Reason Writers Around Town: Shikha Dalmia on The Progressive Fallacies in Stimulus Talk

President Obama was only regurgitating his party’s conventional wisdom when he remarked that the private sector was doing just “fine” -- but the public sector needed stimulating to create jobs and boost economic growth. Why he should get lampooned for something Harry Reid and others have said a million times is unclear. But repetition does not make a stupid idea less stupid, suggests Reason Foundation Senior Analyst Shikha Dalmia in her latest column at The Daily. Obama’s statement “manages to pack in virtually every 'progressive' economic fallacy — and then some,” she writes:

For starters, his claim that private-sector job growth is hunky-dory is hooey. It is true that private companies have added 4.3 million jobs since February 2010. However, this represents a 2.8 percent rate of job growth compared to the 8 percent average after previous recoveries — despite (or perhaps because of) $800 billion in stimulus spending.

But instead of asking whether the effects of his own policies — like uncertainty over the extension of the Bush tax cuts and the compliance costs of Obamacare — might be choking the private sector, Obama wants to apply his stimulus therapy to the public sector. This won’t produce overall growth. Indeed, more government spending means a shrinking private sector, and there are three main reasons why.

 Go here to find out what they are.

Editor's Note: We invite comments and request that they be civil and on-topic. We do not moderate or assume any responsibility for comments, which are owned by the readers who post them. Comments do not represent the views of or Reason Foundation. We reserve the right to delete any comment for any reason at any time. Report abuses.

  • Pound. Head. On. Desk.||

    And reason number four: They piss me off and make me not try as hard as I otherwise would. That's why I have two part-time jobs instead of starting another new business.

  • sarcasmic||

    Take money away from people who create things of value, skim some off the top to pay useless bureaucrats, give what's left to political cronies, and watch the economy boom!

    What could possibly go wrong?

  • Whiterun Guard||

    Seems like a lot could go wrong. That's really a horrible plan.

    I'm glad no one told the government about it, they just might have been crazy enough to try it!

  • CampingInYourPark||

    "For example, between 1970 and 2010, public school enrollment went up by 8.5 percent — while public-school employee rolls swelled a mind-boggling 96.2 percent."

    Mind sufficiently boggled

  • Whiterun Guard||

    They have a lot of teeth to pull.

  • Auric Demonocles||

    The classrooms are dangerously understaffed! We need a lower student to teacher ratio to get those test scores up!

  • John||

    The stimulus was doomed to fail for reasons beyond the overall failure of Keynesian economics. Thanks the public employee unions, the Dems couldn't even do a proper stimulus. Instead of money to start the economy, the stimulus was nothing but a payoff to the public employee unions.

  • Whiterun Guard||

    And the public unions won't even use it for good stuff like building casinos in Vegas and buying Caribbean governments.

  • John||

    Or building pyramids or going to Mars. Something, anything other than just letting the SEIU steel it all. As bad as the New Deal was, they at least built a few dams and bridges. The Obama deal might as well have just set the money on fire.

  • T o n y||

    Surely even you guys can't be buying this uncertainty bogeyman bullshit anymore. Yeah the weak economy is entirely the fault of Obama being 100% clear on what he wants to do about the Bush taxes and the healthcare bill. That's all. No macroeconomic factors, just Mitt Romney's talking points: Obama is to blame, in a general sort of way.

    It must be nice having no empirical requirements for your economic beliefs. You can blame anything you want and never have to accept any yourself.

  • Whiterun Guard||

    Because the article exactly says that was the only factor, and not one of a multitude.

    Thanks for playing!

  • T o n y||

    According to the libertarian theory of the magic market, the fact that states and localities have been hemorrhaging government jobs relative to other periods should mean that the private sector has a lot of holes ready to fill, right? If public sector jobs crowd out the private sector, shouldn't the opposite thing happen when they're cut?

    No, because it's a bunch of bullshit. We have many decades of evidence that consumer demand drives economic growth, and teachers and firefighters spend the same dollars private sector workers do. If those are somehow not "real" jobs (educating children and putting out fires being pointless endeavors, especially when compared to selling meat product on a bun or useless plastic Chinese crap), then you should only get to talk about private sector employment when you're doing that intellectually rigorous libertarian task of blaming Obama for everything.

  • John||

    Tony, when those jobs are doing things that could be done more efficiently with fewer people, no they are not real jobs. All you are saying is that the way the stimulate the economy is to just give money away. And if you are going to give it away you might as well give it to Democrats.

    It doesn't work that way. If your taxes, borrowing and regulation are still killing business, laying off a few teachers from their do nothing jobs, isn't going to help.

  • T o n y||

    It's Republicans who believe just giving money away leads to economic stimulus, but they think it works best when it's given to rich people. In fact it works better when given to people more likely to spend it in the economy.

    Your FOX News teacher hate is a little disturbing. Yeah, being a teacher is such a cushy fucking job. And what do they really do for anyone anyway?

  • John||

    Letting people keep the money they earn is not giving it away.

    And yes, public employees are bankrupting the country. They deserve the hate. Once again, if you were anything but a retarded hack, you would hate the SEIU for destroying government's ability to be effective. You can't use government to transform society when it is bankrupt thanks to pensions.

  • T o n y||

    Letting people keep the money they earn is not giving it away.

    Let's unpack this, and then we can put this little semantic idiocy to bed forever, how about?

    Republicans believe cutting taxes for rich people stimulates job growth, despite absolutely no evidence to support it and lots of evidence to contradict it. Whether this is "letting people keep the money they earn" or it's "welfare for the rich" is a completely semantic thing and does not affect empirical reality, which is that the underlying claim is a big fat lie.

    Your problem (and the problem of all libertarians) is that you cannot separate empirical fact from your anti-tax moral obsession. Like in any religion, you need these things to coincide, even when it's clear to a rational person observing reality that they don't.

    Republicans advocate Keynesian stimulus, just in its absolute least effective form.

  • John||


    Even Keynes admitted later in life that tax cuts were the most effective way to stimulate the economy. You just don't like it because it prevents the Dems from stealing it.

  • John||

    And speaking of empirical evidence, remember how the stimulus was going to put unemployment below 8%? No one claimed it was too small until after it failed.

  • T o n y||

    I'm gonna need a source on that Keynes claim. At any rate, the Republicans believe in cutting taxes at all times, and just because you are an antitax ideologue doesn't mean that taking income away from the budget magically doesn't result in deficits.

    You're just going to have to read a little more, John. Try a reliable source and not a Republican party propaganda outfit, just for a change. The 8% thing--the prediction Romer made before Obama was sworn in--was acknowledged as a too-rosy prediction by Obama. It serves ONLY as, I know this will be a shock, Republican party talking points. You are not offering any solutions, you're just regurgitating things you read on right-wing blogs. You are all hacky shallowness. Read something else but the scummy Michelle Malkin types you obviously rely on, I beg of you.

  • John||

    Here you go Tony.

    am converted to your proposal…for varying rates of contributions in
    good and bad times. (June 16, 1942). Keynes, Collected Writings, vol.
    27, p. 208.

    are able to show fluctuations in income of an order of magnitude which
    is significant in the context… So far as employees are concerned,
    reductions in contributions are more likely to lead to increased
    expenditure as compared with saving than a reduction in income tax
    would, and are free from the objection to a reduction in income tax
    that the wealthier classes would benefit disproportionately. At the
    same time, the reduction to employers, operating as a mitigation of the
    costs of production, will come in particularly helpfully in bad times. (July 1, 1942). Keynes, Collected Writings, vol. 27, p. 218.

    If you want to claim cutting taxes are not a good stimulus, your choice. But please stop associating Keynes name with it.

  • John||

    Tony I have read more and forgotten more about this shit than you ever will know. You are the one who spends your life in a cocoon filled with talking points. Stop projecting your ignorance on every one else. I am very familiar with what Keynesian economics actually was and was not before partisan hacks like you got a hold of it.

  • T o n y||

    I read reason magazine every day. I even spend the occasional Saturday on a FOX News binge. One thing I make it a point to be intimately familiar with are hacky Republican talking points, which, despite your claims to well-rounded learnedness, seem to be the only things that constitute your thoughts.

  • sarcasmic||

    I read reason magazine every day.

    Yet you do not learn a thing. Sad.

  • T o n y||

    I learn plenty. But it's an interesting philosophical question whether one can "learn" a bunch of nonsense bullshit.

  • Red Rocks Rockin||

    But it's an interesting philosophical question whether one can "learn" a bunch of nonsense bullshit.

    Considering that's what universities are pumping out these days, it's no wonder you haven't learned a damn thing.

  • sarcasmic||

    Whether this is "letting people keep the money they earn" or it's "welfare for the rich" is a completely semantic thing

    No it is not.

    Welfare is money that was taken from one person and given to another.

    Allowing the evil rich to keep their income is not welfare, because the money was not taken from someone else.

    You can call it semantics, but that doesn't make it so.

    If I take $100 from you every week, and one week decide to take only $80, is that the equivalent of my taking $20 from someone else and giving it to you?
    Obviously not.

    Calling tax cuts welfare is not semantics, it is a outright falsehood.




  • sarcasmic||

    Try a reliable source and not a Republican party propaganda outfit, just for a change.

    Translation: What is said does not matter. Only who said it matters.

  • The Last American Hero||

    It wasn't 8%. It was if the stimulus is is not enacted, the unemployment would reach as high as 8.2%. This degree of precision implies that gov't is so able to control the economy that it knows the exact impact of its policies. The absolute height of arrogance - btw, they were wrong.

  • KDN||

    Yeah, being a teacher is such a cushy fucking job.

    I'm married to one: it is. You work 10 hours a day for 8 1/2 months a year, occasionally having to stay late for meetings or extracurricular functions. This is true regardless of the type of students (the wife's taught in both a bottom-15 and top-3 district in NJ over the last 5 years). The only difference is the type of stress you deal with, not how much of it you get.

    And what do they really do for anyone anyway?

    The ones responsible for the budget bloat probably don't do a whole lot. For example, a significant proportion of special ed teachers are babysitters or security guards that get paid like math teachers. Surely there's some value to be had by having them there, but paying them the same way you do other teachers that provide significantly more value-add is just stupid policy.

    Regardless of the question of funding and administration, there's a ton of room for optimization if you can figure out which teachers should be cleared out for new blood (and actually clearing them out), which ones should should be paid more, and which ones are adequate but could be well served by having pressure put on them. The problem is that the unions scream bloody murder if anybody even tries.

  • Pagan Priestess||

    It's not hard to figure out at all. Just ask the students. From your own time in high school, I bet you can name at least 5 teachers that sucked hard core. The thing is everyone who's who been a public school student can do this. It's just administrators can't figure it out.

  • John||

    But he is not 100% clear you fucking retard. That is the whole point. They admitted themselves they had no idea what was actually in the health care bill. And HHS is writing thousands of pages of regulations to impliment it complete with the usual payoffs and insanity. No business in America has any idea what their labor costs are going to be in the medium term. And no one has any idea what their tax rates are going to be this year thanks the debate over the Bush tax rates. That is called uncertainty.

    Obama wasted nearly a trillion dollars on a stimulus that was nothing but a payoff to supporters. It wasn't even a real Keynesian stimulus. If you were not such a retarded hack and actually believed in the shit you preach, you would hate Obama for discrediting Keynesian economics by putting its name on looting the treasury for the public employee unions.

  • T o n y||

    As Keynesian stimulus it wasn't as effective in kind as it could have been and it wasn't enough in quantity to bring about full employment. Every credible economist believes this. What prevented it from being as effective as it needed to be? Republicans, of course, who believe invisible leprechauns create economic growth, or something equivalent.

  • John||

    Republicans who had 39 votes in the Senate and a small minority in the House when it was passed. Come on Tony that is even stupid for you.

    And what prevented it from being a real Keynesian stimulus was not its size, which was the largest ever. It was Obama's Chicago politics and the desire to use it as a way to pay off supporters. And don't forget environmental regulations that prevented anything from actually being built.

    Face it Tony, Obama has completely discredited liberal economics. And you still love him for it. Just get back in the car Tony. Obama only hits you because he loves you.

  • T o n y||

    God you're just a Sean Hannity puppet machine. You're so fucking stupid it's painful. Chicago politics? Onerous environmental regulations? Jesus Christ it's a wonder you find your way out your bedspread in the morning.

  • John||

    Yeah Tony, I have worked for the government and done environmental law. I intimately familiar with how hard it is to build anything. I have probably forgotten more about he subject than you will ever know. You couldn't do the New Deal today if you wanted to. It takes years to get any large project going.

    And yes Obama is a Chicago politician who views government as a way to help his supporters at the expense of everyone else. And the stimulus is the best example of this. Screaming and yelling Hannity doesn't change the facts no matter how badly you don't want them to be true.

  • T o n y||

    For all I know you're absolutely correct that a New Deal equivalent would be impossible today. What does that have to do with whether growth or austerity policy works best in this environment? The New Deal still happened. We have more sophisticated monetary tools today and there are still things that need to be built and repaired, investments that can be made, and workers whose jobs can be saved. And I don't see any reason why you can't do these things while at the same time protecting the environment from harm. Shit, why don't we just invest in clean energy tech and kill two birds?

    Oh, because Mitch McConnell wants Obama to lose the next election. That's why we have to endure magical leprechaun stories about economics and fully propagandized victims like you claiming the whole problem--the cause of global economic weakness--is stuff like "Chicago politics."

  • John||

    What does that have to do with whether growth or austerity policy works best in this environment?

    It means everything. It means you can't just go out and build things and put people to work. It makes a traditional Keynesian stimulus impossible.

    And I don't see any reason why you can't do these things while at the same time protecting the environment from harm.

    Because environmental groups fight everything to the bitter end. Their goal is to ensure nothing gets built and doing so is as hard as possible. Things like NEPA have long since stopped being about the environment. Even Obama had to admit there is no such thing as a shovel ready project

    Shit, why don't we just invest in clean energy tech and kill two birds?

    You accuse me of talking points and then put out that? Clean energy is a joke. It has failed everywhere including Europe. It is a ticket to poverty and ruin. And it is also terrible for the environment. Wind power is going to make raptors extinct and Solar power is giant producer of hazardous waste. There is nothing clean about clean energy you dope.

  • T o n y||

    Well there's certainly nothing clean about fossil fuel energy. But your imitation of an environmentalist caricature (fuck the planet-wide ecosystem, save the raptors!) is par for the course for fossil fuel apologists.

  • sarcasmic||

    Well there's certainly nothing clean about fossil fuel energy.

    CO2 and H2O.


  • The Last American Hero||

    Keynes said that stimulus would work if it is targeted, timely, and temporary. People like you and Krugman tend to forget that part and believe that government spending orgy is a good thing. Speaking of Krugnuts, the stimulus was significantly larger than the $600+ billion he originally advocated. When pouring gasoline on the fire failed to put it out, you guys just yell for more gas.

  • The Last American Hero||

    Rational citizens pursuing their own economic self interest =/= invisible leprechauns. Blaming economic slowdowns on "Animal Spirits" sounds fantastical to me.

  • KDN||

    Every credible economist believes this.

    Translation: every economist cited in magazines whose point of view I agree with believes this.

  • Red Rocks Rockin||

    Republicans, of course, who believe invisible leprechauns create economic growth, or something equivalent.

    As opposed to progressive twinks like you who think money comes from elves and unicorns.

  • Auric Demonocles||

    It must be nice having no empirical requirements for your economic beliefs. You can blame anything you want and never have to accept any yourself.

    Aren't you the one championing the stimulus which lead to higher unemployment rates than the projected "doomsday scenario of no stimulus" by saying that this just proves how bad it would have been without the stimulus?

  • Spoonman.||

    You know what blows my mind? All those Obama ads showing that Romney increased Massachusetts's debt and its poor job growth during its administration.

    Obama is hitting Romney on debt and job growth. Now, I'm already not voting for Romney (or Obama). But how could that possibly get anyone to vote for Obama? "Both sides are bad, vote Democrat!"

  • Chupacabra||

    Actually, I think that Obama's pitch is "both sides are bad, but at least I'm corrupt!"


Get Reason's print or digital edition before it’s posted online

  • Progressive Puritans: From e-cigs to sex classifieds, the once transgressive left wants to criminalize fun.
  • Port Authoritarians: Chris Christie’s Bridgegate scandal
  • The Menace of Secret Government: Obama’s proposed intelligence reforms don’t safeguard civil liberties