Stimulus Spending and Unemployment

 Warwick McKibbin’s lovely discussion of the stimulus is part of the growing recognition that what was done in the name of saving the economy from recession was, in fact, a form of madness for which we will pay long and hard. Say what you will, with the wisdom of hindsight it is hard to imagine any of the programs that were put in place at the start of 2009 getting the go ahead today.

Below is a chart by Veronique de Rugy from National Review Online which, as she says, is pretty well self explanatory. The green line is the stimulus expenditure, the yellow bars are the unemployment rate and the dotted line shows the maximum rate of unemployment that Obama said would have been reached had there been no stimulus. On this last matter but on few others, I am apt to believe the American President was right.

Not much any of us can do now other than put pressure on governments to wind the stimulus back. They have started this process everywhere but there are still a few holdouts, Australia being one. To ruin the mining industry to pretend that we are balancing the budget is pretty stupid. It just seems one bad idea leads to another.

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12 Responses to Stimulus Spending and Unemployment

  1. Butterfield, Bloomfiled & Bishop

    [Homer - Steve doesn't want you on his threads. I have moved your comment to the open thread. Sinc]

  2. This chart says it all.
    At least, for people who can interpret charts! ;-)
    a) the stimulus proponents predicted that, with a stimulus, unemployment would not rise. Their predictions were simply wrong.
    b) stimulus went up, but unemployment went up too.
    c) just eyeballing the chart, fluctuations in unemployment are clearly unrelated to the size of the stimulus.

  3. JC

    Wow, that’s a pretty damning chart and set of lines.

  4. C.L.

    Speaking of unemployment and the failure of stimulus economics (modern code for KEYNESIANISM), I posted this on the Open Thread today: former Bush staffer Kevin Hassett (see the argument, skip the ad hom) points out that Obama is now worse than Herbert Hoover.

  5. ennui

    Homer red-carded!
    Seems like Steve wants a Ken Henry style consensus.

  6. Taylor

    I suspect Martin Wolf in the FT might almost agree with Homer on this one. Not in so many words of course. Probably need a translation from the Homeric verse.

    Anyone who is opposed to stimulus spending should find their way over to the UK. No stimulus here. Don’t bother lining up a job before you come either – the labour market will be booming in a couple of weeks!

  7. Butterfield, Bloomfiled & Bishop

    [Take a hint. Sinc]

  8. Capitalist Piggy

    If the stimuli in Australia were designed to boost employment in the retail trade industry – they failed. Employment in retail, as at May 2010, is 1.2% below the level in August 2008. This compares to growth of 3% for all industries.

    Also, public sector employment has grown much faster than private sector employment.

  9. Butterfield, Bloomfiled & Bishop

    [Homer, Steve does not want you on his threads. Please aide by his wishes. Sinc]

  10. Butterfield, Bloomfiled & Bishop

    [Homer - please respect Steve's wishes on this matter. Sinc]

  11. .

    Swan admitted as much as the RSPT was to plug budget holes and pay for the increase in super.

    Stop whitewashing history.

  12. Butterfield, Bloomfiled & Bishop

    [Deleted comment. Homer is unwelcome on Steve's threads. Sinc]

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