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Sorry. No. This is haphazard analysis and intellectually dishonest from someone who should know better. Correlation is not causation, nor can causation be inferred from correlation.
TJWP, I’m happy you look up links I post about logical fallacies, but you’re committing one yourself by not really understanding the fallacy.
you argue like correlation more or less proves that there is not causation.
that’s grade school logic.
correlation alone does not prove causation, but with supporting facts, it can be inferred.
especially when it’s a trend over many years, supported by actual experience over the last 100 years in societies that expanded government and destroyed jobs and the free market, i.e. socialist states
Right up until that comment, I had assumed that you were more ideologue than idiot.
My issue is with how the data is presented, in a way that certainly tries to lead the reader to infer the causation with little reasoning backing it up, other than the discussion of the multiplier, which is entirely correct.
However inferring causation is very difficult because correlation can not tell you if government spending rises because of a fall in employment (which would be what we expect from counter-cyclical monetary policy) or if employment falls because of a crowding out of private players due to an increase in the size of government.
You will find that almost all macroeconomic literature favors the first explanation over the second. It is, in fact, the theory that central banks use to justify their intervention in markets via monetary policy.
I agree that this graph is certainly slanted towards the idea it is used to support.
and if it were about a more arcane subject, I’d even agree with you.
but since this correlation is something I’ve personally experience here in Europe (where I currently live) it is not really important if the graph itself is biased.
unfortunately it’s well known that government spending increases unemployment…
a few reasons:
the money to spend must come from somewhere. Governments do not create money or wealth or value. they leech it from a system with taxation.
taxation is a burden on people who employ others and on the employed themselves.
if a government wants to increase spending, they have to increase taxation and fees/state mandated insurance (a VERY BIG DEAL in Europe. seriously. this is often 10% or more of one’s income)
this makes it so expensive to hire people, and for the employed it often makes sense to quit a job, since the insurance is free if you’re unemployed, but unaffordable if you are…
Obamacare is a step to EU style insurances and fees that are not really taxes
so at the end, it really is a correlation
You are confusing types of government spending. Just contrast French style government spending where the state is a massive part of the economy verses the American fiscal stimulus to combat a down-trend in employment (reserve judgement on effectiveness). I certainly agree over the long run, lets say a decade or so, higher levels of government spending do crowd out private parties. However in counter-cyclical policies it actually increases private sector activity by artificially boosting demand.
Additionally, the increased tax burden is again true if you extrapolate the expenditure over a longer period of time, a decade or so. However, America did not increase taxes to fund it’s fiscal policies. It would be quite illogical to fund counter-cyclical policies with simultaneous increases in taxes. The policies in America were funded by the Federal Reserve buying treasuries from the Treasury, thereby increasing the deficit (but effectively conjuring the money out of thin air).
It is very important to identify the type of spending, how it is funded, and even with those things it is not always easy to forecast employment because of so many other variables that factor into the equation. However, I maintain this is why it is difficult to infer causation, because even by examining other cases we do not know if we have similar factors.
duh….
government intervention, taxation and fucking over businesses which are in competition with government owned businesses destroys jobs.
who knew?
same happened in the soviet union, in the EU and everywhere else.
but that’s the whole point. in order to transform the US into a socialist utopia, the free market and private enterprise needs to be destroyed