‘Stimulus’ Has Cost $278,000 per Job

[handyman2]

I remember the words spoken by Obama when he introduced the package. He said this stimulus is for shovel ready jobs that will improve our roads, bridges, and infactructure. First there were few shovel ready jobs. One county in California was to build a road that no body wanted. etc etc. So where did all the money actually go?

[floridayankee]

Jul 5, 2011 15:16:04 GMT -5 handyman2 said:

I remember the words spoken by Obama when he introduced the package. He said this stimulus is for shovel ready jobs that will improve our roads, bridges, and infactructure.

"Shovel-ready was not as shovel-ready as we expected."

"there's no such thing as shovel-ready projects."

[reasonfreedom]

Jul 5, 2011 13:42:37 GMT -5 ugonow said:

thinkprogress.org/economy/2009/11/02/172997/misleading-stimulus-math/ Beware the math

They may be correct in that it cost money for the tools needed with those jobs, but the math is still correct. amount of money/jobs created= cost per job created. The mathematics is not apples to oranges, it is simple math. No matter how the money was spent the stimulus only created that many jobs.

[reasonfreedom]

Jul 5, 2011 13:42:37 GMT -5 ugonow said:

thinkprogress.org/economy/2009/11/02/172997/misleading-stimulus-math/ Beware the math

They may be correct in that it cost money for the tools needed with those jobs, but the math is still correct. amount of money/jobs created= cost per job created. The mathematics is not apples to oranges, it is simple math. No matter how the money was spent the stimulus only created that many jobs.

[EVT1]

Just curious, what is a job really worth to the economy? Take someone no longer using unemployment or public other assistance- maybe food stamps or Medicaid, who is now earning and spending money, which circulates around to other businesses, improving their sales, etc. Multiply that by the number of jobs created and it is hard to argue it isn't stimulating the economy.

Or on the other hand, we could have, maybe let the car companies fail- and let that failure trickle down to their suppliers, dealerships, transportation companies, advertisers, other vendors, etc., forward that to all of the other businesses their employees frequent, etc., add more people to unemployment and government assistance, and on and on- so we can give some more tax breaks for people with piles of money not circulating through the economy or to make sure bankers can't ever lose a bet.

Republican economics= a race to the bottom and a ruined economy, but really great for maybe 1 out of a thousand people aka their true base

[Deleted]

Simple is about right...

[ed1066]

Just curious, what is a job really worth to the economy?

Ah, is this going to be the slogan for Obama's re-election campaign?

[Virgil Showlion]

From the thinkprogress.org article:

"The Associated Press’ Calvin Woodward, however, was not fooled, and today released a piece telling readers to “beware the math” coming from the Republicans:

Some Republican lawmakers critical of President Barack Obama’s stimulus package are using grade-school arithmetic to size up costs and consequences of all that spending. The math is satisfyingly simple but highly misleading…First, the naysayers’ calculations ignore the value of the work produced. Any cost-per-job figure pays not just for the worker, but for material, supplies and that worker’s output — a portion of a road paved, patients treated in a health clinic, goods shipped from a factory floor, railroad tracks laid. Second, critics are counting the total cost of contracts that will fuel work for months or years and dividing that by the number of jobs produced only to date.

Bear with me for a lengthy analysis. I promise not to disappoint you.

Firstly, the "worker's output" is the worker. A job is worthless if it produces no usable output. The stimulus has the sole purpose of generating usable output. The fact that a man is employed to produce this output is ancillary. For example, spending $100 B to hire 10 million basket weavers would create millions of jobs at the low low cost of $10 K per job. Even so, it would be an utter failure as a stimulus program. The pertinent question to ask is: Is the output of a typical "stimulus job" worth $275,000 in value? Or another way of asking the same question: Would a similar job in the private sector pay $275,000? Is this fair market value for the output?

Mr. Woodward wrongly seems to think that a job comes "in addition to" productive output. This is a common misconception. A job is its productive output.

Regarding the inclusion of material costs, Mr. Woodward has a point. However, if we compute the total cost of the concrete one worker can lay in a year, or the total amount of asphalt, or the total cost of the railroad ties, or the total cost of office supplies for an office job, we wind up with a few thousand dollars. I'd wager dollars to dimes that if we computed the average cost of bulk materials per worker, we wouldn't even hit five figures. The figures $270,000, $265,000 or even $250,000 are just as damning as the original.

The argument about $275,000 being spread over "years to come" is also valid on its face, but comes with some enormous caveats. The first is: the only parts of 2009 and subsequent years that can be fairly counted toward as "production-added" are the parts where a worker would be unemployed if not for the stimulus package.

Let us consider one "unit" to be one year's worth of labour (assuming 100% productive output). Then:

• if Worker Joe is hired at the beginning of 2009 due to the stimulus, and would otherwise would have been jobless until the start of 2010, the $275,000 has purchased exactly one unit--in line with the Republican claims
  
  
• if Joe would otherwise have been unemployed until the start of 2011, the stimulus has purchased two units at a cost of ~$140 K per unit
  
  
• if Joe would have secured a private sector job on Jan 2 had he not been awarded a stimulus job on Jan 1, then the stimulus has purchased zero units. (You might argue: "But Clint, another worker, will get to fill the position Joe would've had in this case." This argument is quite often a fallacy, for reasons given below.)

To determine how many units the stimulus has actually purchased, we need to determine the distribution of unemployment times for the various jobs. If it turns out that the average duration of unemployment is more than a full year, then the cost per unit production of the stimulus is, as the AP suggests, overestimated by the "cost per job" defined by Republican pundits.

If, however, the average length of unemployment sans stimulus is less than a year, the cost per unit production is underestimated. That is, part of the $275,000 the taxpayer has given Joe has purchased production that would have occurred anyway (at zero cost to the taxpayer).

As a final issue: it is foolhardy to ignore the issue of job displacement. A stimulus only generates as much productive labour as it does not displace.

If the US government hires 100 employees at $100,000 apiece to create the GovCo construction firm, this firm is awarded a major highway renovations contract, and the 100 employees (making $20,000 apiece) at competing Private Builders Inc. lose their jobs because GovCo. underbid them on the contract, the U.S. government has just spent $8,000,000 taxpayer dollars doing absolutely nothing.

By the same token, in the Joe/Clint example above, if the no-stimulus case had Joe working at BuildEx and Clint working at Private Builders Inc., then the stimulus case has Joe moved to GovCo., Clint laid off from his job at Private Builders Inc. and then being hired by BuildEx. The government has spent $275,000 for zero additional productivity and what amounts to a sordid game of "musical jobs".

I do not claim that stimulus jobs displace private sector jobs in a 1:1 ratio like some economists do (in fact, some economists claim that stimulus jobs displace private sector jobs at a worse than 1:1 ratio due to the "bird feeder effect" and government dependency). But any private sector displacement must be fairly counted against the overall productivity gain of the stimulus. For example, if the ratio is 3:1 (one private sector job displaced for every three stimulus jobs created), then our cost per unit production immediately goes up to $412,500. In the extreme case of 1:1 displacement, the stimulus does absolutely nothing to affect the nation's production and the cost per unit goes to infinity. Displacement effects cannot be ignored in a fair assessment.

$275,000 may not be the best "big picture" number to look at. But it's simple, reasonable, and (for the reasons described above) just as likely to underrepresent the cost per stimulus job as it is to overrepresent it.

"Misleading" may not be misleading you in the direction the AP and thinkprogress want you to think it is.

[reasonfreedom]

Nice analysis Virgil. I was basing my conclusion that both the stimulus money spent and jobs created were accurate numbers. Seemingly both numbers are variable because there is not enough data collected to determine the value of one variable or the other. So in mathematical equations we would have something like 666 (billion)\x=z or x\y=z. Without having a definite number for at least 2 of the variables(x,y, or z), you will not have a definite answer. Granted a very long calculus equation could be used with all of the other factors and more that were mentioned in your analysis. I quite frankly had enough calculus in 11th grade to want to even start collecting the possible data to fit into a nice long equation.

[privateinvestor]

Bear with me for a lengthy analysis. I promise not to disappoint you.


You didn't and good job, but don't forget the Simulus has to be paid for someday. Obama may not stimulate much if he pushes for his tax increases by targeting the wealthiest of Americans or closing loopholes to corporations...The economic slow down now could be even slower according to his former economic adivisors who jumped off the Ship over the past two years and that would increase unemployment numbers.. Any tax increases to corporations could result in more layoffs.

[handyman2]

One thing that I notice is always missing from true cost when they compile the numbers is that if this is borrowed money there is millions in interest payments that make an impact on the final cost. Am I correct in this assumption or not?

[jkapp]

Jul 5, 2011 8:48:21 GMT -5 Mkitty is pro kitty said:

A significant portion of the stimulus was given directly to the people in the form of tax breaks

Well, since the stimulus didn't work, ergo tax breaks don't work. Check and mate.

Well, if the left is correct and tax breaks = spending, then I guess spending doesn't work either

Are Obama's economic advisors racists or what?

Do Conservatives play the race card or what? [/quote]

As the saying goes - When in Rome... ;D

[jkapp]

>>Republican economics= a race to the bottom and a ruined economy, but really great for maybe 1 out of a thousand people aka their true base <<

Ironic since that's basically the type of economy we have now with Obama's and the Dems economics...it's just instead of being $9T in debt and a ruined economy, we have hit the debt ceiling with nearly $15T in debt and a ruined economy with no wiggle room. [edited B to T]

Thanks Dems!

>>Just curious, what is a job really worth to the economy? Take someone no longer using unemployment or public other assistance- maybe food stamps or Medicaid, who is now earning and spending money, which circulates around to other businesses, improving their sales, etc. Multiply that by the number of jobs created and it is hard to argue it isn't stimulating the economy.<<

And the left still doesn't understand how it works...in order for the government to "give" that unemployed person that spending power, they must first TAKE it from someone else's spending power. So it's a zero-sum game...

[privateinvestor]

Well the next few weeks in Washington DC are going to be hot as hell and not because of the weather this time...

Obama will meet tomorrow to hammer our a deal in the White House to try and get something before the 01 August deadline so we have 25 days to go.....and it will be one of the major stories coming out of the White House for those remaining days unless Tim Geithner or another economic adviser to our president quits..

[Virgil Showlion]

"Shovel-ready was not as shovel-ready as we expected."

But not to be outdone, the Republicans will come back swingin':


Remind me why you guys have a two-party system again?

[formerexpat]

Anyway... its impossible to calculate, in the way the OP pretends to, how sustaining personal buying power impacted the economy.

OP didn't calculate the cost per job Read the article and the report from Obama's economists.

That 7.3 percent was December 2008, before Obama was elected. Isn't it rather dishonest to blame Obama's stimulus bill starting with a number before he was even elected?

I thought he was elected in November and seem to remember that he was very involved post election so he could shape this stimulus package.

Yep, memory serves me right: articles.philly.com/2008-12-03/news/25243868_1_obama-and-biden-stimulus-plan-national-governors-association

thinkprogress.org/economy/2009/11/02/172997/misleading-stimulus-math/ Beware the math

when jobs is what matters most to people when total employment is over 15%, it's reasonable to use this approach.

Irrelevant are all the left leaning links you guys want to post. Obama's own economic advisers are prepared to admit it was a failure - quit hanging on the guys nuts.

[formerexpat]

Or on the other hand, we could have, maybe let the car companies fail- and let that failure trickle down to their suppliers, dealerships, transportation companies, advertisers, other vendors, etc., forward that to all of the other businesses their employees frequent, etc., add more people to unemployment and government assistance, and on and on- so we can give some more tax breaks for people with piles of money not circulating through the economy or to make sure bankers can't ever lose a bet.

This is possibly the dumbest thing I've seen here. Do you have no clue how a structured bankruptcy would work?

The business would continue to operate and its debts would be restructured. The LA Dodgers are in bankruptcy right now. Have they stopped playing games?

The problem with that process for Obama was that it would be the unions; those that financially helped him greatly, that would have taken it on the chin.

Instead, he decided to reward them very well for their support during the 2008 election.

[reasonfreedom]

Jul 5, 2011 12:04:56 GMT -5 oped said:

lol... so, you're good with the math... ok.

And you are willing to concede that tax cuts are spending. Also good to know.

I never conceded that because it isn't true. Spending= spending, tax cuts only decreases the tax revenue(which in turn should slow spending, but in our government it doesn't) and gives more back to business to profit which should in turn trickle down to the employees. Then the employees will spend money on goods. I am by no way saying that businesses are fair and do this but I stand by thoughts that tax cuts are in no way spending.

[privateinvestor]

Obama was asked about this issue today on twitter which was carried by MSNBC and he admitted the Stimulus Spending didn't create the jobs he had hoped to see. He blames the banks for being responsible for not lending in sufficient numbers to jump start the housing industry and other industries thus jobs were not created to match the goals he outlined in early 2009 or as he thought ...Obama had hoped to see unemployment be @ 5% with all of the Stimulus Spending..

[Deleted]

Republican economics= a race to the bottom and a ruined economy, but really great for maybe 1 out of a thousand people aka their true base

Evt1, well since we need to put blame (like you have on the Republicans) then everyone needs to remember that THIS recession was caused by a democrat law to help the poor buy a house. Well it seems to me that only 1 out of a thousand laws passed by the democrats actually helps people. I would except the excuse that they were misguided EXCEPT for 2 things. 1. They never admit that they screwed up & 2. They are batting about 100% in screwed up. That would be ok if they weren't screwing the poor the worst.

[Deleted]

He blames the banks for being responsible for not lending in sufficient numbers to jump start the housing industry and other industries thus jobs were not created to match the goals he outlined in early 2009 or as he thought

The last time the banks did what the democrats wanted they all needed bailing out. No wonder they are a little timid this time. Also it's no wonder that he found someone else to blame. They always do...

...Obama had hoped to see unemployment be @ 5% with all of the Stimulus Spending..

Hoping is fine. A responsible stimulus package would have been a lot better!

[floridayankee]

Jul 6, 2011 15:19:46 GMT -5 @oldtex said:

....since we need to put blame....

Don't bother Tex. Anybody that places blame on the opposition party for every single problem and fails to see the problems within their own party...and this goes for both major parties...can't be reasoned with. You can talk till you're blue in the face, but it does no good.

[Mkitty is pro kitty]

if the left is correct and tax breaks = spending

No, tax breaks are a subset (you can "spend" other ways). Could you run off and tell that imaginary person/people in your head he/she/it/they is/are wrong? I always feel weird for defeating an argument I supposedly made.

As the saying goes - When in Rome...

So Conservatives really are unabashedly unembarrassed in their hypocrisy. Why don't you wait until a liberal plays the race card, then play that routine? Being unapologetic in hypocrisy is bad enough, but being hypocritical over something the other side hasn't done in the first place, well that's sad even for Conservatives, and there aren't enough emoticons in the world to show that.

and a ruined economy

Why don't you visit a third world country then tell us what a ruined economy is?

Ah, is this going to be the slogan for Obama's re-election campaign?

What are the Republicans? We know how to complain about jobs! jobs! jobs! Oh, you actually want something done? Uh ... tax breaks, cut spending, and lots of anti-abortion laws! (none of which really create any jobs)

I thought he was elected in November and seem to remember that he was very involved post election so he could shape this stimulus package. Yep, memory serves me right:

I don't care when he was elected, nothing can begin to happen with a bill until it's enacted, and then it takes time after that to get things going. Do you think once a bill is signed, things fall into place magically? We're judging the bill itself, not when Obama was elected. Using your logic, if a runner thinks about a race a week ahead, then runs a mile in a minute, he actually took a week and a minute to run the race. Your memory may serve you right, but your "logic" isn't doing you any favors.

This is possibly the dumbest thing I've seen here.

You should read the post where this guy thinks a bill should be judged when it was thought about rather than enacted.

No matter how the money was spent the stimulus only created that many jobs.

So Perry was bad for paying off the Texas debt rather than spend it on jobs then?

Obama's own economic advisers are prepared to admit it was a failure

And was it a failure to give it to governors then? Tell us all about it.

when jobs is what matters most to people when total employment is over 15%

So you're against government employees being laid off?

quit hanging on the guys nuts.

Nobody seems to have gone there except you.

[privateinvestor]

Lord, keep Your arm around my shoulder
and Your hand over my mouth. Amen.
Texas Prayer

[formerexpat]

I don't care when he was elected, nothing can begin to happen with a bill until it's enacted, and then it takes time after that to get things going. Do you think once a bill is signed, things fall into place magically? We're judging the bill itself, not when Obama was elected. Using your logic, if a runner thinks about a race a week ahead, then runs a mile in a minute, he actually took a week and a minute to run the race. Your memory may serve you right, but your "logic" isn't doing you any favors.

Markets reacted to the information it gathered about the stimulus, even before it was enacted. It was known before the pen was put to paper what would be included in the "stimulus". Businesses, seeing that it wasn't business friendly and was more of a thank you to my buddy's for electing me rather than a real stimulus focused on helping the economy, had no other choice but to lay off employees.

Just because you produce an analogy, doesn't make it true.

So you're against government employees being laid off?

Faulty logic.

You can attack the poster all you want to defend your man but that will not change the fact that his own advisers say that the economy would likely be better without the stimulus.

Sorry you don't like the messenger but the message from Obama's own advisers is pretty clear.