- The Washington Times - Wednesday, August 25, 2010

Administration officials passed around the champagne Tuesday as the Congressional Budget Office reported that the $814 billion spent on the first stimulus bill created between 1.4 million and 3.3 million new jobs. President Obama’s policies “put the country on a path to recovery by getting Americans back to work quickly,” Vice President Joseph R. Biden Jr. crowed. “We’ve created 3 million jobs, and we’re adding jobs every month.”

As is obvious to anyone living outside the Beltway, there’s not much cause for celebration in this economy. While America’s output is on the rise, the rate of growth is weak, and many economists expect that the second-quarter GDP growth figure will be revised down to just 1 percent on an annual basis.

The job outlook is equally bleak. Each week, a half-million people sign up for unemployment. For some, it is the first time ever setting foot in a line to ask for benefits. For 1.7 million others, the wait has been so hopeless that they’ve simply given up looking for work. The Bureau of Labor Statistics household survey finds that since April, the total number of people employed has dropped by 495,000.

If that’s the case, how did CBO arrive at 3 million jobs created? By counting the number of jobs funded by the stimulus, and then adding “the number of jobs that were created or retained indirectly as a result of recipients’ increased income.” In other words, each person who received one of the coveted “shovel-ready” jobs actually creates multiple jobs as he spreads around his government cash.

There’s an obvious problem with this analysis. That money doesn’t come out of thin air. It comes directly out of the pockets of people who earned it from hard work. That’s why the jobs “created” must be balanced against the jobs that are lost. If government spending has a multiplier effect through which initial spending is respent, there is an equal multiplier that should be subtracted away as the money that Americans would have spent on their own is redirected to the government. Spending by government employees is no more valuable in creating new jobs than spending by any other workers.

Indeed, there is significant evidence that government spending during recessions (or any other period) has either no impact on total income or a detrimental impact. A 2002 International Monetary Fund report examined 27 developed countries that experienced recessions between 1971 and 1998. It found heavily indebted countries that increased government spending experienced slower growth.

Such facts are of little consequence to adherents of Keynesian economics. They take failure as an excuse to demand even more government spending. The last year that Republicans controlled both Congress and the presidency, the federal government spent $2.7 trillion and ran a $160 billion deficit. In 2010, with Democrats firmly in control of the public purse, spending soared by 30 percent to $3.5 trillion, with a $1.34 trillion deficit.

Keynesian theories are merely an excuse for Democrats to enact their long-held wish list of government spending programs. As President Obama famously told “Joe the Plumber” during the 2008 campaign, “I think when you spread the wealth around, it’s good for everybody.” Such thinking stimulates government, not the economy.