Demonomics: Money For Nothing and the Pixiedust is Free

The Obama administration isn’t the first to call on the black arts to bend the unyielding laws of the dismal science. Reagan’s policies were called voodoo economics by Bush the elder. Voodoo, however, worked a lot better than the conjuring tricks the Democrats are dazzling us with now.

a lot cuter than a gorilla

It’s magic! First Jay Carney, and now, Labor secretary Hilda Solis, another wise Latina, assure us that unemployment benefits create employment, and they aren’t talking about jobs for the government folks who administer the program. No, jobs for people like you and me.

One dollar in food stamps equal $1.79 in new money!

Nancy Pelosi agrees with them and posits a 179% ROE for food stamps, just a little under the two-for-one bang Ms  Solis sees in unemployment benefits

According to Jay the the Republicans have nothing more than gorilla  dust, so we should stick with the Democrats’  pixie dust.

Here’s how it works: You have a dollar in your left pocket. Take it out, put it in your right pocket. You now have TWO dollars

Repeat

No dollar in the left pocket? Borrow one from China.

This is of course, in the view of many, a gross oversimplification. There is the “multiplier effect,” which, while reading up on it will lead you to pages of arcane formulas composed of weird symbols, Greek letters and very few actual numbers, can be fairly simply stated as “spending begets more spending,” so that if all goes well, economic activity will increase, and output grow, if somebody will just throw some cash into the game.

And common sense will show that there is some truth to this.   Way back in eighth grade, one of my teachers gave the class an example of a new car purchased for a thousand dollars, and showed how it would generated thousands more in economic activity, what with repairs, maintenance and resales.

This is why I spent only one quarter as an econ major.( Interestingly, the paper in which this graph apppearsquestions the mathematical basis of Keynesian theory)

These were transactions in the private sector, but the the multiplier effect is bedrock to Keynesianism, wherein the first dollar is borrowed by government. Here as far as the general public and the academic/media /government complex are concerned, the science has long been settled.

Until it stopped working, if it ever had: an examination of stimulus programs will show many instances when economic activity had been picking up before the stimulus, No, I don’t have citations, but I can remember the 40-60 billion dollar stimulus packages of the 80s and 90s that lumbered through Congress, and then spread goodies around various constituencies long after recessions had ended.

You don’t need to be an econometrician, or economic historian, but merely to have had  decent high school U.S. history course to know that Keyensian stimulus did nothing to end the Great Depression. Believers argue, just as socialists do, that there wasn’t enough of it, and point to the Second World War as the ultimate stimulus, This has long been debated, and probably always will be. One could ask if being the only country with massive and completely untouched industry and agricuture base might have had something to do with the post war resurgence,

But let’s return to simpler, less academic concepts. If you rob Peter to pay Paul, you still have one rich guy and one poor guy, and if the government is holding the gun some comes off the top,

But hey, what do I know? Ms Solis holds degrees from Cal Poly and USC, and Mr Carney went to Yale( after Lawrenceville, I have to add: preppies always at least look like they have money, so they must know something.) Ms Pelosi went to to a catholic college, but better than an an ivy credential,she has decades of legislative experience and she is also really rich, and has been getting richer.

So why not give it a try? Let’s give a whole lot more people food stamps and unemployment benefits, thereby creating heaps of jobs which the unemployed can then take. How many more people? I dunno, just keep going. If we run out of working people to put on unemployment and food stamps, we can move to the next step, the thermonuclear option:  Give everyone a government job.

No wonder the First Lady advised people to go into government(Source)

And at living wages, of course.


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2 thoughts on “Demonomics: Money For Nothing and the Pixiedust is Free

  1. This rant doesn’t make sense, but hey, what DO you know? I think if you waded into the dismal swamp you’d find a preponderance of economists saying that stimulating the lower third of the population brings far more benefit, e.g., these people must spend rather than save when they get some extra income. And the multiplier effect is real (that one Econ course must have taught you something!)
    And you might have added a “fair and balanced” look at the Bush tax cuts which went predominantly to the top 15% income. They da people that create jobs was the mantra. Then please explain why there was a net decrease in job creation after the tax cuts!!!!!!! (look it up).
    But “fair and balanced” you not….

    • The rant doesn’t make sense if you read it selectively. As I said, I learned about the multiplier effect in eight grade. What I question is the efficacy of government providing the stimulus.

      I do know you can’t spend money you don’t have indefinitely. Europe sees to realize this; the U.S.has cravenly kicked the can down the road, and don’t believe for a minute that automatic sequesters will ever happen.

      So, a preponderance of experts are always correct?

      The bush tax cuts: ah yes the knee jerk response; anyone criticizing the president must be a Bush supporter. I asked myself what this has to do with my rant, but it occurs to me that a tax cut is in fact a stimulus, so you ay be adding proof for my argument, I will check it out.

      What do I know? Look around you: what do the President and congress know?

      Government stimulus may “work” at times: take for example the housing bubble. Yes, of course I know it wasn’t a fiscal stimulus, but it got things humming…until the crash. There is enough blame to go around there, starting with the Clinton administration, and both parties share the guilt.

      Oh, but the Fed set the rates, so it wasn’t government right? Uhuh.

      The housing bust is worse than that of the Depression(look it up) and thus beyond our experience, beyond any standard policy, and is not going to be fixed anytime soon.

      I’m not so sure lower income people automatically spend. Certainly, the Obama bucks( that 400 $ that I don’t get for some reason) are being used to pay down debt, and I would bet the same was true of the bush bucks earlier. I did get that one: does that make me a Bush lover?)

      As for the Recovery act, you might check out recovery.gov

      As of 30 September, it reports 400,024 jobs created( as reported by recipients) I had work this out on paper, but with a total cost of 731.9B, I make this as 1,812,908 per job. Whether that includes government jobs, and jobs for people running this site( they have an iphone app! Cool), and how many are permanent jobs I have yet to check out.

      Yes there is the multiplier effect, but the multiplication here seems to be largely occurring in the public debt.

      Somehow, I don’t think this was Keynes had in mind. Surely it would have been more effective to simple send everyone a fat check.

      Anecdotal evidence doesn’t prove much, but I will recount how, on a recent drive from Phoenix to Fort Wayne, I saw recoveryact stuff everywhere: new historical markers, refurbished visitor centers, far off the highway, accessible on beautifully upgraded roads, where I was the only visitor in days, if the guest books were accurate. Tiny Texas and Oklahoma towns with brand new state of the art 8-way stoplights at all three, sometimes two, and even just one of their intersections The big stuff was highway work, on state highways as well as the Interstate. Politicians of all stripes just love road work; always have, always will.

      The way we throw money around scatter shot is insane in my view. Frankly, command and control socialism would make more sense, not that I advocate it.

      Another 400 billion is not going to make a difference. In any case, although the
      President said we must pass this bill, he seems to have moved on, and I suspect the whole thing was to give him a talking point in the election. He is misguided, but not stupid: he too, knows it won’t work.

      The problem is structural, and generational.

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