Truth on the Market

Via Ted Frank, I have been perusing e21: Economic Policies for the 21st Century.  It seems to be a site run by some Republican policy wonks, and includes contributions from some excellent academics including Charlie Calomiris, Ed Lazear and Phil Swagel.

A recent posting there on The High Price of Job Creation has some important if scary graphs and offers some enormously important statistics to the ongoing stimulus debate.  As everyone knows, Obama called for more job-creating stimulus in his SOTU, one of the many elements from his SOTU that eerily tracks elements of previous SOTUs from his reviled predecessor.  But even if we accept that a government stimulus package would achieve its intended goals (I know, I know . . . ) what would it need to look like?  Given some seemingly reasonable assumptions about workforce participation, in order to reduce the unemployment rate to 8% (what Obama’s economists claimed the original stimulus package would accomplish) by November (I’m not sure why this date was chosen . . . ) the economy would need to

generate between 1.1 million and 1.9 million net new jobs per month to reach 8% unemployment by November.  Few expect aggregate employment to increase by these amounts over the entire ten month period, let alone each month until then.

The amount of spending required to achieve this objective would be staggering (it took $787 billion to “create or save” an alleged 2 million jobs in a year, recall).  And that’s assuming stimulus would be effective in its intended goal–an extraordinarily dubious assumption (rap video explanation here).  Most important, however, is a clear understanding of where such jobs would be created (or saved), and maybe the scariest graph from the post is this one, looking at public sector versus private sector employment since January 2007:

Alarming, no?  Of course past performance is no guarantee of future results, but given the political dynamics that shaped the first stimulus, I wouldn’t expect the apple to fall too far from the tree.  Every time partisan hacks like Brad DeLong and Paul Krugman argue that we need stimulus now, and we can worry about managing government costs later, think of this graph, and think about how easy it will be to pare down that bloated, inefficient and growth-curtailing government workforce.