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Study Confirms: Government Cannot Spend Our Way into Prosperity

November 03, 2011

[img_assist|nid=25037|title=|desc=|link=url|url=http://www.americansforprosperity.org/budget-spending|align=left|width=79|height=103]When stumping for his stimulus plan in 2009, President Obama promised that if the giant $800 billion dollar stimulus was passed unemployment would not go above 8 percent and we would “save or create” 3 million jobs. Yet the latest data from the Bureau of Labor Statistics shows the President has fallen far short of his goal: the unemployment rate is 9.1 percent. The broader rate of unemployment, including discouraged and part time workers, is at 16.5 percent.

Even after this colossal failure by his own measures, this same disastrous Keynesian economic policy is driving President Obama’s “Stimulus 2.0” known officially as the American Jobs Act. The President has shied away from big projections this time around, and for good reason in light of a new study from the Phoenix Center for Advance Legal & Economic Public Policy Studies.

The new study, titled “Can Government Spending Get America Working Again? An Empirical Investigation,” attempts to determine what effect, if any, government spending has on job creation – particularly in bad economic times. The study finds that during periods of low economic growth government spending has literally zero impact on private-sector job creation. That means that for every $1 million spent by the government on “job-creation,” zero jobs are created.

By comparison, a $1 million investment by the private sector during economic downturns results in the creation of 4.8 private-sector jobs. The authors go even further to estimate the jobs created by a small 5% increase in private investment, or $90 billion. Under this realistic situation, the private sector would create 432,000 jobs. A similar investment via taxpayer-funded government stimulus would fail to create a single job. It’s no wonder the stimulus didn’t live up to its promises.

This study follows on the heels of another great Phoenix Center study published in April showing that a eliminating a single regulator grows the United States economy by $6.2 million and creates 98 private-sector jobs.

These two studies confirm what Americans for Prosperity has been saying all along. If the President is truly committed to growing the American economy and creating jobs, he needs to eliminate needless regulations and reduce government spending to allow individuals and businesses to keep more of the rewards of their labor. To achieve true economic “stimulus,” we must release job creators in the private sector from the hand-cuffs President Obama has slapped on.

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