Those of us who had to square dance in grade school may remember the old Virginia Reel; the caller commanding us to do the dos-a-do which was a spin move in one direction and then another.  That spin, however, doesn’t compare with the Obama Administration’s version of that dance move, in which the American people are told one thing, and then with dizzying speed, find out something else . . . the truth. Fortunately, most Americans are beginning to focus on the complete disconnect between the absurdity of the claims made by the Administration’s spinmeisters and the people’s own sense of reality.

The most breathtaking flight of fancy from Washington this past week was the full- court press by the President, Vice President, Chairperson of the White House Council of Economic Advisors and a whole host of Obama acolytes to proclaim that the Stimulus is working, that we’re “ahead of schedule” on job creation and that we’ve created  (or saved) millions of jobs.  The job saving claim is, in a strange way, irrefutable…sort of like a witch doctor saying if he hadn’t done his rain dance, the drought would have been worse.  As Democratic Senator Max Baucus complained to the White House “you created a situation where you cannot be wrong.  If 2,500,000 jobs are lost, you claim that without your stimulus program, 3,500,000 jobs would have been lost.  Taken to its logical conclusion, if everyone except one person were laid off, the Administration could claim that without its stimulus program, that person would have lost his job.”

There is, of course, a reason for this disciplined chorus of downright silly spin.  The Administration knew that data were about to be released from a variety of reliable sources revealing a further decline in manufacturing and retail activity, a further pull back in private sector hiring plans and industry investment plans, unemployment stubbornly stuck at just under ten percent and a further sinking of consumer confidence.  What’s a “fella” to do with elections coming and millions of jobs lost?  Dance the old dos-a-do and around you go, and claim the stimulus saved jobs.

This further sinking of consumer confidence is particularly significant and vexing to the Administration.  Consumer confidence is a consequence of the consumers’ sensitivity to what they see, hear and feel all around them.  It is reality. It can’t be manufactured, successfully manipulated (for very long), divined from the White House or spoon fed from a teleprompter.

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Despite Vice-President Biden’s claim, the reality shows that, despite costing more than the administration expected, the stimulus still hasn’t created the jobs they promised.

CLAIM:  Democrats assert stimulus failed because Republicans kept it small.

Democrats repeatedly promised their massive 2009 stimulus plan would create over 3 million new jobs.  It hasn’t.  Instead, unemployment climbed to 10 percent as over 2 million more jobs were eliminated.  This weekend Vice President Biden took the extraordinary step of suggesting stimulus failed because Republicans made it “too small”:

TAPPER: Was the stimulus, in retrospect, too small?

BIDEN: Look, there’s a lot of people at the time argued it was too small. Actually, we…

TAPPER: A lot of people in your administration.

BIDEN: — yes. A lot of people in our administration, a lot of — I mean, you know, even some Republican economists and some Nobel laureates like Paul Krugman, who continues to argue it was too small. But, you know, there was a reality. In order to get what we got passed, we had to find Republican votes. And we found three — three. And we finally got it passed. So there is the reality of whether or not the Republicans are willing to play, whether or not the Republicans are just about repeal and repeat the old policies or they’re really wanting to do something. And I — I’m not — I’m not — you know…

TAPPER: So if you didn’t have Republicans that you had — if you didn’t have the legislative reality…

BIDEN: I think what…

TAPPER: — it would have been bigger?

BIDEN: I think it would have been bigger. I think it would have been bigger. In fact, what we offered was slightly bigger than that…

FACTS:  Democrats’ stimulus bill failed on its own merits, not because – at $862 billion or nearly $3,000 for every man, woman and child in the U.S. – it was “too small.”

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Nobel Laureate Vernon Smith in The Daily Beast:

The case for government deficit spending was that idle unemployed labor and capital would be put to work to increase the output of goods and services. Hence, a dollar of government spending would produce more than a dollar of new output because of the “multiplier effect.” Robert Barro of Harvard has studied wartime and defense spending, and found a multiplier of only 0.8. But those were better times, when businesses, banks, and consumers were not primarily concerned to use new income to pay down debt or save to protect against income loss. Even in better times there wasn’t much bang for the buck.

So what has been the government’s response in the current crisis? Besides spending stimulus, it was tax incentives for new home buyers and cash for clunkers if you bought a new car. All three are programs for borrowing output, homes and cars from future production and sales. Using subsidies to pump up home sales beyond what people could afford was the problem that led to the crisis. Now the problem is touted as the solution.

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In a recent post, I posited unemployment insurance should be reformed to offset the minimum wage for new small businesses hires.  Please continue in comments to help me brainstorm.

This is a “free stimulus,” because it uses current unemployment payments to actually create new jobs.  No tax cuts.  No deficit spending.   No new government program.  And only Main Street gets to use it.  When was the last time you heard something sane and immediate?

The Elevator Pitch

Example:  A company not currently making new $7.25 per hour hires, can bid $2 per hour and if no other employer in the area bids more, and have deeply discounted workers… with the government making up the difference to $7.25.

The discounted employment contract is for one month, so when a higher bid comes in, the current employer will have to meet the new pay.  If no higher bid comes in, the small business continues paying $2 per hour.  Highest bid wins.

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