My AP economics students ask me why the government has been unsuccessful in getting America back to work. I have written on the inefficiency of the Obama stimulus package here and on the efficacy of Keynesian programs (aka The New Deal) during the Great Depression here. Since government make-work programs did not cure long-term unemployment in the 1930s, and, in fact, prolonged the Great Depression, I was confidant Obama's $825 billion stimulus would not lower long-term unemployment this time either. The tax money has to come from somewhere. Peter (rich tax payers) must be robbed to pay Paul (recipients of government programs), and then Peter has less money to support our consumer-driven economy. The Wall Street Journal, in it's September 8, 2011 issue, showed how much of the $825 billion stimulus money was poorly spent and often outright wasted. The article, titled Why the Stimulus Failed, reviewed "a pair of new Mercatus Center working papers by the George Mason economists Garett Jones and Daniel Rothschild, who did field research on what they call the supply side of the stimulus." The economists found that the stimulus money was earmarked for items the recipients did not need and had little bearing on job creation. Secondly, "Jones and Rothschild estimate that merely 42.1% of the firms that received grants hired people who were unemployed. Instead, they poached workers from their competitors." No wonder unemployment remained high.
Instead of $250 billion of new spending that the Obama administration currently proposes (out of a $500 billion jobs bill), the Wall Street journal recommends "incentives for people and businesses to invest, produce and grow." The greatest incentive we can offer is letting men and women keep more of the money they earn. If we have less wasteful government programs we can enjoy the blessings and incentives of less taxation.
A good analysis.
ReplyDelete