Quick analysis on the stimulus

on Tuesday, 01 January 2013. Posted in Blog

 The US and Canadian government have recently passed stimulus packages. When looking at it from the taxpayer position. Some basic economic questions have not been answered: 

According to President Obama, his $800-billion stimulus plan will create four million jobs. If I’ calculated this right and got all the zeros accounted for, that’s $200,000 per job. 

 

 My fundamental question if we do not spend any stimulus what is the job baseline? How are we going to measure the success of the money spent? Second, who chooses the baseline? The baseline is a forecast and therefore intrinsically iffy. But if you know you’re going to be judged by the baseline then it should be public information and available to all taxpayers. 

The way success should really be measured, of course, is against a counterfactual baseline. Figure out where employment would go over the next couple of years without the stimulus package and then watch to see whether real-world employment is four million better over the next couple of years.  I am not an expert (economist) in the field, but I think creating long term jobs is more difficult than simply throwing money to the problem. 

I argue that deficit spending has no effect on employment since what is gained in the public sector is lost in private. I also believe jobs gained now will be lost later, when taxes are raised to pay interest on our gigantic new government debt.  The bigger issue we are facing is the fear mongering on a daily basis and the effect on psyche. 

Our previous government did three things to skyrocket the debt from $5.7 trillion to $10 trillion 

1 Lowered taxes on the super rich (Around 3 trillion)

2 Invaded Iraq instead of winning in Afghan-Pakistan (another $900 Billion)

3 Deregulated Wall Street speculators, Bailout is now over 1 trillion 

Being a proud father of 2 kids, the next generation will most likely not experience the same quality lifestyle or services that we have enjoyed.

 

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