This post at Ezra Klein’s online space at the Washington Post is meant as a defense of Nancy Pelosi’s saying that extending unemployment benefits is the best job creation measure out there; that it is the most bang for the buck.
Specifically, it includes this graph.
Let me put this in small words.
THIS GRAPH REFERS TO GDP, AND GDP ALONE.
The part at the bottom says, “$ Change in GDP for Each $ Spent.”
When you mistake changes in GDP for the creation of jobs, there is no saving you. You are off the deep end, you are floating in a different dimension of reality. You are not remotely on the same planet as the rest of us in the real economy.
Unemployment is spent on rent or mortgage, utilities, and food. Of course it is spent and not saved. Is it spent on new cars? No. Is it spent on durable goods? No. How many jobs do you think unemployment check extensions are creating in the banking, utilities, and farm sectors?
Someone should teach these people that in a properly functioning economy, the same money “bounces around” as it is used by each party whose hands it enters to buy more goods from other participants in the economy. Money that is 100% spent, but goes straight back to the banking system, to the utilities, or to federally subsidized industrial sized farms, is far less “stimulative” and far less helpful to job creation and job growth than money that bounces around like a pinball.
It isn’t just a matter of how much of $1 thrown into the economy is spent. It’s what that dollar is spent on.
People who can’t grasp that have no hope of understanding how to help the economy. They will throw money at the problem in manners based on statistics that are, by definition, completely out of touch with job creation. GDP was never meant or designed to measure jobs. I thought Democrats castigated Republicans under George Bush Sr. for worshiping GDP data in a jobless recovery. Maybe they did, and it doesn’t matter; they need to celebrate everything they can get, just like the Republicans tried to do back then.
The point is, mistaking a proportional rise in GDP for total gainful economic activity relevant to job creation is dumb, dumb, DUMB economics. It screams to me that there is something rotten in Washington, and everyone will suffer for it.
I have nothing against smart stimulus. This isn’t it.