Added: Dec 8, 2011

From: ReasonTV

Duration: 7:37

High, persistent unemployment and a sluggish economy underscore what all but the most-dedicated supporters of Barack Obama know to be true: The president's 2009 stimulus program was a massively expensive bust. Understanding why the stimulus failed is an important step in understanding how the government can—and cannot—goose economic recovery. To get a better sense of how and where the stimulus went wrong, Reason.tv focused on Silver Spring, Maryland, a suburb of Washington, D.C., that's home to a large number of government contractors and other recipients of money earmarked for the sorts of "shovel ready" projects that were going to bring the economy back to life. President Obama's top economic advisor Larry Summers laid out ground rules for how stimulus dollars should be spent: The funds must be "targeted" at resources idled by the recession, the interventions must be "temporary," and they needed to "timely," or injected quickly into the economy. None of that turned out to be true. "Even if you were to believe that government spending can trigger economic growth," says Veronique de Rugy, Reason columnist and senior research fellow at the Mercatus Center, "the money is never spent in a way that's consistent with the conditions laid out by the Keynesians for it to be efficient." Reason.tv identified four basic ways in which the stimulus was doomed almost before it was put into operation. For the full discussion of those areas and links to supporting data, go to http://reason.com/blog/2011/12/08/why-obamas-stimulus-failed-a-case-study Written and produced by Jim Epstein, who also narrates. Approximately 8 minutes. Go to http://Reason.tv for downloadable versions and detailed links and text. Also subscribe to Reason.tv's YouTube Channel to receive automatic updates when new material goes live.

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Alicia Banks Says:

Jan 31, 2013 - hobama has failed! the blackish racist hobama is a liar! hobama is the new hitler/gwb 3.0/mixon 2.0... that global warlord bankster hobama is a liar and a hologram! shame on the blind deaf adoring snoring fooled fleeced sheeple! cc wwiii/africom/ndaa/fema camps/cbc/"mongres"/apartheid regime in DC/dhs ammo etc aliciabanks.xanga.com/76954805­0/selection-2012--%E2%80%9Cfor­ward%E2%80%9D-with-the-fleecin­g-of-america/

T Davis Says:

Feb 11, 2013 - I voted for the President twice. He and his whole administration are frauds They spend, spend, spend, this is what they do best. All the money that has been wasted since the President took office has been THE most spending EVER by any Presidential administration... sigh...

Kevin Morton Says:

Feb 21, 2013 - "Even if you were to believe that government spending can trigger economic growth, the money is never spent in a way that is consistent with the condition laid out by the Keynesian for it to be efficient." -Wonderful insight. Thank you Veronique de Rugy.

HoneySiegalSurvivor Says:

Mar 3, 2013 - Yes we can "return him and get our $6Trillion back?" Department of Health and Human Services received $129,984,194,582 ! OBAMACARE RESCINDEDorNO USA 2. Department of Education $92,261,427,518 3. Department of Labor $66,156,177,969 4. Department of Agriculture $43,885,361,156 5. Department of Transportation $38,230,112,907 6. Department of Energy $29,722,303,264 7. Department of the Treasury  $23,141,698,534 8. Social Security Administration $13,830,109,934

James Carlyle Says:

Mar 4, 2013 - Stimulus was supposedly debunked many years ago with prescott and sargent, dating back to the days of the ricardian equivalence. Somehow someway, we've reverted back to this insanity. It's really akin to trying to cure patients by returning to the days of blood letting and arsenic. I mean really, even among economic scientists, pure stimulus is widely regarded as complete nonsense. And yet, nonsense has dictated major government policy for the last few years. It's mind boggling.

James Carlyle Says:

Mar 4, 2013 - The trouble with most stimulus proponents is they tend to equate jobs with economic health. This is wrong. If the government paid ppl to dig ditches and fill them up..theoretically there is no unemployment but the resources are wasted and those jobs come at the expenses of future taxes and thus future jobs. Economic health is about growth that results from innovation. Jobs and prosperity are by products of growth. Stimulus is categorically ineffective at raising long run growth.

Majlerin Says:

Mar 4, 2013 - How do you measure your "growth"!? No, it's not "categorically ineffective". By promoting growth in the short tun, it is preventing a long spiral of recession with people unemployed and unused resources What "resources are wasted" if people are already unemployed and capital is not being invested!? That's the typical irrational reply to stimulus

TheInfernal36 Says:

Mar 4, 2013 - Growth in a practical sense, is measured by detrending long run real gdp and determining the growth rate. To answer your question, I'll give you an example. If stimulus was to paid for people to grow oranges and sell them, resources(in the form of real capital and labor) are then allocated to oranges. Once stimulus is stopped, those resources must now be reallocated because real demand was never there for orange product. And since that stimulus was funded with taxes, it was a net waste.

TheInfernal36 Says:

Mar 4, 2013 - And there's nothing irrational about my reply to stimulus, it is built on the recardian equivalence. Again, there's been tons of research on this. Check prescott, sargent, modigliani, Hall, Ramey etc. I forgot to add, real gdp growth is entirely the result of innovation(both capital and labor). Innovations don't come if you pay people to just dig ditches and fill them up. The soviet union had full employment and imploded because they had no innovations.

Majlerin Says:

Mar 4, 2013 - It was not a net wasted because the workers that grew orange have then more money to spend, even if oranges have 'no real demand' according to you

James Carlyle Says:

Mar 4, 2013 - I never said no real demand. It would be unsustainable propped up demand from a short term source(gov), And that mextra money that workers have came from either current tax payers or bond holders who purchased the bonds and now have less money. Nowhere is money magically created out of thin air that we on net have more of. Best case, its a transfer payment. More realistically, its a net negative because of rigidity and waste within the system.

Majlerin Says:

Mar 4, 2013 - There's also tons of research that show no evidence for the Ricardian equivalence. A large part, if not most,innovation today, R&D is funded by govt money btw. It's still a small fraction of overall govt spending in any case, or the expenses of private businesses

Majlerin Says:

Mar 4, 2013 - Workers spend more of their income than rich people, thus aggregate demand increases.

James Carlyle Says:

Mar 4, 2013 - Your actually wrong. The majority of research and innovation does not occur from government. But even if i were to grant you that, this innovation is not resulting from stimulus, especially if you look at where the stimulus money is going. I might concede stimulus makes some sense if it went toward innovation, but it doesn't

Majlerin Says:

Mar 4, 2013 - "The trouble with most stimulus proponents is they tend to equate jobs with economic health. This is wrong." That's funny because workers disagree :)

James Carlyle Says:

Mar 4, 2013 - I think you're missing the general principle of how growth works. I started this discussion by explaining that economic prosperity derives from growth, and so we should look at what contributes to economic growth. If you were to just google long run economic growth factors, you would see what I'm talking about. And no, nowhere does it say transfer payments, stimulus, shovel ready projects, or high intractable debts and higher tax rates contribute to growth.

Majlerin Says:

Mar 4, 2013 - Again, how do you measure growth? GDP is the most used measure. Some abstract idea of potential innovation is not a measure of economic growth. As for "long run economic growth factors", that sounds like pop talk. One thing is certain: economic contractions and recessions are detrimental to "long run economic growth"

dapras Says:

Apr 10, 2013 - The biggest crooks and thieves...Politicians, but only the stupid and the black one's get jail time.

TheMilesev Says:

Apr 28, 2013 - I realize this comment is old but I've always wanted to say this. The income people don't spend is invested. That's the critical flaw in Keynesian thinking, it ignores it's effects on investment. Governments borrowing money so they can spend it just moves money from private investment into government spending. It's like trying to raise the water level of a lake by taking buckets of water out of one side and dumping the buckets out in the other side.

TheMilesev Says:

Apr 28, 2013 - A society can become twice as wealthy as it is now, but if employment levels are 90% they can never be twice as high as it is now. Employment levels are just one aspect of economic health, focusing on it and ignoring all the other aspects is a recipe for workers digging holes with spoons when shovels are available and nobody wants that.

Fallkenn Says:

Apr 30, 2013 - So wait, you can't get something for nothing? Who would have known.

Lengsel7 Says:

May 1, 2013 - The printing press, the (private) "Federal Reserve" bank, and our new masters, China......and, oh yeah....OUR pockets...where else?

EGarrett01 Says:

May 25, 2013 - The demand for jobs also increases when there are entrepreneurs capable of getting seed money. Those entrepreneurs are most capable of getting seed money when rich people and the banks that hold their money are able to make loans and investments. This is what the "aggregate demand" theory doesn't understand.

Muzzy337 Says:

Jun 18, 2013 - obama is a mega failure