Most economists say that the “stimulus” didn’t stimulate. I’m shocked, of course.
20 thoughts on “You Don’t Say”
But aren’t most economist white men?!?!?!?
I’m not sayin’…I’m just sayin’…!
Oh Jim? Where are you?
Rand, just for the sake of accuracy, the article itself doesn’t talk about “most economists”. It says most of 68 economists who work for firms large enough to employ their own economists feel that their firms didn’t gain new business from the economic stimulus. No matter what you believe, the sample size and the people polled would not lend credibility to the headline, “Most economists say that the “stimulus” didn’t stimulate.”
That would take a different (and more careful) poll.
“Unexpectedly”… LOL
Dave, I think they’d be the people who would actually know.
Remember, the government has no money of its own. It doesn’t sell band candy, or hold car washes or bake sales to raise cash. Therefore, no stimulus dollar can be spent unless it is extracted from a private sector actor. It can be extracted from a private sector pocket now, or in the future. Either way, it has to be taken out of the private sector.
Given that, there is no possible way that the stimulus could create jobs or wealth compared to private sector use of that same money. This is because it takes the government a full dollar to procure the same amount of goods and services that can be procured in the private sector for only $0.75. That $0.25 loss in purchasing power for each dollar extracted, when multiplied hundreds of billions of times over, represents hundreds of thousands of jobs that will never come into existence. In my view, no other outcome is even possible.
I don’t know if this phenomenom has a name, but I refer to it as “the degraded purchasing power of the federal dollar”.
Rand, thinking about it a little further, the kinds of firms that employ their own economists are often firms involved in construction or banking. If they say that their firms didn’t benefit from stimulus, I would certainly believe them. But I would look elsewhere than this poll to answer the broader question of whether the stimulus benefited the overall economy.
whether the stimulus benefited the overall economy
The best they can do is benefit a small segment of the economy at a larger cost to the overall economy… and they can’t even do that usually (cash for clunkers, anyone?)
Tom Nally is right, economic inefficiency is guaranteed with government spending. You will always get less than a dollars worth of value from it.
Given that, there is no possible way that the stimulus could create jobs or wealth compared to private sector use of that same money.
Notice the particularly oily phrase Obama used when talking about the jobs that were “created or saved.” Obama can argue that when the stimulus bill gave money to states who in turn used it to keep from laying off public employees, that the jobs of those public employees were “saved.” More accurately, they managed to kick this particular can of worms down the timeline a year or so but the fundamental problems remain – too many public employees and too few tax dollars to pay them.
In agreement with your point, government spending on “infrastructure” amounts to little more than a payoff to largely unionized and politically connected construction companies. However, in order to pay out a dollar in “stimulus”, the government has to take substancially more from the private sector in the form of taxes in order to pay the bureaucratic overhead. For every dollar taken in taxes, only 60-80 cents comes back in stimulus. If you asked for change for a dollar and I gave you 60 cents, you wouldn’t be too happy with the arrangement. However, that’s the deal we accept from the federal government every day. A better alternative would be to eliminate that layer of bureaucratic overhead to the extent possible by keeping the tax collections and payouts at the lowest level of government practicable.
Dave, I think they’d be the people who would actually know.
No, they’d only know about their particular businesses, they’d have no special insight into whether the stimulus helped the economy as a whole (or even helped their companies indirectly). The people who do track that sort of thing are near-unanimous in stating that it has helped.
This is because it takes the government a full dollar to procure the same amount of goods and services that can be procured in the private sector for only $0.75.
And where, pray-tell, does the $0.25 go, such that it has no economic impact at all?
You will always get less than a dollars worth of value from it.
The funny thing is, I read this statement on the Internet, the poster child for government spending that returned many, many times its cost.
The economy is not a zero-sum game: it is possible for wealth to be created, or lost, depending on how money is used. It therefore follows that some uses of public funds actually create wealth, and that some private uses destroy it. You can’t just say that the government always gets less for its money than the private sector — it depends on the particulars.
More accurately, they managed to kick this particular can of worms down the timeline a year or so but the fundamental problems remain – too many public employees and too few tax dollars to pay them.
Too few tax dollars in the depths of a deep recession is not a fundamental problem, it’s a temporary one, and “kicking the can down the road” is exactly what you want to do when the alternative is making the recession even deeper.
Too few tax dollars in the depths of a deep recession is not a fundamental problem, it’s a temporary one
Unless your tax and economic policies prolong the recession into the foreseeable future.
“Unless your tax and economic policies prolong the recession into the foreseeable future.”
That’s the thing. Some people believe you can do just about anything to the economy and it will always come back. Ideological impulses can be indulged, because an improved economy washes away all sins. All you have to do is wait.
And where, pray-tell, does the $0.25 go, such that it has no economic impact at all?
It is consumed in bureaucratic processes that do not add a commensurate amount of value to the good or service being procurred.
Two next door neighbors live in identical houses. They get their roofs replaced using the same materials, workmanship and warrantees. One neighbor pays $2500 for the work, while the other pays $3000. Which neighbor maximized the value of the transaction?
You might say that the roofing company that charged $3000 has higher overhead back at the office. Perhaps that extra $500 is spent on wages for the guy who sorts mail. Therefore, it amounts to an equivalent amount of value.
But at the end of the day, if the extra $500 spent doesn’t result in a marginal increase in the value of the product delivered, it essentially becomes value lost forever.
And where, pray-tell, does the $0.25 go
I’ll tell you exactly Jim. When I worked for the FAA we could only buy stuff off the government contract. For example, at the time I worked for them a desktop computer cost $20k. I could go down to the corner and buy that same computer from a company not part of the contract for $5k… the exact same computer. So what about that extra $15k the government contractor got? A large part of it went to political campaigns, payola, lobbyists, television commercials. So while some of it was of dubious economic value, a lot of that $15k of wealth was just thrown down the rat whole. That’s what government spending gets you. While I was there I probably bought a dozen computers off that contract in my small department. We had hundreds of computers in that five story building. You do the math.
I’m an economist and I think the economic stimulus was a contradiction in terms. Here’s the glibbest way I’ve seen it put.
hole not whole… sheesh. That was almost twenty years ago. I have more than ten times the computer for $600 now, including a wide screen LCD monitor that would have been science fiction back then.
Sam, you’re an economist? My fav joke about that is you could line up all the economists from head to toe and they still couldn’t reach a conclusion. I’ll try not to think less of ya! Somebody has to do it, right? 🙂
Link is good anecdotal evidence. Jim will ignore it.
The funny thing is, I read this statement on the Internet, the poster child for government spending that returned many, many times its cost.
The current internet is mostly private funded. Further, my take is that it would have been created anyway even if the government didn’t get involved. The idea is natural and obvious. It’s not a poster child for government spending IMHO.
Truman got so fed up with economists saying “On the other hand…” that he said, “Will someone please bring me a one-handed economist?”
But aren’t most economist white men?!?!?!?
I’m not sayin’…I’m just sayin’…!
Oh Jim? Where are you?
Rand, just for the sake of accuracy, the article itself doesn’t talk about “most economists”. It says most of 68 economists who work for firms large enough to employ their own economists feel that their firms didn’t gain new business from the economic stimulus. No matter what you believe, the sample size and the people polled would not lend credibility to the headline, “Most economists say that the “stimulus” didn’t stimulate.”
That would take a different (and more careful) poll.
“Unexpectedly”… LOL
Dave, I think they’d be the people who would actually know.
Remember, the government has no money of its own. It doesn’t sell band candy, or hold car washes or bake sales to raise cash. Therefore, no stimulus dollar can be spent unless it is extracted from a private sector actor. It can be extracted from a private sector pocket now, or in the future. Either way, it has to be taken out of the private sector.
Given that, there is no possible way that the stimulus could create jobs or wealth compared to private sector use of that same money. This is because it takes the government a full dollar to procure the same amount of goods and services that can be procured in the private sector for only $0.75. That $0.25 loss in purchasing power for each dollar extracted, when multiplied hundreds of billions of times over, represents hundreds of thousands of jobs that will never come into existence. In my view, no other outcome is even possible.
I don’t know if this phenomenom has a name, but I refer to it as “the degraded purchasing power of the federal dollar”.
Rand, thinking about it a little further, the kinds of firms that employ their own economists are often firms involved in construction or banking. If they say that their firms didn’t benefit from stimulus, I would certainly believe them. But I would look elsewhere than this poll to answer the broader question of whether the stimulus benefited the overall economy.
whether the stimulus benefited the overall economy
The best they can do is benefit a small segment of the economy at a larger cost to the overall economy… and they can’t even do that usually (cash for clunkers, anyone?)
Tom Nally is right, economic inefficiency is guaranteed with government spending. You will always get less than a dollars worth of value from it.
Given that, there is no possible way that the stimulus could create jobs or wealth compared to private sector use of that same money.
Notice the particularly oily phrase Obama used when talking about the jobs that were “created or saved.” Obama can argue that when the stimulus bill gave money to states who in turn used it to keep from laying off public employees, that the jobs of those public employees were “saved.” More accurately, they managed to kick this particular can of worms down the timeline a year or so but the fundamental problems remain – too many public employees and too few tax dollars to pay them.
In agreement with your point, government spending on “infrastructure” amounts to little more than a payoff to largely unionized and politically connected construction companies. However, in order to pay out a dollar in “stimulus”, the government has to take substancially more from the private sector in the form of taxes in order to pay the bureaucratic overhead. For every dollar taken in taxes, only 60-80 cents comes back in stimulus. If you asked for change for a dollar and I gave you 60 cents, you wouldn’t be too happy with the arrangement. However, that’s the deal we accept from the federal government every day. A better alternative would be to eliminate that layer of bureaucratic overhead to the extent possible by keeping the tax collections and payouts at the lowest level of government practicable.
Dave, I think they’d be the people who would actually know.
No, they’d only know about their particular businesses, they’d have no special insight into whether the stimulus helped the economy as a whole (or even helped their companies indirectly). The people who do track that sort of thing are near-unanimous in stating that it has helped.
This is because it takes the government a full dollar to procure the same amount of goods and services that can be procured in the private sector for only $0.75.
And where, pray-tell, does the $0.25 go, such that it has no economic impact at all?
You will always get less than a dollars worth of value from it.
The funny thing is, I read this statement on the Internet, the poster child for government spending that returned many, many times its cost.
The economy is not a zero-sum game: it is possible for wealth to be created, or lost, depending on how money is used. It therefore follows that some uses of public funds actually create wealth, and that some private uses destroy it. You can’t just say that the government always gets less for its money than the private sector — it depends on the particulars.
More accurately, they managed to kick this particular can of worms down the timeline a year or so but the fundamental problems remain – too many public employees and too few tax dollars to pay them.
Too few tax dollars in the depths of a deep recession is not a fundamental problem, it’s a temporary one, and “kicking the can down the road” is exactly what you want to do when the alternative is making the recession even deeper.
Unless your tax and economic policies prolong the recession into the foreseeable future.
“Unless your tax and economic policies prolong the recession into the foreseeable future.”
That’s the thing. Some people believe you can do just about anything to the economy and it will always come back. Ideological impulses can be indulged, because an improved economy washes away all sins. All you have to do is wait.
It is consumed in bureaucratic processes that do not add a commensurate amount of value to the good or service being procurred.
Two next door neighbors live in identical houses. They get their roofs replaced using the same materials, workmanship and warrantees. One neighbor pays $2500 for the work, while the other pays $3000. Which neighbor maximized the value of the transaction?
You might say that the roofing company that charged $3000 has higher overhead back at the office. Perhaps that extra $500 is spent on wages for the guy who sorts mail. Therefore, it amounts to an equivalent amount of value.
But at the end of the day, if the extra $500 spent doesn’t result in a marginal increase in the value of the product delivered, it essentially becomes value lost forever.
And where, pray-tell, does the $0.25 go
I’ll tell you exactly Jim. When I worked for the FAA we could only buy stuff off the government contract. For example, at the time I worked for them a desktop computer cost $20k. I could go down to the corner and buy that same computer from a company not part of the contract for $5k… the exact same computer. So what about that extra $15k the government contractor got? A large part of it went to political campaigns, payola, lobbyists, television commercials. So while some of it was of dubious economic value, a lot of that $15k of wealth was just thrown down the rat whole. That’s what government spending gets you. While I was there I probably bought a dozen computers off that contract in my small department. We had hundreds of computers in that five story building. You do the math.
I’m an economist and I think the economic stimulus was a contradiction in terms. Here’s the glibbest way I’ve seen it put.
hole not whole… sheesh. That was almost twenty years ago. I have more than ten times the computer for $600 now, including a wide screen LCD monitor that would have been science fiction back then.
Sam, you’re an economist? My fav joke about that is you could line up all the economists from head to toe and they still couldn’t reach a conclusion. I’ll try not to think less of ya! Somebody has to do it, right? 🙂
Link is good anecdotal evidence. Jim will ignore it.
The funny thing is, I read this statement on the Internet, the poster child for government spending that returned many, many times its cost.
The current internet is mostly private funded. Further, my take is that it would have been created anyway even if the government didn’t get involved. The idea is natural and obvious. It’s not a poster child for government spending IMHO.
Truman got so fed up with economists saying “On the other hand…” that he said, “Will someone please bring me a one-handed economist?”
Gotta love these guys:
http://www.politicsdaily.com/2010/02/22/top-economists-say-recovery-is-firmly-on-track/
I wonder what they’ll be saying in June…
It does remind me of the old joke. If you ask 4 economists the same question, you’ll get at least 6 answers.