Sunday, November 23, 2014

How the stimulus nearly destroyed Illinois

Here we have the concluence of three graphs, oil prices (scaled) in red, Illinois unemployment rate in blue, and the spending for the federal stimulus in green. Now Illinois is the traffic hub of America, both rail and truck.  It is middle America.  So Illinois will be clobbered by high oil prices worst then border states.  The entire commercial network of the USA was bypassed with the stimulus, meaning, money sent to border states was spent in border states, not part of the regular commercial flow.  Oil prices, we see rose with the stimulus, and up to a point Illinois unemployment dropped. But notice that since the stimulus bypassed the normal network, that Illinois, the traffic hub, nearly collapsed in mid 2011, employment shooting back up.  For almost the next three years, Illinois unemployment stayed at 9%, it was the last economy to recover.

Now Illinois has the usual pension problems, as does California.  Neither California nor Illinois ever fixed the problem and that had contributed to the late recovery in both states.  But clearly, Illinois suffered a net negative from the stimulus.

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