ATR "Told You So" Series: Stimulus Unemployment

Economist Greg Mankiw presents the following graph following the release of December unemployment numbers, comparing them to what was proposed by the Administration:

The situation is even more dire if you take a more long term approach over hte past two decades, and look at the ratio of Employment: Population:

As the

Wall Street Journal Notes:

Indeed, President Obama’s stimulus bill failed by its own standards. In a January 2009 report, White House economists predicted that the stimulus bill would create (not merely save) 3.3 million net jobs by 2010. Since then, 3.5 million more net jobs have been lost, pushing the unemployment rate above 10 percent. The fact that government failed to spend its way to prosperity is not an isolated incident.

This is no longer a theoretical exercise. The idea that increased deficit spending can cure recessions has been tested repeatedly, and it has failed repeatedly. The economic models that assert that every $1 of deficit spending grows the economy by $1.50 cannot explain why $1.4 trillion in deficit spending did not create a $2.1 trillion explosion of new economic activity.

Why Government Spending Does Not End Recessions

Moving forward, the important question is why government spending fails to end recessions. Spending-stimulus advocates claim that Congress can “inject” new money into the economy, increasing demand and therefore production. This raises the obvious question: From where does the government acquire the money it pumps into the economy? Congress does not have a vault of money waiting to be distributed. Every dollar Congress injects into the economy must first be taxed or borrowed out of the economy. No new spending power is created. It is merely redistributed from one group of people to another.

Again, again, again - We. Told. You. So.

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