29 Oct 2009

A Little Stimulus Arithmetic

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As is my wont, I was listening to Rush Limbaugh today as I ate my Arby’s sandwich. (I always get the Market Fresh ones; my body is a temple.) He was complaining about some news story in which the Obama administration’s claimed 30,000 jobs “created or saved” by some stimulus spending turned out to be inflated by at least 5,000. (I think the GAO did an audit of the claim, but I could be mistaken.)

So then Rush starts wondering aloud how many jobs he could have created with a trillion dollars. (His answer was two: He’d pay himself all but $100,000, and then hire an assistant.)

This got me thinking: How many people are unemployed right now? The BLS says 15.1 million. I know that’s a bogus figure, but I’m just making a point here. (In any event the number would have been lower back in January when they were debating the stimulus.)

If the government had taken the $787 billion “stimulus” package and just written checks to all 15.1 million of the officially unemployed, that works out to $52,000 per person. So the government could have literally provided every single one of them a nicely paying job for a full year. The official unemployment rate right now would be 0%, instead of 9.8%.

I’m actually not criticizing the government right here. Instead, my target is Paul Krugman. How in the heck can he have such a messed up system, where he thinks $787 billion is woefully inadequate to restore full employment? I’m not relying on any multipliers in the above–I just showed you could overnight restore full employment by spending $787 billion.

Am I missing something here? I know, I know, in the world of the Keynesian model and Okun’s Law, blah blah blah. Part of my point is that that analysis can’t possibly be right. Why would it take a lot more money to “restore full employment” than it would take to restore full employment?

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