[Originally posted on my old college blog in April 2010 – Editor]
The stimulus bill, as ill conceived as it is, gives is a fantastic opportunity to test Keynesian economic policy and models in comparison to actual results.
According to the law, districts with the highest unemployment were supposed to get the bulk of the stimulus money. Did that actually happen?
First: The idea behind the $787 billion stimulus bill is that, if the government spends money where it is the most needed, it will create jobs and trigger economic growth. Hence, we should expect the government to invest more money in districts with higher unemployment rates.
Controlling for the percentage of the district employed in the construction industry, a proxy for the vulnerability to recession of a district, I find no statistical correlation for all relevant unemployment indicators and the allocation of funds. This suggests that unemployment is not the factor leading the awards. Also, I found no correlation between other economic indicators, such as income, and stimulus funding.
Second: On average, Democratic districts received one-and-a-half times as many awards as Republican ones. Democratic districts also received two-and-a-half times more stimulus dollars than Republican districts ($122,127,186,509 vs. $46,139,592,268). Republican districts also received smaller awards on average. (The average dollars awarded per Republican district is $260,675,663, while the average dollars awarded per Democratic district is $471,533,539.)
The exact same thing happend under the “new deal” where much of the spending went to swing districts to buy votes. Massive amounts of money spent and non-farm unemployment never dropped below 20% during the New Deal.
The fact remains and it might as well be considered a Law of Economics: Politicians spend money with a political result in mind, not an economic one. Pictorial logarithm proof:
As you can see the log shows no correlation, but look at this….
Well would you look at that. Oh the news gets better…
In the report from Dr. Veronique de Rugy from George Mason University:
I found that an average cost of $286,000 was awarded per job created, a 16.3 percent increase over the previous period.
See the full report HERE.
Now in case you are thinking to yourself, /whiney voice on “Well wait, that economist you quoted doesn’t count cause she is French and she wrote a note about her findings to Natioal Review which means she is a nazi and only twice removed from Hitler’s third cousin!”
Well USA Today hired some econo-geeks and they came up with the same result:
Counties that supported Obama last year have reaped twice as much money per person from the administration’s $787 billion economic stimulus package as those that voted for his Republican rival, Sen. John McCain, a USA TODAY analysis of government disclosure and accounting records shows. That money includes aid to repair military bases, improve public housing and help students pay for college…
More crony capitalism and corruption.