Stimulus Economics

Last time you went shopping, how many jobs did you create? You have no way of knowing how your dollar turned up, or with whom, or what they did with it. But as Obama’s stimulus jobs report comes out today, Republicans are counting on widespread ignorance about basic economics to dominate the discussion. Of course, the media is channeling the ignorance. Here’s CBS last night:

My favorite inanity: a driving school in Georgia bought trucks. The “jobs created” were listed as students, which means there weren’t any “real” jobs created. This is only correct if you discount the facts that trucks don’t spring into existence on their own, but have to be manufactured and sold to driving schools.

The whole point of stimulus is to create economic activity. Economic activity creates jobs. That, too, is basic economics.

But wait! The Republicans cry. We’re already in the hole! Why spend on stimulus? I could go into great detail about how “deficit” is a scary word for something people don’t understand, but it happens that Bruce Bartlett at Capital Gains and Games has demolished this canard:

According to the Congressional Budget Office’s January 2009 estimate for fiscal year 2009, outlays were projected to be $3,543 billion and revenues were projected to be $2,357 billion, leaving a deficit of $1,186 billion. Keep in mind that these estimates were made before Obama took office, based on existing law and policy, and did not take into account any actions that Obama might implement.

Therefore, unless one thinks that McCain would have somehow or other raised taxes and cut spending (with a Democratic Congress), rather than enacting a stimulus of his own, then a deficit of $1.2 trillion was baked in the cake the day Obama took office. Any suggestion that McCain would have brought in a lower deficit is simply fanciful.

Now let’s fast forward to the end of fiscal year 2009, which ended on September 30. According to CBO, it ended with spending at $3,515 billion and revenues of $2,106 billion for a deficit of $1,409 billion.

To recap, the deficit came in $223 billion higher than projected, but spending was $28 billion and revenues were $251 billion less than expected. Thus we can conclude that more than 100 percent of the increase in the deficit since January is accounted for by lower revenues. Not one penny is due to higher spending.

But it doesn’t work! Republicans cry. Except that it does. The largest stimulus program in world history was America’s “war effort” against fascism. When World War II ended, America’s chief economic challenge was a devastated global economy; the Marshall Plan was the second-biggest stimulus program in history, and worked just fine. Given that GDP grew 3.5 percent last quarter, it’s clearly working now.

In fact, CBS spent another segment straining to discount the effect of stimulus on the economy. Methinks they do protest too much:

Of course, there are caveats. For instance, stimulus in good economic times has less effect, and even in bad economic times government spending makes up a small portion of GDP. Nevertheless, stimulus has a place in recession economics because it can make things less awful and spur investment spending; that reality is lost on the Village. The GOP has nothing left except Teh Stupid™, and Teh Librul Media™ media is playing parrot.