The Congressional Budget Office (CBO) in the US has now reported the following, the ARRA being the American Recovery and Reinvestment Act, better known as “the stimulus”. They are comparing how things might have been had there been no stimulus with how they actually turned out instead:
CBO estimates that ARRA’s policies had the following effects in the first quarter of calendar year 2012 compared with what would have occurred otherwise:
– They raised real (inflation-adjusted) gross domestic product (GDP) by between 0.1 percent and 1.0 percent,
– They lowered the unemployment rate by between 0.1 percentage points and 0.8 percentage points,
– They increased the number of people employed by between 0.2 million and 1.5 million,
– They increased the number of full-time-equivalent jobs by 0.3 million to 1.9 million. (Increases in FTE jobs include shifts from part-time to full-time work or overtime and are thus generally larger than increases in the number of employed workers.)
So depending on how you do the calculation, the fall in unemployment may have been as low as 0.1 percentage point and the cost per job as high as $4.1 million. If, on the other hand, you take the best outcome, the fall in unemployment was 0.8 percentage points at a cost of $540,000 per job. And if you’d like to split the difference, it’s about $2.5 million for a fall in the unemployment rate of 0.4 percentage points.
Of course, beyond that, which they do not report, the American economy has had by far the worst recovery since World War II with no genuine end in sight.
Textbook Keynesian economics is such nonsense. John Stuart Mill 160 years ago could write that the demand for commodities is not demand for labour, meaning that buying things creates no value, meaning that public spending to raise employment cannot work. Keynesian theory is the economic equivalent of applying leeches, almost a perfect description of what Keynesian economics is actually about.