Despite Bureau of Labor Statistics statistics showing that  unemployment in August skyrocketed up to 9.7% – the highest it has been in 26 years, members of the Administration continue to push the totally discredited line that the stimulus package is helping ‘save or create’ jobs.

Just last week, Vice-President Biden stated that "The Recovery Act is doing more, faster and more efficiently, and more effectively than most people expected." Considering our expectations were that it would do nothing, and it has done nothing, I think our expectations were pretty right on.

Of course, members of the Administration – with no basis in fact, logic, or reason – argue that without the stimulus it would be even worse. One good way to check if a relationship exists between fiscal stimuluses and unemployment is to look at the size of fiscal packages in different countries, and then see how unemployment has changed.

One of Australia’s leading economists, Professor Sinclair Davidson from the Royal Melbourne Institute of Technology, has done just that. And the results are hardly surprising:













Looking at the OECD as a whole, the higher the stimulus package, the higher the growth in unemployment as the job-creating private sector is crowded out by the government. Even if you do not accept the correlation is strong enough to indicate a causation effect with the size of the stimulus directly contributing to an increase in unemployment (and I’m unsure what the correlation coefficient here is but it looks fairly high), it is abundantly clear obvious that stimulus packages do not and can not ‘save and create jobs’.

Noble-Laureate James Buchanan stated last week that "Barack Obama is committing the same mistakes made by policymakers during the Great Depression". How much more evidence the administration need before it stops these failed policies of the past, and embraces a market-based approach that really works?

(Reproduced with the kind permission of Professor Davidson)