Saturday, November 21, 2009

US unemployment and the stimulus

Here's an interesting theory that I tend to agree with. The US unemployment rate climbed as rapidly as it did because unemployment benefits were extended. Other countries with sharper declines in GDP fared better.

Why did the unemployment rate rise so rapidly -- from 7.2 per cent in January to 10.2 percent in October? It was clearly the administration's "stimulus" bill -- which in February provided $40 billion to greatly extend jobless benefits at no cost to the states, says Alan Reynolds, a senior fellow with the Cato Institute.

And from the same source today a report about the jobs apparently created by the stimulus is riddled with errors.

The acting head of the Government Accountability Office (GAO), Gene Dodaro, told the committee his investigators found 3,978 reports where recipients reported creating a total of 58,386 jobs without spending any money. Another 9,247 reports covering $965 million in spending listed no jobs created or saved.

So what is the overall outcome of government intervention in the labour market? Increased unemployment and wasted taxpayer money.


Manolo said...

The Messiah Obama's hands of death strikes again.

The greenhorn U.S. president appears to be out of his depth, assisted by a coterie of incompetents and socialists running (or is it trying to ruin?) the American economy.

JC said...

The stimulus also created a number of new counties, ie fictitious administrative areas where money was spent to create new jobs.

There's much joviality as a number of wags have put themselves forward as mayors of these new areas.