Friday, October 30, 2009

Imprecision and Bogus Econ

Just read a couple of different articles. One about evolution and one about how many jobs the most recent U.S. Federal stimulus program has created. They both annoyed me a lot, and for the same reason. What do these topics have in common?

Confusing or misleading imprecision by the authors.

Evolution: The author used the term repeatedly, but never specified when he was talking about evolution within species or among species. They aren't the same thing, but this author, and many others, seem to think they are.

Jobs: The author of the article I read, the interview subjects, and the reports cited estimate how many jobs have been created by the Federal government passing out tax money. In this article and in others, there's little or no talk about what kind of jobs.

For one thing, there's a big difference between creating a minimum-wage job and a job for a highly-skilled person. For another, there's an even bigger difference between a temporary job and a permanent job.

So, the Federal government takes $15,000 in taxes from you and I, then passes $12,000 to a company that will create jobs. (I don't really think the Federal government would have such a low administrative overhead, but I don't want to get into that issue here.) That company hires 12 people for one month each. Some reports were initially claiming that the Federal government's actions had created 12 jobs, but then people started catching on, so some folks started adjusting the counts to equal full-time employees for one year, making the example above equal one job created. Except that those were temporary jobs. When the handout money ran out, the jobs ran out. That might not be so bad if the Federal government could keep taking enough money from taxpayers to keep shoveling money at companies and organizations to keep people employed, but they can't. So, the Feds have "created or saved" X number of jobs. Please. They created or saved X number of temporary jobs. Does anyone think a very short-term temporary job is as good for the economy as a permanent job? Of course not.

But, a temporary job is better than nothing, right? Well, what was the cost of that short-term job? Money taken from taxpayers, both individuals and companies. What might that money have been used for, if it hadn't been taken as taxes and redistributed? Most individuals would have used their extra money to buy things. Which would have... wait for it... stimulated the economy! Except that this is longer-term stimulation. Most companies would invest their extra money. In what? Primarily raw goods, services, and payroll. Which would have... you got it: stimulated the economy! And again, with much longer-term repercussions.

These ignorant folks waxing eloquent about the success of the Federal stimulus package may have been some of the same folks who claimed that the cash-for-clunkers program was a great success. Well, if success was subsidizing car purchases for a month or two, then it was successful, alright. However, many of those purchasers were enticed to purchase a new car to replace their old car sooner than they otherwise would have. The secondary impacts include this: For each one of those people who would have otherwise purchased a car next year, now they won't. All the cash-for-clunkers did in these cases was to shift a small number of future purchases to current purchases, weakening the future economy.

Sigh. Sometimes I wonder if any of our bone-headed politicians have even read an economics textbook?

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