Concluded: The Stimulus is an Epic Fail

It’s been proven time and again that FDR’s New Deal actually worsened the Great Depression. Keynesian economics just don’t work, not matter what trollish hacks like Paul Krugman preach.

Now a study from Harvard Business School shocks its very authors, who are surprised to find that increased government spending results in increased unemployment.

Recent eesearch at Harvard Business School began with the premise that as a state’s congressional delegation grew in stature and power in Washington, D.C., local businesses would benefit from the increased federal spending sure to come their way.

It turned out quite the opposite. In fact, professors Lauren Cohen, Joshua Coval, and Christopher Malloy discovered to their surprise that companies experienced lower sales and retrenched by cutting payroll, R&D, and other expenses. Indeed, in the years that followed a congressman’s ascendancy to the chairmanship of a powerful committee, the average firm in his state cut back capital expenditures by roughly 15 percent, according to their working paper, “Do Powerful Politicians Cause Corporate Downsizing?

“It was an enormous surprise, at least to us, to learn that the average firm in the chairman’s state did not benefit at all from the unanticipated increase in spending,” Coval reports.

So, you wonder why unemployment is so high and this recession has lasted twice as long as normal recessions?

Here’s why.

Did I do that?

Did I do that?

Comments

  1. Phillip says:

    Academics are always surprised when through meticulous research they learn what is obvious to everybody else.

  2. keith johnson says:

    FDR, like Obama, surrounded himself with communists. The difference is, FDR himself may not have been a commie.

  3. Anonymous says:

    I wonder what shape the economy would be in now if Obama had just let it crater.

  4. Anonymous says:

    The Austrian School == economic S&M

  5. CJ says:

    @Anonymous – The economy would have cratered, adjustments would have been made, it would have righted itself, and we’d be pretty close to fine today. That’s how economies naturally work – without government interference, anyway.

  6. Anonymous says:

    “…pretty close to fine today.” Hysterical. Regardless of what Obama did or will do, we still would have been at least 12+ trillion in debt, and incurring more at 1 trillion+ per year for the foreseeable future, 10% unemployment and Europe still would have been largely a basket case, that’s best case. What baffles me about this let-it-bleed attitude is that you “libertarians” don’t bother to think about what would have happened in Sept 2008 – pre-Obama – if the Bush administration had taken your advice, stood back and let it crash then.

  7. Anonymous says:

    Uhhhh…. the same thing I mentioned above – only a couple years earlier on the timetable.

    Maybe I used words that were too big for you. I’ll try again: Economy fall down, people cry, economy get up, people smile. That’s the natural order of things.

    Suggesting that it would somehow be worse if government left it alone demonstrates a basic misunderstanding of macroeconomics. History simply doesn’t support that conclusion (again, see The Great Depression)

  8. CJ says:

    Yeah, that was me above.

  9. Frank R says:

    So, let’s see. Obama tripled the previous administration’s expenditures, added a one trillion dollar healthcare bill, nearly a trillion in stimulus spending and we still have 10% unemployment. Yup we are better off.

  10. VTR1000 Lady says:

    My friend and I were arguing about this! Now I know that I was right. lol! Thanks for making me sure!

    Sent from my iPad 4G

  11. Bildo says:

    Stimulus?

    Yeah, if that’s what you call it…

    What’s in the stimulus bill

    Read through the list. Very, very few things on there have anything to do with creating jobs. The vast majority of the spending went to welfare of one sort or another (unemployment, food stamps, crop insurance for farmers, WIC nutrition program, emergency food/shelter for homeless, etc.) and aid to the states to help them balance their budgets (I’m being redundant).

    The so-called tax cuts weren’t tax cuts but tax credits, another direct form of welfare that the geniuses in Washington had to give an Orwellian name because “giving people’s money away to deadbeats” was too obvious.

  12. Frank R says:

    Bildo you are correct. We now have another “jobs” bill coursing through Congress which has little to do with actually creating jobs. This makes how many “jobs” bills since O was in office?

  13. Bildo says:

    “This makes how many “jobs” bills since O was in office?”

    Precisely zero.

  14. Frank R says:

    It just keeps getting better. May jobs report, 431,000 new jobs. Problem: 411,000 are Census jobs which will be over by August. That means 20K jobs. We need to have 100,000 jobs a month just to get back to where we were before this debacle.
    So, Anonymous, wherever you are, do you want to explain the macro economics thing again?

  15. Anonymous says:

    Just for you, Frank: The US economy of late is like your dear old uncle Sam in the ICU after a stroke. He’s conscious, but he’s old. He’s grossly overweight. He’s spent a lot of borrowed money in the past years on needless extravagances, including lots of presents for his nephews. He really can’t afford his hospital bills right now. But he’s a lovable old guy who’s done a lot o good things for the community.

    From the relatives who care enough about uncle Sam to gather outside his hospital room to discuss his fate, we hear two basic arguments: some are willing to borrow and spend whatever it takes to restore uncle Sam to health. The other argument basically says we can’t afford it, let uncle Sam die – pull the plug.

  16. Frank R says:

    If the mathematically challenged uncle’s hospital bills threaten the rest of my family’s well being as well as that of my grandchildren’s, then we pull the plug. We love the dear old soul, but the true golden rule is that we must take care of ourselves first. If we don’t, we are no good to anyone.

  17. Anonymous says:

    Well, Frank, that’s not the Golden Rule that most Bible readers will recognize. But you are indeed true to the self-centered “libertarian” thought espoused by our host, Mr. Garrison. Pull the plug, Every man for himself.

  18. Anonymous — it’s awesome that your compassion is only limited by how much you can pilfer from other people.

    Even better that you care so much you’re willing to bankrupt future generations buying snake oil that won’t help the old fart anyhow.

  19. Anonymous says:

    If those future generations will be bankrupt, you can rest assured that their fate was fixed some time ago. What’s really ‘awesome’ is that you have no compassion at all.

  20. Frank R says:

    Anonymous, if I have lived a financially profligate life and end up in dire need, what right do I have to demand that my family bankrupt itself to save me. If I am a family member, how responsible am I being in saving my uncle at the risk of my family’s future or my own. Unless you help yourself first, you are no good to others.

    The libertarian point of view says that we are the only ones that have a right to our lives. If we wish to give our lives to save another, which essentially means we value their life over ours, then it is our right to do so. Many parents could easily imagine themselves in the latter situation. If we choose not to, that too, is our right, as well. The libertarian point of view is about sets values and priorities prior to a crisis. It’s a reasoned approach, not an emotional approach, although emotions, like love, can play a role.

    “If those future generations will be bankrupt, you can rest assured that their fate was fixed some time ago.”
    They will be bankrupt. It is now a matter of how many generations will be so. Is this supposed to be an excuse for continuing irresponsible spending?