Did you sing “Happy Birthday”?
The nation just “celebrated” the fifth anniversary of the signing of the so-called American Recovery and Reinvestment Act, more commonly referred to as the “stimulus.”
This experiment in Keynesian economics was controversial when it was enacted and it’s still controversial today.
The Obama administration tells us that the law has been a big success, but I have a far more dour assessment of the spending binge. Here’s some of what I wrote about the topic for The Federalist.
The White House wants us to think the legislation was a success, publishing a report that claims the stimulus “saved or created about 6 million job-years” and “raised the level of GDP by between 2 and 3 percent from late 2009 through mid-2011.”
Sounds impressive, right? Unfortunately, those numbers for jobs and growth are based on blackboard models that automatically assume rosy outcomes. Here’s how I explain it in the article:
[H]ow, pray tell, did the White House know what jobs and growth would have been in a hypothetical world with no stimulus? The simple answer is that they pulled numbers out of thin air based on economic models using Keynesian theory. … Keynesian economics is the perpetual motion machine of the left. They build models that assume government spending is good for the economy and they assume that there are zero costs when the government takes money from the private sector. That type of model then automatically generates predictions that bigger government will “stimulate’ growth and create jobs. The Keynesians are so confident in their approach that they’ll sometimes even admit that they don’t look at real world numbers. And that’s what the White House did in its estimate. The jobs number (or, to be more technical, the job-years number) is built into the model. It’s not a count of actual jobs.