, diet, dietary guidelines, dietary guidelines advisory committee, eat your vegetables, mail, mailboxes, massachusetts, mustache, new york, ocpc, outer constinental shelf, outercontinental shelf policy committee, pizza, pizza oven, Stimulus, stimulus funding, stimulus money, vegetables
Not at all, to be honest. For starters, the very notion of stimulus violates basic economics. Taking money out of the economy and then putting it back in has no net effect. But it gets worse. Much worse.
When that money is put back into the economy, it goes to the weirdest places — $3.4 million is going to Florida to build a tunnel under U.S. Highway 27, so turtles can cross safely. A fish hatchery in South Dakota is getting $20,000 for new light fixtures. $50,000 is being spent to resurface a tennis court in Bozeman, Montana.
And so on.
These boondoggles aren’t getting nearly enough press. To help fill the vacuum, the good folks at Citizens Against Government Waste have put up a new website, MyWastedTaxDollars.org. Click on over and check it out. The best feature is an interactive map that shows just how unwisely stimulus funds are being spent all over the country.
Stimulus is worse than a zero-sum game. It is actively harmful. It is government saying that it knows how to spend your money better than you do; stimulus is the ultimate act of hubris. Kudos to CAGW and MyWastedTaxDollars.org for providing hundreds of examples of why government hubris should be replaced with government humility.
Posted in Economics, Stimulus
Tagged basic economics, boondoggle, bozeman, bozeman montana, cagw, citizens against government waste, Economics, fl, florida, florida tag, government waste, hatchery, montana, mt, mywastedtaxdollars.org, opportunity costs, sd, south dakota, Stimulus, stimulus package, turtles, waste
Over at the American Spectator, I explain why it won’t, but a deregulatory stimulus would. Main points:
-Anything that Washington giveth, it must first taketh away from somewhere else. The jobs bill is a zero-sum game.
-When government borrows more, less investment capital is left over for the productive sector.
-Taxes will have to be raised later to pay for today’s increased borrowing.
-Deregulation is a better approach. The biggest obstacles to job creation and economic growth are all in Washington.
Posted in Business Cycles, Economics, Publications, regulation, Spending, Stimulus
Tagged american spectator, deregulate to stimulate, deregulation, deregulatory stimulus, jobs, jobs bill, regulation, regulations, unemployment
The Senate just passed an $18 billion spending bill. Since the House already passed it, the legislation is now headed to President Obama’s desk to await his signature and become law.
The hope is that the spending will create jobs. If you’re reading this blog, then you probably know enough about economics to know that isn’t what will actually happen. Remember: anything that Washington giveth, it must first taketh away from somewhere else. It’s a zero-sum game. All those new jobs that politicians will be touting for the cameras will have come at the expense of other jobs elsewhere. On net, they’re not creating a thing.
Take the payroll tax break for small businesses that’s in the bill. Yes, those small businesses benefit. Maybe the money they save will even be used to hire more workers. That’s easy enough to see. But that money had to come from somewhere. That is harder to see. Too hard for the Senate to see, at the very least.
The reason is this: the government is foregoing some payroll tax revenue. But since it isn’t cutting spending to match, it has to borrow more. And there’s only so much investment capital to go around. Because Washington is borrowing more, less is left over for private investment opportunities. At the very least, companies will have to offer investors higher interest rates to lure them away from government bonds.
That makes getting loans more expensive. And when something gets more expensive, there tends to be less of it. Because of today’s bill, about $18 billion less capital will be available for the private sector to create jobs.
The legislation the Senate passed today is no jobs bill, at least on net. It is a spending bill. It doesn’t create jobs, it only redirects them.
Posted in Economics, Spending, Stimulus
Tagged barack obama, billions, creating jobs, Economics, jobs, jobs bill, jobs saved or created, obama, overspending, president barack obama, president obama, profligate spending, senate, spending, Stimulus, unemployment, us senate