Obama's Fiscal Stimulus Has Saved Jobs 18 comments
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The National Journal asks:
Is the Obama administration’s stimulus plan helping to create or “save” 650,000 jobs, as the president and his aides say? Is that an appropriate way to measure the stimulus’ impact?
My response:
I am astounded by claims that fiscal stimulus under recession circumstances doesn’t create jobs. Or at least I am astounded when such claims come from reputable economists. Do they think that a construction job on a road-building project doesn’t count as a real job if the funding comes from the government? Or do they think that the increase in demand doesn’t raise output in the aggregate, because the federal debt crowds out private production and so someone else somewhere loses his or her job? That would be hard to believe, at a time when the Fed is keeping interest rates at zero, long-term interest rates are also quite low, and capacity is lying idle. Moreover, Republican lectures to Democrats about the evils of the national debt take real chutzpah, after Presidents Reagan, Bush I and Bush II increased the debt ten-fold during periods when no national emergency required it.
Yes, the effort to identify specific jobs saved is more a political exercise than an economic exercise; the true number of jobs saved, relative to what would otherwise have happened is greater than the 650,000 number. It is legitimate as a communications strategy for the White House to make the benefits concrete by pointing to the many teachers who would have been laid off by fiscally devastated state and local governments in the absence of federal government money. But one problem is that the exercise doesn’t count the indirect effects of most of the spending and tax cuts, where it is hopeless to try to pinpoint whose job was saved.
The biggest problem, of course, is that one cannot estimate accurately, let alone prove, what would have happened in the absence of the stimulus package. Claims by Republican congressmen that one should judge Obamanomics by looking at whether employment is greater now than before February are nonsense. If there hadn’t been a severe recession underway (starting on the predecessor’s watch, if you want to get political about it), there would have been no need for the stimulus. None of us claims that fiscal stimulus creates a lot of jobs on net when the economy is already expanding strongly. The increased government spending that occurred during the terms of Presidents Reagan and Bush after the recessions of their respective first terms had already ended, for example, did not create a lot of jobs. But without the recent stimulus, the recession would have been worse.
The appropriate way to estimate the stimulus impacts is by means of a standard macroeconomic model with fiscal multipliers in it. But if you believe philosophically that fiscal multipliers are zero, even in a severe recession, then neither a standard macroeconomic model nor anything else will convince you.
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This article has 18 comments:
On Nov 10 04:55 AM Dave Wrixon wrote:
> It depends what you mean by a Job. All employment is transient and
> lasts for a finite period of time. What you are actually doing with
> this policy is robbing jobs from the future. It may be that under
> extreme circumstances that is justifiable, but don't imagine there
> is no price to be paid and don't imagine that somebody will not pay
> for it with the loss of a least a job opportunity.
Furthermore, you should be aware that we are where we are because Politicians in the past robbed jobs from the future just in the way you are proposing.
All government stimuli cause one thing: market distortion. The following is a partial list of the stimuli that government provided for real estate that, in part, caused the real estate bubble:
* the Community Reinvestment Act
* exclusion of capital gain taxes on residential real estate
* deductibility of mortgage interest
* post-dot-com interest rate drops by the Fed
* allowance for rental real estate losses to offset earned income
* jawboning about an "ownership society" by Pres. Bush
In short, government action--even if well-intentioned--has unintended consequences that government authors cannot begin to comprehend. Indeed, the unintended consequences are often worse than the "problem" that they are attempting to cure.
From estimates that I have seen, it would probably have been more productive to use Ben's helicopters to distribute that money. Irresponsible government intervention in the housing market extending back at least several decades through both Republican and Democratic administrations with help from their lapdogs in congress and at the fed created this mess.
Anyone who thinks that either party somehow deserves credit for these misguided efforts to clean up the mess they largely created in the first place has to be a subscriber to the broken window theory of economics.
Government has been destroying the economy with stupid unaffordable policies stacked on top of other stupid unaffordable policies,all the while pretending that they actually know what they are doing. The inflation/debt recipe of Keynesians is as effective for the economic patient as bleeding therapy was for people in colonial times. If the illness itself does not get you, the proposed cure probably will...
And now further crippling the economy with multi-generational debt and a plunging currency are to be lauded? Ten years from now, no one will admit to ever having been a Keynesian for fear of being recognized as a fool. Real employment will not recover for years, if ever. We have to clean house in Congress in 2010, along with everywhere else in government. The parasites have grown to the point where they are killing the host.
You also can't estimate
A) the number of jobs created
B) the number of jobs saved
C) Due to A&B, the cost per job created
Even if you did take Bidens word for it ( I wouldn't), saving 650,000 jobs for 787 billion dollars isn't a good ROI.
You don't just look at the facts and say did Obama create jobs or not. You have to attach a price to that "stimulus". If he created a new ditch digging job for 1,000,000, would that be worth it?
Jobs may or many not have been created, but what is certain is that we will have hundreds of billion dollars worth of additional debt.
Like the $24,000 clunkers we bought and squashed flat and then paid to haul off, the question is NOT whether or not the program can spend money, but whether or not it was a good thing for the government to do.
They were standing in front of "Home Depot" waiting for someone to buy landscaping !
Of course, we'll be bankrupt and standards of living will return to that of the stone age -- but look at all the jobs created!
One for instance for you to consider - if any existing job received a raise in pay from the stimulus it was counted as a job created.
Your research is sadly lacking. Suggest you do a little more digging.
After all, as the Goldman exec said - they are "doing God's work".
Could you please enumerate the "many signs of improvement" you allude to? Perhaps you refer to the laughable numbers the NAR puts out on home sales? Or maybe its the latest unemployment numbers?...wait...let's skip that one, shall we?
I will grant you the market's up a lot....causing a bit of a "feel better" effect by legions of retail investors.
On Nov 10 08:28 AM Lok Sang Ho wrote:
> I agree 100% to what Frankel wrote here, and am amazed how some commentators
> continue to ignore the many signs of improvement that have occurred.
> With further improvement in industrial production and exports, employment
> growth should come back in a matter of months.
> Here in southern NH is a great example of the way jobs were "saved".
> Construction was underway to create a new access road from the Everett
> Turnpike to the Manchester Airport when the stimulus bill was passed.
> Suddenly, the $300 dollar signs were put up around the construction
> site, and when the workers came back to work after the weekend, there
> jobs were magically "saved". I think there are examples like this
> in every state. Isn't it wonderful how a job that existed and wasn't
> about to disappear was saved.
I've been tempted to add a sign below those ARRA signs that says, "Please, hug your grandchildren. They're paying for this."