On the stimulus’s first anniversary, keep in mind one number: 9 million.
That is the Obama jobs gap — the difference between the 3+ million net jobs President Obama said would be created (not just saved) and the nearly 6 million additional net jobs that have since been lost.
By the president’s own logic, the stimulus failed. So Obama has shifted his argument. Sure, the economy lost jobs, he now says, but without the stimulus it would have lost nearly 2 million more jobs.
This “it would have been worse” theory is completely unprovable. No one knows how the economy would have performed without the stimulus.
Furthermore, it’s faith-based economics. The White House’s new estimates of “saving” nearly 2 million jobs are not based on observations of the economy’s recent performance. Rather, they are based on the Obama administration’s unshakable belief that deficit spending must create jobs and growth. Specifically, the White House’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?
The idea that government spending creates jobs makes sense only if you never ask where the government got the money. It didn’t fall from the sky. The only way Congress can inject spending into the economy is by first taxing or borrowing it out of the economy. No new demand is created; it’s a zero-sum transfer of existing demand.
The White House says the $300 billion spent from the stimulus thus far has financed as many as 2 million jobs. Maybe. However, the private sector now has $300 billion less to spend, which, by the same logic, means it must lose the same number of jobs, leaving a net employment impact of zero. But the White House’s single-entry bookkeeping simply ignores that side of the equation.
Even Washington’s transferring money from savers to spenders doesn’t create demand, since the financial system already converts one person’s savings into another person’s spending (as I detail here). A family might normally put its $10,000 savings in a CD at the local bank. The bank would then lend that $10,000 to the local hardware store, which would then recycle that spending around the town, supporting local jobs. Now suppose that the family instead buys a $10,000 government bond that funds the stimulus bill. Washington spends that $10,000 in a different town, supporting jobs there instead. The stimulus has not created new jobs. It has merely moved them to a new town.
Yet the White House continues to wave the magic wand of “stimulus.” All evidence that it failed be damned.
2/19 UPDATE: There was an error in the original jobs gap numbers, that is now corrected.