by the Sandwichman
The Sandwichman is still wondering how economists make up their guesses about how $x billion dollars of fiscal stimulus (AKA "deficit spending") will create y million jobs.
Yves Smith says they find them on the back of an envelope. Greg Mankiw says econometrics doesn't always confirm the predictions of textbook Keynesian models. Martin Wolf mentions something about how "deficits aimed at sustaining demand will be piled on top of the fiscal costs of rescuing banking systems bankrupted in the rush to finance excess spending by uncreditworthy households via securitised lending against overpriced houses." Don't you love that house-that-Jack-built volute?
Whew! It can be easy to forget that the issue here is unemployment. As Paul Krugman notes, the US employment report comes out tomorrow, Friday. "The economy is falling fast. We’ll see what tomorrow’s employment report says, but we could well be losing jobs at a rate of 450,000 or 500,000 a month."
Coming Soon: The Sandwichman Stimulus Plan. I'll show you my back of the envelope calculations.