Government Spending Does Not Increase Jobs?

Government Spending Does Not Increase Jobs?

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It would be easier to get Iranian President Ahmadinejad to admit that the Holocaust actually happened than to get Democrats to admit that increased government spending is not the answer to our problems.

John Merline of says that Democrats continue to ignore history when they suggest that increased government spending will create jobs:

Sen. Tom Harkin, D-Iowa [said] that “the last election was about jobs and the economy, and now we’re in a position where we really do need some economic pump-priming by the federal government.”

Has Harkin been asleep for the past two years? Doesn’t he remember that Democrats already pushed through $830 billion worth of “pump priming”? And that this was supposed to stimulate growth and hold unemployment under 8%?

Instead, quarterly GDP growth has averaged an anemic 2.8% since the recession officially ended two years ago, and unemployment has been at or above 9% for all but two of the past 24 months.

Indeed, few ideas have been so thoroughly discredited as the one that says more government spending will increase jobs. As the chart above shows, government outlays climbed more than 40% between 2006 and 2011. At the same time, the employment figure has dropped by almost 5 million.

Merline reproduces this Cato Institute chart that shows that Obama’s stimulus package failed to create jobs:

Merline explains:

In our view, the chart doesn’t just suggest anything. It practically screams that government spending won’t create jobs. If it did, there’s no way we’d see so many unemployed today after wildly increasing federal outlays. Nor would we have a record number of long-term unemployed — 6.2 million unemployed, or 46.1% of all those without jobs, have been out of work for 27 weeks or more.

Plus, there’s a growing body of economic research showing the stimulus failed to stimulate anything. The Hoover Institution’s John Cogan and John Taylor found zero effect one way or another from the stimulus. And a more recent study by Timothy Conley of the University of Western Ontario and Bill Dupor of Ohio State actually found a negative correlation between federal stimulus spending and private-sector job growth. That suggests more spending actually kills jobs.

About Peter Pappas

Peter is a tax attorney and certified public acccountant with over 20 years experience helping taxpayers resolve their IRS and state tax problems.

He has represented thousands of taxpayers who have been experiencing difficulty dealing with the Internal Revenue Service or State tax officials.

He is a member of the American Association of Attorney-Certified Public Accountants, the Florida Bar Association and The Florida Institute of Certified Public Accountants and is admitted to practice before the United States Tax Court, the United States Supreme Court, U.S. District Courts - Middle District of Florida

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