Thursday, October 22, 2009

Obama Economic Policy: Stimulating Unemployment











In The American Veronique de Rugy, a senior research fellow at the Mercatus Center, reports that the Obama promise "Give us money, and we’ll give you jobs" when he asked Congress for a $789 billion stimulus bill back in January, 2009 is a promise he is not delivering to the American people. The cash, the administration said, would create millions of jobs over the next two years. Based in part on this argument, President Obama got his money. So what happened since then? Using data from the President’s website Recovery.gov and data from the Bureau of Labor Statistics, this chart shows the monthly increase in the unemployment rate in tandem with the administration’s stimulus spending.

As illustrated in the chart since April 2009, the administration spent roughly $90 billion, or 18 percent of the total stimulus spending, on top of $62 billion in tax relief. During that time, the unemployment rate grew from 8.9% to 9.8%. And according to the Bureau of Labor Statistics, job losses accelerated in September. The current unemployment rate is already far above the 8.8% the administration said the rate would top out at next year without a stimulus.

Obama's economic policies are fundamentally flawed for the long run. Keynesian economics, i.e., government deficit spending, may work in the short term, but for the long-term it causes a "crowding out" of the private sectors opportunities to grow. Under the current plan, only 25 percent of the total spending will take place in 2009.  That is too slow since by the time the economy starts recovering, most of the stimulus money will remain unspent and, by then, government spending will actually hurt the economy.

As Ms. de Rugy explains, Is President Obama that ignorant of fundamental economics 101? Or is he not very concerned about job or economic growth and his economic policies are aimed at his primary interest which is to take over the private sector through bankrupting the nation's economy to further his socialist agenda.

"Putting aside the question of whether the stimulus is too small or being spent too slowly, what too many stimulus advocates overlook is that to spend money, the government needs to either borrow, tax, or print it (or combine these). Money taxed or borrowed from the private sector is money that firms cannot spend on goods or employees. The government’s slice of the pie gets bigger by making the rest of the pie smaller. This may explain in part why the stimulus has not translated into declining unemployment".

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