Re: [Pen-l] Krugman critiques Obama stimulus plan (basic arithmetic version)

[Laurent GUERBY <laurent@xxxxxxxxxx>]

On Wed, 2009-01-07 at 19:52 +0100, Laurent GUERBY wrote:
> On Tue, 2009-01-06 at 10:15 -0500, Louis Proyect wrote:
> > http://krugman.blogs.nytimes.com/2009/01/06/stimulus-arithmetic-wonkish-but-important/
> > January 6, 2009, 9:26 am
> > Stimulus arithmetic (wonkish but important)
> > [...]
> > In the extended entry, a look at my calculations.
> > 
> > The starting point for this discussion is Okunâs Law, the relationship 
> > between changes in real GDP and changes in the unemployment rate. 
> > Estimates of the Okunâs Law coefficient range from 2 to 3. Iâll use 2, 
> > which is an optimistic estimate for current purposes: it says that you 
> > have to raise real GDP by 2 percent from what it would otherwise have 
> > been to reduce the unemployment rate 1 percentage point from what it 
> > would otherwise have been. Since GDP is roughly $15 trillion, this means 
> > that you have to raise GDP by $300 billion per year to reduce 
> > unemployment by 1 percentage point.
> > 
> > Now, what weâre hearing about the Obama plan is that it calls for $775 
> > billion over two years, with $300 billion in tax cuts and the rest in 
> > spending. Call that $150 billion per year in tax cuts, $240 billion each 
> > year in spending.
> > [...]
> 
> According to:
> http://www.bls.gov/news.release/empsit.t01.htm
> There are 10.3 millions so-called "unemployed" (and 80.2 millions "not
> working") people in the USA, for an "unemployment rate" of 6.7%
> (of a 154 millions "active" population).
> 
> According to:
> http://www.bls.gov/news.release/wkyeng.t01.htm
> The median yearly wage is $37500 per year.
> 
> 775 billions for two years is 387 billions per year. 387 billions per
> year is the median yearly wage for ... 10.3 millions people.
> 
> So you can wipe out "unemployment" as currently measured to exactly zero
> for two years by having the government hiring people to dig lots of
> holes and then fill them up or whatever you find more useful (surely
> there's some infrastructure to work upon).
> 
> How can that become only a bit more than 1% of "unemployment" decrease?
> 
> Is basic arithmetic failing me?

http://www.prospect.org/csnc/blogs/beat_the_press_archive?month=01&year=2009&base_name=basic_stimulus_arithmetic

Dean Baker concludes on a cost of "about $65k per job year".

Laurent

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