Last year, White House economists claimed that the $862 billion stimulus would create 3.3 million jobs. Since then, the nation has lost more than 3 million jobs.
That’s a 6.3 million jobs gap. By the White House’s own standards, the stimulus failed.
So President Obama has shifted his argument. Sure, the economy lost jobs, he concedes — but without the stimulus, it would’ve lost nearly 2 million more jobs.
This is nothing but faith-based economics. The White House estimate of “saving” nearly 2 million jobs is based not on observations of the economy’s recent performance — but merely on the administration’s unshakable belief that deficit spending must create jobs and growth.
Specifically, the White House staff’s “proof” that the stimulus created jobs is an economic model that they programmed to assume that stimulus spending automatically creates jobs. How’s that for circular logic?
In other words, even if we’d lost 20 million jobs, their models would basically crank out the conclusion that we’d have lost 22 million without the stimulus.
Worse, the central tenet of this “faith” is false: The premise that stimulus spending must create jobs just isn’t true.
The stimulus theory is that government spending injects new dollars into the economy, thereby raising demand and spurring economic growth. That makes some sense — if you don’t ask where the government got the money.
Congress doesn’t have a vault of cash waiting to be distributed. Every dollar it “injects” into the economy must first be taxed or borrowed out of the economy. No new income, and therefore no new demand, is created: It’s merely redistributed from one group of people to another.
Removing water from one end of a swimming pool and pouring it in the other won’t raise the overall water level, no matter how large the bucket. It’s the same with redistributing dollars from one part of the economy to another.