Feb 18 2010

Government Stimulus A Big Lie

Updates At End

The government cannot generate economic stimulus. Being a leech that lives off the general economy it is always a drag on the economy, not a force to create rapid growth (technology investment creates long term growth potential). Sometimes a needed one to ensure things do not run out of control or people are enslaved by the greed of others. But it is a drag on the economy, taking money from everyone who works to fund its missions – and its mistakes.

When the economy dips or stumbles the proven method used by George W Bush, Ronald Reagan and John F Kennedy was to lower taxes and reduce government spending to give some air to the economy so it can pick back up. This proven approach is evil incarnate to the liberal mind – one wrapped in fairy tales of left wing superiority. It is false to say nothing else could have been done. All the money wasted in the stimulus bill would have had an impact if taxes and spending were cut.

It is only the extremely naive and gullible who think the leech of government can stimulate the economy and create jobs. This week a very naive, young President came out to tout his liberal stimulus bill, to put lipstick on his bloated and lethargic pig. It truly was one of the dumbest political moves I have ever seen.

We all know the ‘stimulus’ bill failed to stimulate anything. That is because the 80% spent to date has all gone to cover state deficits, unemployment, food stamps and medicare. No one should buy the myth bloated state governments had no room to cut bureaucratic waste, salaries and services before the teachers, fire/rescue and police.

To date very, very little has been spent on job producing make-work projects. That is because even the builders of our vast and bloated bureaucracy (i.e., Congress) have never understood how slow and ponderous this federal leech has become. The fact is it takes years to move money from a congressional budget line to an actual spending project which is creating jobs. That is why this liberal mirage was doomed to fail before the ink dried on the bill – the jobs were not going to show up within a year.

We have the government generated data here to prove it. First, here is a reminder of the unemployment picture since January 2008, with a highlight of when the stimulus bill was passed. It illustrates the unaltered trajectory of the U3 (general unemployment) and U6 (all unemployed, underemployed, etc) – click to enlarge.

As anyone can see the trajectory of unemployment did not divert at all. It kept rising and apparently slowed naturally. The liberal lie that unemployment would not surpass 8% was meant to sell the package, since anyone with even modest math skills would know 8% was going to be broken in February or March based on the trajectory of the previous months. That was a lie, the stimulus bill was a lie.

The real damage to the job market can be seen in another federal statistic, and that is the number of poor souls clinging to the Emergency Unemployment Compensation (EUC) life line. These are people who have been out of work so long they have used up all the normal unemployment and extended unemployment benefits and are trying to stay alive on EUC. Unlike the slowly stabilizing curve of U3 and U6, EUC is skyrocketing to never before seen heights.

This is the true measure of lost jobs. Jobs lost so long that the EUC rolls have been expanding by 796,000 in January, 776,000 in December and 604,000 in November. If the stimulus bill was actually creating jobs this would not be the case, people would not be running out of unemployment assistance.

Right now the EUC rolls are a staggering 5,797,875 – which is nearly 3 times the number of people on the EUC rolls when the vaunted stimulus lie was passed a year ago.

As I said, these are all government numbers. And the most damning numbers come from the organizations that were directed to create all those jobs in all those make-work programs. Of what was the original $787 billion (now well over $800 billion due to the higher unemployment than ‘expected’), $300 billion was targeted to make-work programs. I have been monitoring 6 government organizations which represent 1/3rd of the make-work money. And here is what the stimulus bill has achieved in terms of spending on jobs one year after it was rushed through Congress:

The far left column is what each organization was authorized in the bill. Interestingly, the government stopped advertising this number on its website after a few months when it became apparent that the progress would look horrible if the value budgeted stayed up for comparison. You can find these numbers on the very early weekly report spreadsheets.

The next column (center-left) captures how much of the total has been applied to legal programs or projects. The government has to go through a lot of hoops to approve the spending program/project before they can even begin to spend. The next column (center-right) shows how much of the total budget has been actually spent. This usually kicks in once the contracts are let and the work really starts up (some planning, mostly doing). This is the job creating spending – and it is truly pathetic to date. The last column (far-right) is the money left unspent.

Since these budgets range from half a billion to 50 billion dollars the chart is not easy to read. So I have a second chart which shows the last three columns as a percentage of the organizations’ total budget. Here we can see the general progress in terms of percent complete:

So, we have percent of the total budget committed to programs/projects in the left column, percent of total budget spent creating jobs in the middle, and percent of the total budget stuck in the bowels of the federal bureaucracy in the far left column.

As we can see the spending to date on jobs has been meager.  On average only 11.6% of the total budgeted a year ago has been spent ‘creating or saving‘ ‘shovel ready‘ jobs. 88.4% of the $105 billion allocated to these organizations has done nothing! In other words $93 billion failed to make it out of the bowels of the bureaucracy to address unemployment. Is it any wonder the EUC rolls are climbing when all the stimulus money for jobs is stuck in DC?

Which makes you wonder, out of that $1.4 trillion dollars of debt racked up last year where did this money get spent if it was not spent creating or saving jobs?

All the hoopla about the stimulus bill working is nonsense for the easily duped. The government’s own data shows that the stimulus bill did not change the trajectory of unemployment one bit. This is supported by the government’s data showing skyrocketing rolls on the EUC and the fact 88+% of the job creating money is still left unspent – one year later.

This is not an anniversary to celebrate, but a memorial for time wasted and lives financially destroyed by liberal ignorance.

Update: And of course today’s weekly unemployment report showed ‘unexpected’ declines.

Update: A clear example of the bloated bureaucracy in action.

Update: As further proof the liberal stimulus bill based on government spending failed is the fact the Democrats are scampering around trying to pass a new one. If the old one had worked we wouldn’t need a new ‘jobs’ bill.

28 responses so far

28 Responses to “Government Stimulus A Big Lie”

  1. crosspatch says:

    Won’t happen. Unless government does something stupid like confiscating all our 401k and IRAs. But even then it won’t be so much a “civil war” as it will be hauling Congress out and hanging them from the street lamps.

  2. WWS says:

    I agree with you, Crosspatch, and what I expect to happen is a great deal of economic unrest combined with a massive turnover of the Congress this fall. The hard part is that the economic unrest is going to continue and maybe even get worse AFTER the new more conservative Congress takes office – and that’s when the response will really get critical. Will they be clueless and try to go on playing for votes and trying to do business as usual? If so, we are sunk. But if they have the nerve to try something like Paul Ryan’s plan, then just maybe we could find our way out of this. And it doesn’t have to be Ryan’s plan specifically, although that’s the best I’ve seen so far. But to get us out of this mess it has *got* to be something that is at least as innovative and as radical in it’s approach as that plan is. Nothing less is going to suffice.

    Now into the fantasy “what if” land of things that I want to say from the start are things that I do NOT believe will happen, but are just “what if” games….. What if, as you say, the Feds try to do something like confiscate 401K’s or worse, suspend parts of the Constitution? As soon as that happens, secession is back on the table, and with the backing of a widespread populist movement, there probably would be nothing to stop it. Would today’s army actually make war on US citizens? Of course they wouldn’t, even if ordered to.

    An order like that would probably turn into a golden opportunity for the Joint Chiefs to depose whoever gave it and institute a provisional military govm’t in it’s place, which might even work if it was willing to cede all local control to the states. There would be no need to invade 50 states when almost all of the problems could be fixed with a military takeover of one city. (D.C.) That’s the obvious conclusion that any trained military strategist would have to come to – economy of force.

    Like I said, those are just my “what if”games.

  3. crosspatch says:

    Well, absent a President, the National Guard would revert to control of the state Governors. Only the President can order the nationalization of the Guard and a military government would not have the authority. Then there is the problem of the Vice President, the Speaker of the House, Secretary of State, etc. to worry about.

    I have a hard time getting my head around exactly how the Joint Chiefs would actually get control of things. It would take what amounts to a mutiny of each of the services against their service Secretary and the Secretary of Defense. It would require each service Chief of Staff to grant “Commander In Chief” status to the Chairman. The State Governors are not likely to buy it and the National Guard will be under control of the Governors.

    The state legislatures would then convene, select delegates, and form a new interim Congress until elections could be held.

    One thing I would suggest we do is to restore at least a portion of the check the States had on the Federal Government. I would revert part of the change of the 17th amendment to make ONE Senator elected by the people and ONE Senator elected by the state legislatures.

  4. WWS says:

    Good thoughts; since we’re playing with thinking the unthinkable, some things could potentially happen much more easily than we would think from the perspective of normal times.

    “It would take what amounts to a mutiny of each of the services against their service Secretary and the Secretary of Defense.”

    One machine gun burst in a crowded room would make most of those issues moot. As would any number of unfortunate accidents – remember how General Zia of Pakistan finished his term of office?

    Reform of the Senate: I think the core problem with letting the various state legislatures choose a senator is that no one really trusts their state legislatures any more than they trust the national legislature – they just don’t have as much power so they can’t cause quite as much trouble. But would you trust the California State Legislature, for example, with the job of picking a Senator?

    Remember that the reason the 17th amendment was passed was that the late 19th century was no age of political enlightenment; it was an age of widespread corruption and machine politics, and senators under that system were every bit the mindless hacks that most of them are today.

    It makes one think, to paraphrase the Bard, that the fault may lie not in our system but in Ourselves.

  5. [...] in DC with a few IQ points should know government programs never get started in under a year. Thus any economic stimulus would be delayed, and the economic pain extended – not corrected. Guess what [...]

  6. crosspatch says:

    “Remember that the reason the 17th amendment was passed was that the late 19th century was no age of political enlightenment; it was an age of widespread corruption and machine politics”

    Yes. And here is how things are different now:

    When that law was passed, America was less than 50% urban. Under the old system, the political machinery in the state capitol could control the Senators. So they decided to make it a popular vote. BUT, since then things have changed. We are now 75% urban. What that means is that the political machinery of the largest one or two metro areas of a state now control the Senate.

    Whoever controls Philadelphia and Pittsburgh, controls Pennsylvania’s Senate delegation. Whoever controls Chicago controls Illinois’ delegation. Whoever controls NYC controls New York’s delegation. Arizona is controlled by Phoenix, etc.

    What might be a better plan is one I proposed before where the legislature nominates the candidates and the people vote for one of them. This makes the Senator at least a little bit responsible to the legislature. If the Senator votes for bills that go against the interests of the state, the legislature would not re-nominate that Senator when elections come around again.

    The political corruption machines have now been able to take advantage of the current system because we now have so much population concentrated into a small area.

    Here is a recent example of a political machine stealing and buying votes. The article doesn’t anywhere mention the party involved but it is Democrats (as usual).

    That is a case where you have a local machine engaged in buying votes and poll workers ensuring the people voted according to the vote they sold. Poll workers were also engaged in outright stealing of votes by distracting voters from the machines, changing their votes, and casting the ballot for them. This is typical of what these machines do and Democrats have the “machines” in the urban areas that control the Senate. Ever heard of a Republican mobster? And in this case, a circuit court judge for three counties was involved. The corruption has spread to all three branches of government with judges taking part in the stealing and buying of votes.

    How do you “fix” that except to find some way to take the power away from the major city machines.

  7. Crosspatch,

    >Unless government does something stupid like confiscating all
    >our 401k and IRAs.

    There were Obama Administration trial ballons about that this past week

    Why do you assume that most of the state governors won’t be Democrats and support thier leftie President with “their” National Guards?

    Consider for a moment that there were more Republican votes in California than Texas in 2008.

  8. [...] The stimulus bill was another liberal fantasy that failed to produce results as predicted by anyone living in the real world. Government is too bloated and lethargic to ’stimulate’ anything, proven by the fact over 85% of the “shovel ready jobs” money is still stuck in the bowels of the federal bureaucracy. [...]