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Old 10-18-2012, 06:02 AM   #70
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Default Re: Unemployment Drops Below 8%, Conservatives Cry Conspiracy

Originally Posted by joe
The government construction worker may now have money to spend, but what about the people who are taxed to pay his salary? Those people now have an equal amount less to spend. So the economy isn't being "moved" any faster when the government creates jobs.

Joe there is something in economics called a multiplier effect. So the effect is not one to one. Those construction workers would have a higher income and they would pay taxes on that and they spend more money on lunches at work and transportation, work clothes, beer and tips at their local bar.

So not only does the construction worker now have more disposable income, the restaurant owners and waitresses have a little bit more, the gas station owner has a little bit more and the clothing store owner and the bartender has a little bit more disposable income.

The real job losses in this current recession has been state and local workers. The private sector has created over 4.5 million jobs since unemployment bottomed in Jan 2010, however government jobs (which usually keep pace with population growth) have not only not kept pace, but are a down over a million jobs since Obama took office.

What's the effect of that? This estimate says with the multiplier effect
roughly 0.67 private sector jobs are lost for every public sector job cut. This means that the public sector being down 1.1 million jobs has likely cost the private sector 751,000 jobs (1.1 million*0.67).

Originally Posted by joe
Those people now have an equal amount less to spend.

This is apples to oranges. Each taxpayer is not paying the full amount of the worker's salary, but a very tiny fraction of it.
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