Study: Stimulus Funds Inefficient Source For Jobs
A new study shows that funds spent for “stimulus” were relatively inefficient at addressing unemployment. The study authors note that their findings “suggest[] just how hard it is for Keynesian job creation to work in a modern, expertise-based economy.”
Among the factors that inhibit the effectiveness of government “stimulus” in promoting employment is the fact that “even in a weak economy, organizations hired the employed about as often as the unemployed.” In other words, organizations spent “stimulus” money just as often to hire workers away from other jobs rather than employing people who would otherwise be unemployed.
Another factor was the way that government mandates increased per-job costs by requiring employers to pay more for workers than may have been justified by economic conditions:
Among organizations required to pay prevailing wages, 38.2 percent thought that they could have hired workers at wages below the Davis-Bacon prevailing wage (Figure 3) while another 17 percent were unsure. This meant higher costs for the federal government and fewer jobs created.
The bottom line is that once again, the influence of politics undermined the actual economic effects of “stimulus” spending. This is important to keep in mind as many Democrats in Washington gear up to demand another round of “stimulus” spending. To whatever extent that Keynesian models remain valid (and they rely on many assumptions that have not even been investigated, let alone proven, in a post-modern information-based global economy), even the most charitable case for them collapses if the economic effect of “stimulus” is dissipated by self-dealing and payoffs to political constituencies like government employee unions and companies with an “in” at the White House.
9 Responses to “Study: Stimulus Funds Inefficient Source For Jobs”
Wow. A study from a conservative, “market oriented” think tank doesn’t like government stimulus. I’m just shocked, I tell you.
We should expect this sort of thing from wage and price controls, but there’s more from the wiki:
Racism and political favors. What’s not to love?
[...] Well, surprise, surprise. A far right think tank does a study that concludes the American Recovery and Reinvestment Act (aka the stimulus) didn’t work, and the usual suspects fall all over it as proof that Keynesian economics destroys jobs. [...]
I can find a study too. By the CBO.
http://cbo.gov/ftpdocs/123xx/doc12385/08-24-ARRA.pdf
I report, you decide. The CBO or a right-wing think-tank.
Hey I just found some MoveOn-study that says the stimulus worked. How relevant.
Regardless of your political leaning, it is intuitively obvious that anything that’s been tried since this depression started has not helped. Maybe slowed the decline, maybe not, but definitely not improved the situation.
This is a new type of depression, folks. We need new types of solutions. Not more tax cuts, not more debt-riddled spending, but actual, systemic reform of education, finance, health care, regulation, even politics.
I heard some talk on NPR recently (sorry, I can’t recall the program) about a call for the govt. to require banks to refinance all existing home mortagages at current interest rates. That struck me as a great idea. It wouldn’t be a bailout, but would actually do something for the common citizens for a change instead of the special interests (who need it least). Of course an idea like that makes far too much sense to ever be implemented. In any case, I’d like to see some sort of relief geared toward the regular people who make up the bulk of this country for a change.
Barky, I’m with you. Let’s try to fix the engine instead of more supercharging.
JSpencer, that’s been suggested in some investor circles also, but when the Fed lowered interest rates at the start of the crisis, the GSE’s (Fannie and Freddie) raised their standards to discourage people from refinancing. That doesn’t work very well in a competitive market, but they have a near-monopoly on the market, especially since they have effective, if only implicit, government guarantees.
A study from a Koch funded university that actively fires professors that don’t toe the Koch line. (George Mason)
Isn’t this supposed to be the Moderate Voice? This is just uber right wing ideological hog wash. I think I trust the CBO or any other organization that doesn’t owe it’s existence to libertarian propaganda. I’d be rolling my eyes the same way if it a liberal study was treated as news. Propaganda is NOT news. It’s garbage.
AlexandSmith, if you read TMV for any length of time you would realize it is considerably more balanced than you are giving it credit for. Logan Penza’s contributions are atypical in that regard, so don’t judge by that alone.