Friday, October 8, 2010

Reason Magazine: October 2010


Austerity Agonistes

Why left-wing economists’ warnings against austerity programs are wrong

...surveying the data of 44 large fiscal adjustments across the globe since 1975, concluded in a 2010 report that cutting annual spending by 1 percent triggers a net 0.6 percent in economic growth. As we will see below, this is a good deal compared to the $1.10 reduction in GDP we get for each $1 spent by the government to stimulate the economy. the best-case scenario, a dollar of government spending produces much less than a dollar in economic growth—between 40 and 70 cents.

...for every $1 in tax-financed spending, the economy actually shrinks by $1.10. In other words, greater spending financed by tax increases damages the economy.

...the total number of jobs the government attributed to stimulus spending as of April was 682,000. Factoring in stimulus dollars spent up to that point, the average cost of these jobs was $282,000. That’s a lot of money. Worse, four-fifths of these jobs were in the public sector. This outcome is far afield from the administration’s original promise that the stimulus would create 3.5 million jobs over two years, 90 percent of them in the private sector.

...on average, the creation of 100 public jobs eliminated about 150 private-sector jobs, decreased by a slight margin overall labor market participation, and increased by about 33 the number of unemployed workers. Their explanation was that public employment crowds out private employment and increases overall unemployment by offering comparatively attractive working conditions. Basically, public jobs, especially ones that also exist in the private sector in fields such as transportation and education, offer higher wages and benefits, require low effort, and therefore crowd out many private jobs. When these new employees are paid with taxes it negatively impacts the economy.


Got an Environmental Catastrophe?

Blame the government.

The first question you should ask when you see environmental misbehavior is: What is the government doing that encourages people to act that way?

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