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August 21, 2011 AD

Why Stimulus spending raises the unemployment rate

This will be a very simple post.

The reason why the government's stimulus always backfires is fundamental economics.

As a rule, each government stimulus worker performs less work than two private workers for the same amount of salary, therefor he is being paid over twice what he is worth.

In order to pay this stimulus worker's salary, the complete equivalent salary of two lower-paid private workers have to be taxed or inflated away by government printing presses.

So in order for the one government worker to be paid, two private workers are forced to be laid off. There is simply not enough private money to keep the private workers employed.

Therefore the net effect is the loss of one job in the total workforce.

Multiply this by millions of government stimulus workers and the economy loses twice as many millions of private jobs.

Of course, the reverse works wonders for reducing unemployment.

If one government worker is FIRED, as he would be in the private workforce because he is only doing half the work for his paycheck, then enough money is freed up from a reduction in the tax rate for employers to hire two private workers.

Fire 90% of the government workforce and America would have enough workers to begin exporting to other countries again in a big way.

Problem solved.

Source: The Patriot Update
Obama’s problem: the Suze Orman economy

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