This USA Today article inadvertently reveals the problems with crackpot Keynesian economic “stimulus” schemes:
Consumer spending, propelled by a temporary government incentive program for auto sales, shot up in August by the largest amount in nearly eight years even though personal incomes continued to lag. In more gloomy news for the economy, the number of workers filing new claims for unemployment benefits rose last week, another report showed.
So consumer spending (i.e. aggregate demand) is up, but more jobs continue to be lost. Such findings run contrary to the calls of Keynesians and statists that what is needed is a boost in aggregate demand to create jobs.
How could aggregate demand/consumer spending be up but ever more jobs continue to be lost? A major reason why is that the “aggregate demand” crowd looks at the economy, well, in the aggregate. They pay no mind to the complex structures of production required to create even a simple product, such as a pencil.
As I explained back in May in this Chapel Hill News article:
Keynesian-inspired economists and politicians, rather, view idle capital and labor only in the aggregate. Such simplistic assumptions overlook the complexity of the myriad structures of production within our economy and the very specific location, attributes and combinations of capital required to produce goods and services demanded by consumers.
As economic historian Robert Higgs described, “If someone, whatever his skills, preferences, or location, is unemployed, then, in this framework of thought, we may expect to put him back to work by increasing aggregate demand, regardless of what we happen to spend the money for, whether it be cosmetics or computers.”
Government cannot “create” jobs — it can merely redirect and consume available resources for political ends. By focusing merely on aggregates and ignoring the very specific nature of individual unemployed workers and capital, our politicians are merely distorting and prolonging the necessary restructuring of resources to productive purposes required for economic recovery.
The USA Today also reports: “Savings declined for a third month. Savings slipped to an annual rate of $324.1 billion, as the saving rate eased to 3% from 4% in July.” Of course savings suffered as a result of increased consumption. Without an influx of newly created money by the Fed, one must always decrease as the other rises (banks are still sitting on the billions of new money).
Isn’t overconsumption and reduced savings a major cause of the current mess? Advocating for and celebrating a boost in short-term consumer spending overlooks the long-term effects of dwindling savings; and, as we can see with the data, doesn’t translate into job growth either.