Tuesday, April 03, 2012

Obama's Stimulus Plan Weakened The Recovery

Obama’s stimulus, multiple jobs bills and massive new regulations on financial markets, housing, health care, credit cards and energy have created chaos in America’s labor market. The resources the government spends must come out of someone else’s pocket. Spending almost $1 trillion on various stimulus projects means moving around a lot of resources and jobs. The new regulations are having a similar effect. And people don’t instantly move from one job to another. All these interventions temporarily increased unemployment and delayed the recovery.
Compare the U.S. and Canada. Their unemployment rates increased in lock step from August 2008 until six months later, in February 2009, when the stimulus was passed in the United States. During those six months, the U.S. unemployment rate rose by 2.1 percentage points, from 6.1 percent to 8.2 percent, and the Canadian rate grew by 1.9 percentage points, from 5.1 percent to 7 percent (using the BLS measure to make the Canadian measure of unemployment comparable to the U.S. rate).
The increased gap right when the stimulus was passed suggests that it was the stimulus, not something unique about the financial crisis, that made things worse.
“Financial crises” is just another item in a long laundry list of excuses offered by the Obama administration for the weak economic growth. Others explanations have included the Japanese earthquake, higher oil prices and economic “head winds” from Europe. Yet the question never asked is: Why did countries that didn’t follow Keynesian policies, such as Canada and Germany, fare so much better than the U.S.?


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