Archive for the ‘Stimulus Bill’ Category

Obama the job creator … say, what?

December 20, 2016

According to his economists, the trillion dollar stimulus program was a bust!

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Lots of MSM headlines these days about the strong economy that Obama is handing Trump … with a strong suggestion that Trump will have a hard time matching Obama’s stellar performance as a job creator.

Really?

On the plus side, the reported unemployment rate has dropped from the financial crisis highs.

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For today, we’ll push aside the facts that (a) American’s who have been economically crushed largely voted the Dems out of office; and (2) the labor force participation rate has dropped precipitously – giving the unemployment rate a faux boost.

But, let’s dig a little deeper into the numbers … using the Administration’s own analyses.

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Unemployment claims moving up … anybody notice?

March 6, 2015

A couple of weeks ago, the Administration and its friends were touting that  unemployment claims had dropped to historically low levels … proof positive that the pork-laden, 2009 Stimulus Spending Program worked … albeit 4 or 5 years after the program ended.

 

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There has been a lot less chest-pounding the past couple of weeks.  Wonder why?

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Where the stimulus money went … and why it didn’t “drop kick” the economic recovery.

February 13, 2012

Nice, balanced retrospective in the NY Post re: Team O’s stimulus and why it didn’t — in Joe Biden’s words — “drop kick” the economic recovery.

First, where did the money go?

Biggest chunk to tax cuts that were so diffused — averaging $10 per paycheck —  that they were either overlooked by folks or not enough to neutralize the impact of crushing debt loads or employment uncertainty.

Next biggest chunk to bail out states’ entitlement programs — mostly Medicaid and unemployment benefits.  Just kept things even, no economic boost.

Thirdly, to teacher retention.  Forestalled layoffs, but only temporarily since cash-strapped localities eventually had cut-back when the Fed funds stopped coming and locals couldn’t afford.

Lastly, to the so-called shovel ready infrastructure projects.  Many of those that could of mattered either weren’t really shovel ready or got caught up in government red tape — i.e. the approval & permitting process.  So, spending went to silly or half-baked initiatives — e.g. turtle crossings and bullet trains.

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In business, when you miss your plan …

November 8, 2011

… you get fired.

In government, you cite bad luck and argue that things might have been even worse.

The numbers say it all … expend $1 trillion and get:

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Source: NY Times

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The $4,000 hiring incentive is a bad idea … here’s why

September 14, 2011

A month ago, we blogged why hiring incentives are a bad idea.

Apparently  the stumblebums at the White House don’t follow the HomaFiles.

Last week, one of the globs that Obama threw against the wall was a one-time $4,000 tax credit for every person hired – provided that they’d been unemployed for at least 6 months. .

At first blush, it sounds like a good idea.

But it’s not.

First, no sensible employer is going to make incremental hires for a single year of benefits. If they do, there are equal odds that they’ll jettison the employees when the waiver expires.

More important, the program punishes “responsible” companies by rewarding hard-hearted ones.

Let me explain.

Say, company A laid off 20% of its workforce during the recession – largely due to the business slowdown, but also the result of opportunistic house-cleaning – getting rid of slackers and dolts.

Comparable company B laid off a couple employees due to the downturn, but – took its lumps – and kept most of its employees on the payroll, even though many weren’t really needed.

Along comes the hiring incentive.

Which company gets it?

Yep, company A – the company that shed employees.

What does company B get for standing by its employees.

Nothing.

Sound fair to you?

Sounds like punishing responsible behavior … again!

And, the program is likely to encourage dysfunctional behavior.

For example, now that the idea has been proposed … why in the world would any company hire employees until the legislation is either passed or killed?

My bet: there will be a marginal decrease in hiring as companies wait and see.

Further, ruthless companies may start forcing attrition among recent hires, in order to replace them with tax-incentivized folks off the unemployment rolls.

Net gain: zero.

Behavioral note:

How can they force attrition?

Easy.

Just start assigning low seniority employess undesirable work schedules, e.g. split shifts

Most often, companies won’t step-up their hiring, they’ll just bag the tax credit for folks they were going to hire any way ((think Cash for Clunkers and Home Buying Credit).

In marketing parlance, it’s called “dilution”.

Never ceases to amaze me how naïve the Administration is re: how businesses work …

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Stimulus Deux and the “liquidity trap”…

September 12, 2011

Punch line: One reason the Stimulus was, at best, marginally successful … and, why Son-of-Stimulus is unlikely to spike the economy … is what economists call the liquidity trap.

Translation: people paying off debts and saving for a rainy day … just like they’re supposed to.

Econo-journalist Robert Samuelson summarizes the situation as follows …

Since 2007, households have lost $7 trillion in wealth, mostly from lower home and stock prices.

To restore that wealth, many Americans are saving more, spending less and repaying debt.

That’s why the past year’s continuing massive stimulus (huge budget deficits, low interest rates) didn’t do more for economic growth.

The answer, I think, is psychology.

Small changes in precautionary behavior by anxious consumers and companies offset stimulus.

Suppose, for example, consumers raised their savings rate by three percentage points; that would neutralize three quarters of Obama’s program.

The surprise and brutality of the financial crisis left a powerful legacy of risk aversion.

Companies — like consumers — have become defensive. They accumulate a cash hoard against unknown threats.

Our political leaders have also compounded the caution and fear; indeed, government policies sometimes cause unwanted behavior.

The liquidity trap, among other reasons, is why O’s proposed $450 billion debt-financed slush fund is a bad idea.

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The Stimulus did stimulate … it stimulated job-switching.

September 7, 2011

Garett Jones & Daniel Rothschild — George Mason economists — surveyed employers to determine the impacts of Obama’s trillion dollar Stimulus.

Their report “Did Stimulus Dollars Hire the Unemployed?” presents several interesting conclusions.

Most noteworthy:

Just 42.1 percent of the workers hired at Stimulus-receiving organizations, were unemployed at the time they were hired.

More were hired directly from other organizations (47.3 percent)

A handful of hires came from school (6.5%) or from outside the labor force (4.1%)

Thus, there was an almost even split between “job creating” and “job switching.”

Bottom line: Hiring isn’t the same as net job creation.

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Technical note: To be fair, there are 2nd and 3rd order effectc.  That is, firms that get poached may need to hire replacement workers — who may be drawn from the unemployment roles.  So, the Stimulus may have reduced unemployment more than the survey indicates.

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New study says Obama Stimulus destroyed private sector jobs … ouch!

May 18, 2011

Two economists — Timothy Conley (Western Ontario University) and Bill Dupor (Ohio State University) – just completed a rigorous analysis of Obama’s Trillion-Dollar-Stimulus programs.

Their conclusions:

  • “We found, surprisingly, either negligible or negative effects of the Act on total employment. 
  • Specifically, we estimate the Act created/saved 450 thousand government-sector jobs and destroyed/forestalled one million private sector jobs.
  • State and local government jobs were saved because ARRA funds were largely used to offset state revenue shortfalls and Medicaid increases rather than boost private sector employment.
  • The majority of destroyed/forestalled jobs were in growth industries including health, education, professional and business services.”

Seems a bit at odds with Obama’s 3 million jobs saved or created.

Hmmm.

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Source: The American Recovery and Reinvestment Act: Public Sector Jobs Saved, Private Sector Jobs Forestalled

SF Fed says “Obama Stimulus created (or saved) 2 million jobs … but they were costly and transient.

December 6, 2010

According to wonk site e21 …

The economists at San Francisco Federal Reserve bank just completed a major study of the Obama Stimulus.

The results suggest that the program did result in 2 million jobs “created or saved” by March 2010.  That’s less than the 3.5 million that Obama-Biden promised and touted.

More alarming,  they found that by August of this year, net job creation was statistically indistinguishable from zero.

Translation: They were all temporary jobs that have gone away already.

Taken at face value, this would suggest that the stimulus program (with an overall cost of $814 billion) worked only to generate temporary jobs at a cost of over $400,000 per worker.

Further, they concluded that even if the stimulus had in fact generated this level of employment as a durable outcome, it would still have been an extremely expensive way to generate employment.

Source article:
http://www.economics21.org/blog/outcome-stimulus-and-burden-proof

SF Fed Report:
http://www.frbsf.org/publications/economics/papers/2010/wp10-17bk.pdf

Tempting the tax cheats … Stimulus bill says "come on down".

January 4, 2010

Another fine example of our government in action …

A report from the Treasury Department’s Inspector General for Tax Administration counts 56 tax provisions in the Stimulus bill with a projected cost of $325 billion. Of those 56, 20 are tax breaks for individuals and 36 are for businesses.

The problem, the Inspector General says, is the IRS can’t verify taxpayer eligibility “for the majority of Recovery Act tax benefits and credits.”

For individual taxpayers, 13 of the 20 benefits and credits can’t be verified; for businesses, it’s 26 of 36.

In other words, Treasury finds that the biggest chunk of the $325 billion in stimulus package tax breaks can’t be adequately tracked to protect against fraud.

IBD, How Corruption Stalks The Stimulus, 12/23/2009
http://www.investors.com/NewsAndAnalysis/Article.aspx?id=516173


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