The Corner

‘The State of the Stimulus’

The Obama administration would like us to forget the promises it made about the U.S. employment outlook back in January when it was selling its massive $800 billion spending bill. Helped by his economic team, the president claimed that the stimulus would create around 3.5  million jobs, that the unemployement rate wouldn’t go up beyond 8.25 percent, and and that, by the end of 2010, unemployment would have dropped to 7.25 percent.

It’s obviously not happening. In this piece for The American, I show that one of many reasons is that the stimulus funds are spent randomly and aren’t targeting the states with higher uneployment. The chart below plots the number of jobs created for each 100,000 people in every state’s labor force and the corresponding unemployment rate in that state.

It suggests that if the stimulus worked, there should be a real correlation between unemployment rates in the states and the number of jobs “created or saved” with stimulus money. But there isn’t. Why?

First, the data show that much of the money has been allocated randomly among states without regard for the level of unemployment in those states.

Second, much of the money has been spent to close budget gaps in the states, which often means keeping union-protected school teachers in their jobs and paying for public-sector jobs, rather than creating jobs in the private sector.

Third, the data on Recovery.gov reveals that many private-sector jobs were created at very high cost to taxpayers.

Finally, the massive amount of over-reporting issues means that the White House’s claim of 640,329 jobs created or saved is totally inaccurate. (More examples here and here).

In other words, what it really boils down to is that government data shows that government spending can’t create jobs.

Veronique de Rugy — Veronique de Rugy is a senior research fellow at the Mercatus Center at George Mason University.

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