Multiplication and Division
John Maynard Keynes’s most popular notion was his infamous “multiplier” effect. Spend some government (taxpayer) money, and the effects “multiply” in the economy, as if the Invisible Hand were on speed.
The truth is the reverse: “the divider” effect. Create government jobs and progress in the marketplace “divides” as a result of the increased taxes needed to support the jobs.
Our orator-in-chief also says he’s in the business of “saving jobs.” Like most politicians, he loves “multiplier” talk, because it gives him the green light to spend.
But, like the bank bailouts, what’s really happening with stimulus spending is that some people are getting raises and bonuses while the unemployment rate goes double-digit.
The actual multiplier effect regards talk. For every dollar government spends, politicians claim umpteen more jobs “saved.” It’s not reality. The multiplication effect occurs entirely in rhetoric and in PowerPoint presentations.
The New York Times tells us how “the federal government spent $1,047 in stimulus money to buy a rider mower” for a cemetery in Arkansas. Then, “a report on the government’s stimulus Web site improbably claims that that single lawn mower sale helped save or create 50 jobs.”
The magic of this sort of job creation doesn’t rest upon the logic of markets. Here the magic lies simply in the lying. The “multiplier” multiplies because politicians tell multiple lies.
This is Common Sense. I’m Paul Jacob.