Sunday, June 06, 2010

How's That Stimulus Coming?

About as I predicted.

Stimulus aside, we're not seeing increase in jobs
The economy will kick into gear again when the private sector begins adding jobs. Investors were spooked Friday because it isn't doing that yet. Of the 413,000 jobs added in May, just 41,000 of them were in the private sector, barely a fifth of what economists expected, and many of those jobs were temporary ones. Speaking of which, virtually all the public-sector job increases were the result of temporary workers hired by the U.S. Census Bureau...

...The Keynesians who advocate for bigger stimulus spending to avoid a double-dip recession are beginning to bump up against the limits of their argument that deficit spending can lead the economy back to a growth cycle. The stimulus spending has to show some private-sector results. We can't keep pointing to the census workers, teachers and other public-sector jobs that have been "kept" thanks to stimulus money.

This really isn't rocket science or brain surgery. The "stimulus" bill was, as I repeatedly said, mostly aimed at shoring up government and union (and public-sector union) jobs, NOT at "stimulating" the private economy that actually generates the wealth that pays for all that government. While private-sector employment crumbled, government employment barely budged at state and local levels, and actually grew at the federal level.

Shoring up government at the expense of the private sector is not stimulus. It's an attempt to permanently expand government. And it won't boost the economy. Quite the opposite. It suppresses growth, as we're seeing. When we do begin to see positive recovery in the private sector, it won't be because of government "stimulus," but in spite of it.


Hackman said...

Welcome back. Good article. What's your view on illegal alien's?

mw said...

While I wholeheartedly agree about the post, I am not actually back. In fact, I'm cooling my heels at O'Hare waiting for my flight as I write this comment.

To be clear, this excellent bit was penned by Tully, not mw. I do intend to pick up the pace and actually post something again Real Soon Now.

Completely agree. I think the only claim that can be made about Porkulus is a counterfactual claim that it prevented greater unemployment int the public sector. This has the effect of further distorting the effect of the recession, with the pain falling disporportionately on the private sector, and sheilding the public sector. With public sector employees now averaging higher income tha the private sector, one wonders how much longer middle class working stiffs will put up with this disparity.

Tully said...

Exactly, mw. The "ratchet effect" in action. When private employment does pick up again government hiring will increase even faster, due to the incrementally larger infrastructure. The system is geared to expand, regardless, if we don't spike it.

All of which begs the question, of course, of why government shouldn't shrink in a down economy, as it certainly has no problems growing in an up economy....

Sooner or later, you run out of other people's money. Looking more like sooner nowadays. A year ago the odds of a double-dip recession were samll, but the ineptitude and inexorable statist growth of the current admin has boosted the odds enormously.

Art Laffer is looking only slightly hyperbolic these days.

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