Did the stimulus money hire the unemployed?

by Russ Roberts on September 19, 2011

in Podcast, Stimulus

This week’s EconTalk is Garett Jones talking about his recent survey work looking at who was hired by firms who received stimulus money. Was it the unemployed? The already employed? It is the beginning of an answer to some of the questions I raised in this post.

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{ 16 comments }

Invisible Backhand September 19, 2011 at 12:34 pm

Did the stimulus money hire the unemployed?

Yes, it did:

http://i.imgur.com/YVm0T.png

Economic Freedom September 19, 2011 at 3:07 pm

And where’s the pie chart showing the number of private-sector jobs that were prevented from coming into existence because wealth had been redistributed away from them into bailouts?

SweetLiberty September 19, 2011 at 3:27 pm

Yeah, tough to graph those pesky unseen numbers. While I don’t think there is a pie chart, the persistent 9+% unemployment gives a pretty good indication that there is no net benefit to bailouts.

Andrew_M_Garland September 19, 2011 at 3:52 pm

IB,
You are properly opposed to unsourced quotes. What about unsourced charts?

Invisible Backhand September 19, 2011 at 4:40 pm
GhengisKhak September 19, 2011 at 9:07 pm

“Yes, it did”

Yea, just under half of it. How convincing.

Dan J September 19, 2011 at 10:10 pm

10.1% unemployment to 9.2% unemployment for just a measly $850 billion. 1 percentage point per trillion dollars. Then slow increases of unemployment. Only $4-$5 trillion more and we might get down 5-6% unemployment. Maybe.

SweetLiberty September 19, 2011 at 1:02 pm

I don’t have any doubt that some percentage of stimulus money is put to use hiring the unemployed (though I doubt there is a way to track these numbers precisely). But that shouldn’t be the point. What is more important to me… are the jobs being created sustainable, and do these jobs add to the overall prosperity of a nation?

To point to the guy who got a stimulus-funded job is easy. He won the lottery. To determine whether or not the taxpayer funds used to employ this guy are being spent wisely is not so easy. Businesses which receive stimulus funds are playing with free money and can afford to put some of the unemployed to work. But what happens when the free money runs out? Will these people still have jobs in 3 or 6 months down the road? And will the additional products and services these stimulus dollars helped create go towards creating real prosperity, or simply be wasted on politically favored whims that have no long term prospects in the real world (i.e., Solyndra)? In other words, if these stimulus dollars are being spent wisely, why wouldn’t banks or venture capitalists willingly invest in these opportunities based on their merits without the need for government funds? Stimulus dollars can only go to the most risky, least profitable business ventures because the sound investments are already attracting private funds which are low risk, high profit enterprises.

Government can always throw money around and create jobs for the unemployed. But the likelihood is that the vast majority of these jobs will be temporary and wasteful, digging the economic hole even deeper for the future.

Martin Brock September 19, 2011 at 1:44 pm

In ’09, business was so slow that I wondered if my job was next. I develop IT targeting the power distribution business, and my business was the target of a lot of stimulus spending, so I concluded that customers had slowed spending in anticipation of grant announcements. In ’10, business picked up so much that lots of folks were leaving the company for greener pastures. This year, things seem to be getting back to normal, but I never felt very stimulated, and I still don’t.

Greg Ransom September 19, 2011 at 2:07 pm

Hayek _DID_ argue that the “knowledge” wasn’t there … i.e. Garett states the matter correctly.

According to Hayek, what individuals have is embedded understandings and rival judgments of local conditions and the significance of relative prices for their own plans.

These embedded understandings include unique individual entrepreneurial perceptions and unique individual “on-the-spot” skills in judging what the alternative are and which alternatives might work best, alternatives of all kinds, including what tools to use, what to repair, who to hire, how to put to work at what job.

Hayek is _ATTACKING_ the “given knowledge” or “knowledge”=data or “knowledge”=Bytes view — most of what allows people to negotiate the word does not come in the form of public, individual units of “knowledge” which can be passed from one individual to another like a hat in a box.

Hayek, in fact, explains why this is a FALSE view, a false view inspired by mathematical and logical constructs where the “given data” is literally “given” as a stipulation by ONE MIND, i.e. the modeler .. or the professor reading a construction written on paper.

Sometimes people invoke Polanyi, Kuhn, Wittgenstein, Burke, Popper, Ryle, Edelman, Peters, and others to make versions of this point.

Josh September 19, 2011 at 4:33 pm

Wow Russ great podcast as usual, you really may end up converting me to the “dark side” yet. (My family are all very principled Democrats lol)

GhengisKhak September 19, 2011 at 9:10 pm

Serious question — what the heck is a principled Democrat? (the same could be asked about Republicans of course). I guess I’m just curious how you would describe the principle, from someone on the inside.

Dan J September 19, 2011 at 10:11 pm

Principled hate of the businessman.

Craig September 19, 2011 at 7:53 pm

I’m opposed to government “stimulus”, but even if an already-employed person got one of those jobs, presumably, someone else would be hired to replace *him*. At some point in the chain, someone without a job would get one somewhere.

This is not a convincing argument against government economic stimulus programs. Let’s move on and find a better one! There’s a veritable plethora to choose from.

T. Friedman September 19, 2011 at 11:20 pm

In a word, no.

Invisible Backhand September 20, 2011 at 10:57 am

The real T. Friedman would get that from an untraceable cab driver in Delhi that just happens to think exactly the quote he needs for whatever book he’s working on.

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