Stimulus Didn’t Work, Says a Right-Wing Think Tank

Well, surprise, surprise. A far right think tank does a study that concludes the American Recovery and Reinvestment Act (aka the stimulus) didn’t work, and the usual suspects fall all over it as proof that Keynesian economics destroys jobs.

Here is Tyler Cowen approvingly explaining the study’s findings:

In a related paper by the same authors (read them both), here is more:

Hiring isn’t the same as net job creation. In our survey, just 42.1 percent of the workers hired at ARRA-receiving organizations after January 31, 2009, were unemployed at the time they were hired (Appendix C). More were hired directly from other organizations (47.3 percent of post-ARRA workers), while a handful came from school (6.5%) or from outside the labor force (4.1%)(Figure 2).

One major problem with ARRA was not the crowding out of financial capital but rather the crowding out of labor.  In the first paper there is also a discussion of how the stimulus job numbers were generated, how unreliable they are, and how stimulus recipients sometimes had an incentive to claim job creation where none was present.  Many of the created jobs involved hiring people back from retirement.  You can tell a story about how hiring the already employed opened up other jobs for the unemployed, but it’s just that — a story.  I don’t think it is what happened in most cases, rather firms ended up getting by with fewer workers.

Remember during the health care debate, when anti-abortion fanatics like Bart Stupak argued that you could not possibly allow low-income women to add abortion coverage to an insurance policy funded through the exchange, even if such women paid for that coverage with their own money, because money is fungible? Well guess what, clowns? Jobs are fungible, too!

Let’s ponder this. Suppose Company A creates a new job, and fills it by hiring a worker away from Company B. What do the authors suppose think happens to the job at Company B? Do they say, well, that’s it, we lost Joyce, nothing we can do about that in an economy with unemployment at only 9%.

I read the paper in the vain hope of finding the authors’ explanation of what they think happens when a new job is filled by moving a worker from another job. I did not see one. Nor did I see any attempt to demonstrate, or even suggest, that the newly-opened jobs of workers moving into stimulus-created jobs were going unfilled. They genuinely seem to assume that “job shifting” is simply the opposite of job creation.

Kevin Drum reminds our friends on the right that stimulus funding was intended, not just to create jobs but also to prevent job loss:

First of all, a lot of stimulus spending went to states, where it was explicitly used to avoid laying off workers. That doesn’t take anyone off the unemployment rolls, but it certainly keeps unemployment from getting worse.

Matthew Yglesias’s thoughts on the Mercatus study are also worth reading.

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