Regime Uncertainty and Job Creation


Thursday September 8th, 2011   •   Posted by Stephanie Freedman at 3:50pm PDT   •  

In an article by Tad DeHaven called “The Stimulus: The Government Job Creation Myth” discusses how in 2009 the president’s economists claimed that their $862 billion “stimulus” package was the jump start the economy needed.

We were told that its passage would keep unemployment from going above 8 percent. Instead, unemployment has remained close to 10 percent ever since...The overall unemployment rate in Virginia has also increased but remains below the national average. However, counties that don’t border the D.C. spending epicenter have unemployment rates that often match or exceed the national average. Virginia has been awarded some $4.5 billion in stimulus funds, yet private sector employment remains flat.

And yet the government still claims to have pulled the U.S. from economic dispair. How did they come to this conclusion?

The first analysis used economic modeling to estimate the number of jobs created or saved. The model the CEA used assumed that government spending will have a positive multiplier effect on the economy. Voilà—the stimulus created jobs!

In the second analysis, the CEA estimated the stimulus bill’s effects by comparing real changes in gross domestic product and employment against a baseline forecast. However, even the CEA admits that this approach is subject to “considerable margins of error,” and that “the comparison will reflect not just the impact of fiscal policy, but all other unusual influences on the economy following passage of the Act.”

Translation: “We don’t know.”

This vague analysis of the process is what they hoped would be enough to have people stop asking questions. DeHaven explains what we should really be looking at:

That the stimulus did create jobs isn’t in question. The real question is whether it created any net jobs after all the negative effects of the spending and debt are taken into account. How many private-sector jobs were lost or not created in the first place because of the resources diverted to the government for its job creation?

Don’t expect the administration’s economists to attempt an answer to that question any time soon.

Here’s another question that the administration would prefer to ignore: How many jobs are being lost or not created because of increased uncertainty in the business community over future tax increases and other detrimental government policies?

He goes on to quote Senior Fellow Robert Higgs:

The economist Robert Higgs coined the phrase “regime uncertainty” to describe Franklin Roosevelt’s anti-business climate, which prolonged the Great Depression. Unfortunately, this president is repeating the same mistake.

A quote from a small business owner tells it all:

“I want to hire but I’m afraid the administration’s policies are going to force me to turn around and let them go.”

This tells me that not only is our government costing us money, it is also costing us our ability to make money as well, which is a daunting thought.

Read full article here




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