Economics

CBO: Obama stimulus may have cost as much as $4.1 million a job

The Congressional Budget Office in a new report:

When [the American Recovery and Reinvestment Act] was being considered, the Congressional Budget Office (CBO) and the staff of the Joint Committee on Taxation estimated that it would increase budget deficits by $787 billion between fiscal years 2009 and 2019. CBO now estimates that the total impact over the 2009–2019 period will amount to about $831 billion.

By CBO’s estimate, close to half of that impact occurred in fiscal year 2010, and more than 90 percent of ARRA’s budgetary impact was realized by the end of March 2012. CBO has estimated the law’s impact on employment and economic output using evidence about the effects of previous similar policies and drawing on various mathematical models that represent the workings of the economy. …

On that basis CBO estimates that ARRA’s policies had the following effects in the first quarter of calendar year 2012 compared with what would have occurred otherwise:

– They raised real (inflation-adjusted) gross domestic product (GDP) by between 0.1 percent and 1.0 percent,

– They lowered the unemployment rate by between 0.1 percentage points and 0.8 percentage points,

– They increased the number of people employed by between 0.2 million and 1.5 million,

– They increased the number of full-time-equivalent jobs by 0.3 million to 1.9 million. (Increases in FTE jobs include shifts from part-time to full-time work or overtime and are thus generally larger than increases in the number of employed workers.)

OK, so without the stimulus, there would be anywhere from 200,000 to 1.5 million fewer people employed right now? That means the current cost-per-job created is somewhere between $4.1 million and $540,000.

At the very least, I think the CBO report should raise more questions about whether $831 billion of temporary tax cuts and government spending was the best use of that money back in 2009. It should also make Washington cautious about further such stimulus measures if the U.S. economy should slip back into recession. Better we try what Sweden did.

And, again, here is the CBO’s take on the long-run impact of the stimulus:

In contrast to its positive near-term macroeconomic effects, ARRA will reduce output slightly in the long run, CBO estimates—by between zero and 0.2 percent after 2016. But CBO expects that the legislation will have no long-term effects on employment because the U.S. economy will have a high rate of use of its labor resources in the long run. ARRA’s long-run impact on the economy will stem primarily from the resulting increase in government debt.

To the extent that people hold their wealth in government securities rather than in a form that can be used to finance private investment, the increased debt tends to reduce the stock of productive private capital. In the long run, each dollar of additional debt crowds out about a third of a dollar’s worth of private domestic capital, CBO estimates.

44 thoughts on “CBO: Obama stimulus may have cost as much as $4.1 million a job

  1. You’re comparing the cost of the program over 4 years with its impact in 1 year. As I do the math from the material quoted and Table 1, the cost of the program between 2009 and 2012 is 90 percent of $831 billion, or about $748 billion. Over the same period, between 1.5 million and 10.9 million full-time equivalent years of employment were created. That works out to between $69,000 and $374,000 per job-year.

  2. Russell, the only way you could come to the conclusion that the cost was $69K, is if 100% of all jobs created were due to the stimulus, but thats obviously not true. Furthermore, you arent computing the negative effect the debt will have on the GDP beginning in 2015, (from their previous report)

      • Rob, thanks for your comment, but I think you’re incorrect. As I understand the CBO report, it is not just reporting the number of new jobs in particular years. Rather it takes the number of jobs reported as directly created under the particular programs funded by ARRA and then uses various econometric estimates of what the “multiplier” is for that number of jobs directly created. The fact that estimates of the multiplier vary a good deal is, I think, the source of the wide range of the estimates of the jobs created by the program. So there is a good deal of uncertainty here, but I think it is not subject to your first criticism. Regarding your second criticism, the current CBO report estimates a slight reduction in output after 2016 because of the increased debt burden, but “no long-term effects on employment” (p. 8).

        • Rather it takes the number of jobs reported as directly created under the particular programs funded by ARRA and then uses various econometric estimates of what the “multiplier” is for that number of jobs directly created.

          The problem with that is that the reporting is non-standardized and, yes, politically tainted. No one — not the Labor Department, not the Treasury, not the Bureau of Labor Statistics — actually measures “jobs saved.”

          There is absolutely no way to know how many jobs were “saved or created”; in some cases, schools and local governments simply reported all of their jobs as “saved.”

          The bottom line is that the “stimulus” did not work as advertised.

          • One example of many why the stimulus claims are bollocks:

            About two-thirds of the 14,506 jobs claimed to be saved under one federal office, the Administration for Children and Families at Health and Human Services, actually weren’t saved at all, according to a review of the latest data by The Associated Press. Instead, that figure includes more than 9,300 existing employees in hundreds of local agencies who received pay raises and benefits and whose jobs weren’t saved.

    • That tripe was debunked up, down, and sideways. Trivial rebuttal: Obama signed the FY (that’s “fiscal year,” Steve) 2009 budget in the third month of his presidency. And the “stimulus.” Any questions? No? Good.

      You’ve been pwned, son. Now toddle back to DNC for new talking points.

  3. Regardless! Your best case situation of taking $69,000 from taxpayers to pay-back over 20 years for ONE 1-YEAR JOB is moronic AT BEST! Private industry CREATES jobs when they are feasible and have an immediate pay-back to the company. Govt MAKES a job regardless of usefulness, efficiency, pay-back time, over-head and benefits, etc on the backs of the taxpayer. Ya want to create jobs? Then give people more freedom and incentive to grow!

    • You want to create jobs? Give states money during recessions, so they don’t have to lay off teachers and police officers. You want to create jobs? Increase federal government spending to increase demand — businesses don’t invest and grow if there is no demand for their products. Then follow Clinton rather than Bush and run a surplus during expansions.

      • That’s Right!

        Government workers should NEVER lose their jobs.
        Government workers DESERVE lifetime employment.
        Government workers DESERVE to retire 10 to 20 years younger than everyone else.
        Government workers DESERVE to receive pensions 3 to 5 times bigger than everyone else.

        Why to they DESERVE so much?

        Their unions give money to Democrats!

      • Well that’s been the Obama stategy since he took office. And you think it’s working?
        I long ago came to the conclusion that liberals have no coherent plan for anything that actually works in the real world, and you just proved it yet again.

      • you have your economics all bass ackwards. how exactly does the government spending money on government projects increase demand in the private sector??? hint: IT DOESN’T, THATS WHY KEYNESIAN ECONOMICS DOESN’T WORK. the money to support the government’s spending is taken mainly from the middle class & small business owners who are the primary drivers of our economy – they then have less money to buy the products that would be otherwise in demand if they had more money in their own pockets, which they also have more of when corporate taxes are lowered, allowing businesses to cut the costs of their products to increase demand while also creating wealth through increased private sector employment, which unlike government employment through these spending projects are long-term and actually put money back into the economy in the form of taxes. government jobs created by “stimulus” spending are temporary positions for BS projects and the money to pay these workers comes from the pockets of other taxpayers – you’re not putting anything back into the economy, you’re just redistributing income.

      • States were given money during the recession – and propped up union contracts and retirement funding, specifically unfunded liabilities due to – wait for it – union contracts!

        If gov’t spending was the answer to every recession, why is it that we ever have one? Doesn’t the gov’t also spend during non-recessions? If gov’t spending were simply the cure, then there should never be a recession, ever, because gov’t spending is magically delicious, and “fixes” recessions.

        Gov’t pay for the things it buys. Amazing, but true. So where does the money the gov’t spends come from? Private sector earnings and borrowing. It’s flatly illogical to assume that a dollar taken out of the private sector will simply create jobs by the USG spending it – after lopping off half the dollar’s value in order to fund Leviathan, the federal bureaucracy, and the gov’t workers/SEIU union members who love to suckle at the teat of taxpayer dollars.

        Clinton cut taxes. Are you arguing that President Barry should cut taxes? Fantastic! Welcome to conservatism, Ace!

        • By far the greatest amount of clonton’s surplus came from gutting our military and intelligence organizations.

          When 9/11 happened, President Bush had no choice but to bring them all up to speed with no concern for the cost. He had to modernize overnight at 2001-2002 prices, as opposed to how it would have been done had they been allowed to maintain currency at 1993-2000 prices.

    • I disagree. I can smell only the continued descent of AEI from its long-gone aspirations to provide objective and reliable analysis. (See the great work of Timothy Noah at the New Republic on this.) Not a nice scent, but it doesn’t smell like racism to me.

  4. Good try, James! But, can you re-write and recalculate, and wait a minute! This is grade 2? Sorry, my advice to you. Get a math tuition first, forget analyzing and predicting our economy. You really look THAT bad!

  5. This also ignores the other side of the equation – what would have happened if the money had been spent on something else. So this shows all of the benefits, ignores the alternatives, and the stimulus still comes out looking horrendous.

    • But the money wasn’t being spent — that’s the rationale for stimulus during a recession, widely accepted by economists, and this has been a recession worse than most. Going forward, though, hopefully we will get both more private sector jobs AND more teachers, firefighters, and bridge repairers — the balance of private and public investment that has always been a US strength.

      • Unless its under a mattress, its in the economy. Not blowing $1T on wasteful government spending would help the private sector by itself.

        That’s not even mentioning the positive impacts of genuine tax, entitlement, and regulatory reform. That’s the alternative that is clearly the right thing to do. The last thing we need is further federal government stimulus

      • But we don’t pay for firefighters, teachers and bridge repairers. We pay for fires being put out, education and transportation.

        If we have enough quality fire fighters, we don’t need any more.

        The public schools are vast, unproductive pools of waste, fraud and incompetence. If we can do a better job through vouchers and privatization, we should.

        Our infrastructure, like housing, education, health care, and the dotcom boom is a bubble produced by gov’t action. We have a lot of roads that should never have been paved. Certainly not with federal money. Almost all of the federal transportation money should be abolished; the States need to decide what to build.

        Regardless, public sector jobs are cost centers. Private sector jobs are revenue creators. You want a better country, you focus on the private sector, then hold your nose to do what you need to do in the public sector. Not the other way around, which is what Mr. Obama’s missing, Marxist daddy dreamed about. And what, apparently, he himself believes in.

        All money that isn’t physically kept in a box or your wallet is in the economy. If banks have money in their accounts, it’s in the economy. More precisely, what you’re thinking of is the velocity at which the money is exchanged. The point of stimulus is that the money isn’t moving fast enough.

        The problem is that the money isn’t moving fast because fast money is risky money. The market decided that it’s more productive to move the money around more slowly than lose it throwing it around quickly. Which is what all of this article is about.

  6. The “stimulus” was not simply a failed economic program. It was always and only a political payoff — designed to not stimulate anything but the political loyalties of the payees.

  7. this is what happens when you have an imcompetent angry marxist as your national president. i guess we got what we deserved, a dictator with no concern for the welfare of the people.

    • I DIDNT GET WHAT I DESERVED I DIDNT VOTE FOR THE FAKE LIAR AND ANYONE WITH HALF A BRAIN KNEW EVERYTHING OUT OF HIS MOUTH WAS A TOTAL LIE AND EVERYTHING ABOUT HIM WAS SHADY AND SUSPICIOUS….ONLY KNUCKLE DRAGGING MOUTH BREATHING MORONS WHO WHERE LOOKING FOR A FREE HANDOUT AND DRUGGED UP LIBTARDS VOTED FOR HIM

  8. This money is never a waste, just not productive as intended. Without it we would be a much worse shape. Economy is tied to the wealthy and the banks to provide loans. The prez can only do so much. Stop crimes on wall street and tax the 99% who send work overseas.

    • “This money is never a waste, just not productive as intended.”

      Are you kidding? $4,100,000 per job!

      They would have stimulated the economy better by just sending all 300M a check for $3,000.

    • Why doesn’t the government just give everyone an allowance if it’s never a waste?

      The economy is tied to the banks which is why the economy is finished. You can’t have an economy that relies on banks when if the banks make bad decisions the taxpayers have to bail them out.

      Didn’t you mean to say the 1% sends jobs overseas? Im not saying I agree with you but I think you made a typo.

  9. The fact that we are here today to debate raising America’s debt limit is a sign of leadership failure. It is a sign that the U.S. Government can’t pay its own bills. It is a sign that we now depend on ongoing financial assistance from foreign countries to finance our Government’s reckless fiscal policies. … Increasing America’s debt weakens us domestically and internationally. Leadership means that “the buck stops here.” Instead, Washington is shifting the burden of bad choices today onto the backs of our children and grandchildren. America has a debt problem and a failure of leadership. Americans deserve better.
    -From Sen. Obama’s Floor Speech, March 20, 2006

  10. What I don’t understand is that census statistics from 2011 show us with about 311 million people. Why didn’t we just give a million dollars to each citizen? Wouldn’t that be cheaper than bailing out wall street, the banks, fannie mae, freddie mac (which is to come).

    With that money people could of paid all their debts and started over and with that the government would still save money.

    As ridiculous as that sounds; it would of been cheaper.

  11. This amount per job sounds exactly like the cost of Mootchelle’s, uh I mean Michelle Owebama’s single vacations….

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