A little over a year ago, President Barack Obama signed a $787 billion stimulus bill intended to create jobs. In the administration’s view, the plan is working like a charm. Through the end of October 2009, the White House “created or saved” 640,000 jobs since the stimulus’ inception, according to a Dec. 1 CNN report. Of course, this is ignoring the nearly 4 million jobs lost during that span, based on a Dec. 3 USA Today article — a factor of six.

The notion of government creating or saving jobs is comical enough. After all, measuring the amount of jobs “saved” is tantamount to measuring the number of crimes prevented by the police. In other words, it’s an unverifiable quantity that serves no purpose besides providing political rhetoric.

The Obama administration and Congress insist on promoting the myth that government can spend its way out of the current recession in spite of elementary logic and historical examples. Public spending can’t magically revive the economy. And contrary to the government’s assertions, public spending can’t create jobs because it can’t create wealth.

The government can only inject money into the economy if it takes it from other sources — debt, printing money or taxation. When government drives itself into debt, it leaves less financial capital for the private sector to borrow and invest. Taxes only shift resources from consumers and producers to the government, also displacing private investment. Printing money creates inflation, devaluing the currency and hurting the purchasing power of all consumers, especially the poor — the group that money injected into the economy reaches last.

The farce that government can create jobs is grounded in Keynesian theory, which contends that the end result of public spending is a multiplier effect. This seemingly miraculous theory postulates that every dollar the government spends will generate more than one dollar of new income.

Yet, there is minimal empirical data — let alone real-world evidence — to support this delusion. The most extensive study of the multiplier was performed in 1991 by Harvard economist Robert Barro, who found that each dollar of public spending produced a mere 80 cent return — in other words, a loss. In a November 2009 piece for Reason magazine, economist Veronique de Rugy concludes from Barro’s work that “high government spending actually hurts economies in the long run by crowding out private spending and shifting resources to the uses preferred by politicians” — namely special interests and pork barrel projects.

Beyond that, Keynesian theory holds some pretty bold assumptions. There’s an inherent belief that throwing money at the problem will eventually make it go away. But government spending doesn’t address the cause of the crisis, specifically loose monetary policy at the hands of the Federal Reserve. Instead, government spending dwells on the symptom that only puts off our proverbial economic day of reckoning. It’s akin to treating Ebola with an overdose of Advil to get rid of fever and muscle pain.

And it’s presumed that government allocates resources better than the market during economic slumps. According to Keynesians, any decrease in demand and spending triggers a wave of declining investment that can lead to a recession. Their antidote for the economy is boosting aggregate demand via government spending. Obviously there’s a decreased level of investment, but that’s a result of increased risk — not a lack of desire to consume. For some reason, they believe that politicians remain immune to the recession’s effects and can see long-term economic effects more clearly than the private sector.

Plus Keynesian theories predicate that the government’s superpowers to allocate resources better than the market only apply during a recession. When the economy is healthy, these superpowers magically disappear. Otherwise, if they didn’t go away, we should have a centrally-planned economy fueled solely by government spending all the time. And if they do go away, I want to know why the government possesses clairvoyance during recessions but loses it during economic expansion.

The fundamental flaw of the stimulus is the idea that government spending can somehow increase standard of living or income. All the government can do is engage in redistribution of money that it takes from other sources — debt, inflation and taxation. Crowding out real jobs in the private sector by entrusting politicians that are as fallible as any individual is not conducive to economic recovery. I’m as keen as anybody else to rise out from this recession. Reconsidering the government’s bad economic thinking is a logical place to start.

Alex Biles can be reached at jabiles@umich.edu.

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