Sunday, February 8, 2009

Government Spending Stimulates Unemployment

A picture (graph) is worth a thousand words....

But, we'll post a few anyway, in order to help the graphically impaired....
It's said that doing the same action over and over, yet expecting different results, is a sign of insanity. If that's so, the Democrats are certifiable....
Unemployment and Stimulus
By Brian Wesbury on 2.6.09 @ 5:37PM
The strangest thing happened on Friday. It was reported that the U.S. economy lost 600,000 jobs in January and the unemployment rate jumped to 7.6%, but the stock market rallied anyway. Partly, this was because the stock market is a forward-looking indicator and employment is a backward-looking indicator. If the economy is near a turning point, the stock market will reflect it well before the employment report.
But there is another explanation -- one that is believed by most of the journalistic punditry -- and that is that a bad employment report makes a stimulus package more likely. As Christina Romer (Chairwoman of the President's Council of Economic Advisors) said on Friday, "these numbers...reinforce the need for bold fiscal action." What's interesting about this is that there is absolutely no long-term economic evidence that higher government spending creates jobs.
Academic economists will debate this until the end of time, but because they have their eyes glued to the computer screen, calculating multipliers (whether a dollar of government spending means more than a dollar of growth for the economy), they rarely look out the window. So let's do it for them. This chart compares the unemployment rate back to 1960 with federal government spending as a share of GDP.
Clearly, the chart shows that more government spending does not create jobs. In fact, it is exactly the opposite. More government spending is correlated with higher levels of unemployment.
The reality is that every dollar the federal government spends must be borrowed or taxed from the private sector. And the more resources the government usurps from the private sector, the less job creation occurs.
It is also true that most government spending is less efficient than private sector spending. While there may be a few areas that government spending makes sense -- let's say defense or some R&D -- the vast majority of government spending has nothing to do with creating new wealth. It often competes against the private sector -- the postal service and Amtrak -- and much of it is pure re-distribution.
So, this raises a serious question. Why is the government trying the same old spending stimulus that the evidence clearly shows does not work? President Carter spent billions of dollars on alternative energy plans, but unemployment rose anyway. If the U.S. and the new administration are serious about "change" and "getting rid of the old ways of doing things," why not try something truly new?
With nearly $1 trillion dollars to spend, the government could do some astounding and positive things. The U.S. could rewrite its tax code and move to a flat tax that would make the U.S. much more competitive in the global economy. Or, we could rethink and rework the entire entitlement system, so that it wouldn't eat our budget and economy alive like Pac-Man in the next few decades. Charles Murray, in his 2006 book, In Our Hands, laid out a plan to give every American over 21 years old $10,000 per year for life in exchange for giving up Social Security, Medicare and every other welfare state program.
We can see the problems that the welfare state is causing in just about every other major industrial country around the world that is ahead of the U.S. on the demographic aging scale. Why not change our course right now and implement true change so that we don't end up like Japan or much of Western Europe? It's a shame that the U.S. is not thinking along these lines.
Yes, the political pressures of a rising unemployment rate make it difficult for politicians to think or plan for the long-term. But the U.S. has a historic opportunity today and there is still time to change course. Let's deal with the immediate banking problems by getting rid of mark-to-market accounting and creating a bad bank or whatever, but let's use our trillion dollar opportunity to make real changes that will provide a stronger economy for generations to come. Spending in the same old way as we have tried so many times in the past is a recipe for higher unemployment in future years, not lower.  Full Text....
Brian Wesbury is chief economist for First Trust Portfolios, L.P.

Stimulus Plan - Si!

Shovel Ready Projects?  
Shovel Ready Illegal Immigrants....
Stimulus Bill financed transfer payments to Mexico....

Will Senate Today Go Through With Plan to Give Stimulus Jobs to Illegal Aliens?  Glen Beck comments:

How many Americans have to lose their jobs before they are given priority over illegal aliens and the outlaw companies that hire them?
The government says employers slashed payrolls by 598,000 in January, the most since the end of 1974, catapulting the unemployment rate to 7.6 percent.
The Labor Department's report is grim proof the nation's job climate is deteriorating at an alarming clip with no end in sight. Job losses were far worse than the 525,000 economists expected. So was the rise in the unemployment rate, now at the highest since September 1992.
-- Associated Press, 6FEB09
America's newspapers, for the most part, continue to do the work of the U.S. Chamber of Commerce in protecting the hiring of illegal aliens instead of the rising armies of unemployed Americans. USAToday ran an article primarily devoted to stating the Chamber of Commerce's distorted criticisms of the E-Verify program.
It carried the typical lie that E-Verify threatens to mis-identify legal residents as illegal aliens and erroneously ordering them fired.
As noted previously, NumbersUSA has issued the challenge to find even ONE case of such a thing happening after milions upon millions of transactions over the last 12 years.  To date, not one has been produced.  E-Verify is one of the most accurate programs ever run by the government.  (Click here to read a NumbersUSA factsheet on E-Verify.)
One of our staff phoned a pro-illegal-alien Senator this week to note the recent Heritage Foundation study that predicted the Stimulus Bill as written in the Senate would give about 300,000 new construction jobs to illegal aliens. The Senate staffer replied that, oh, no, that was not possible because it is illegal to hire illegal foreign workers.
Oh, my,  I need a lot of those uproarously laughing smiley faces on this line!
Well, yes, it has been illegal to hire illegal aliens since 1986 when an amnesty brought our illegal population close to zero.  But we now have an estimated 7.7 million illegal foreign workers in jobs. Obviously, simply saying something is illegal doesn't stop it.
Requiring every government and business to run new hires through E-Verify is absolutely necessary if Americans and authorized immigrants already here are to get the new jobs being created as rather minor relief to monthly collapse of U.S. jobs. (Click here to read a press release by Rep. Lamar Smith, urging that the stimulus protect American workers)
If the Senators decide to pass the Stimulus Bill, they have 598,000 more reasons today to include an E-Verify requirement.

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