More Nonsense from the Stimulus Package

Includes: DIA, SPY
by: Casey Mulligan

This week I wrote that, to an order of magnitude, the $787 billion spent on the first stimulus amounts to a quarter million dollars per job promised. Econbrowser now claims that this comparison is invalid because, supposedly, it confuses stocks and flows.

Suppose that the government passed a law that would spend $1 billion to build 1000 2 bedroom houses in the suburbs. According to Econbrowser, the $1 billion is a flow and the 1000 is stock, so we should not compare them. I say that we have a good sense of what a 2 bedroom house is worth, and paying $1 million each is drastically overpaying. I don't care how long the house lasts!

The same goes for judging the value of "job creation." A quarter million (or a million -- that's a more realistic yet still charitable estimate of what the stimulus bill does in terms of job creation) dollars per job is too much to pay for the average job -- I don't care how long it lasts. Let's not forget that jobs require effort and time at work, and those have opportunity costs!

Econbrowser does offer another interesting comparison -- the amount the stimulus bill paid per job year created. The Administration claims it is creating or saving 6.8 million job years -- ie, that each person who got one of those jobs it created (or had one of those jobs it saved) would otherwise have been unemployed another two years. We'll break down the absurdity of that another time, but taking them literally means each job year cost over $100,000.

I rest my case.