Outside the Beltway

I’m pretty sure this qualifies as waste and inefficiency:

The jobs created and saved by the economic stimulus law that President Barack Obama signed on Feb. 17, 2009 cost at a minimum an average of $228,055 each, according to data released yesterday by the Congressional Budget Office (CBO).
In a report released Wednesday—“Estimated Impact of the American Recovery and Reinvestment Act on Employment and Economic Output from October Through December 2010”—the CBO said it now estimates the stimulus law cost a total of $821 billion, up from CBO’s original estimate that the stimulus would cost $787 billion.
In the same report, the CBO estimated that in the fourth quarter of 2010 there were somewhere between 1.3 million and 3.5 million people who were then employed who would not have been had the stimulus not been enacted. “CBO estimates,” says the report, “that ARRA’s policies had the following effects in the fourth quarter of calendar year 2010: … Increased the number of people employed by between 1.3 million and 3.5 million.”

Previously, the CBO had said that the number of jobs saved or created was between 1.3 million and 3.6 million, so let’s be generous and go with the slightly higher number.

Take that $821,000,000,000 and divide it by 3,600,000 and you get $228,055.56. Divide it by 1,300,000 and you get $631,538.46. It would’ve been cheaper if we’d just written all 3.6 million people a check for $100,000.00 and called it a day.

Economics and Business, US Politics

Barack Obama, Congressional Budget Office, copyright law, Stimulus

21 responses to “2009 Stimulus Bill Cost $228,055 Per Job “Saved Or Created””

john personna

February 24, 2011 at 5:26 pm

Why would you say out of hand that is a bad price? If we assume the jobs created or saved last some number of years, it might be a very good price.

Don’t use “point” timescale for a long-term process.

(It costs very much more to endow a chair, than the recipient makes in one year.)
john personna

February 24, 2011 at 5:28 pm

(The concept you need is “net present value.”)
anjin-san

February 24, 2011 at 5:33 pm

Are you counting job creation as the only benefit of the stimulus? What about the long term value of new or improved infrastructure? Or a business that remains a going concern, not a bankrupt memory?
Neil Hudelson

February 24, 2011 at 6:00 pm

Wasn’t around a third of the stimulus price tag tax cuts, and not stimulus spending? If so, shouldn’t the price per job be about 2/3rds of what you posit?

back of the envelope calculations: 152,000 a job.

I’m not saying this is a great price tag per job, but it is a more honest assessment.
legion

February 24, 2011 at 6:35 pm

Not to mention, the purpose of government is not to make a profit – it’s to serve the citizenry. I’ll bet the people who got those jobs consider that money well spent.
Tano

February 24, 2011 at 8:05 pm

jeez louise doug,

Woudl it be asking too much to expect you to do at least a tiny little bit of mental work preparing these posts? You spew out inanities like a post on misspelling in a tweet – now you cut and paste some crap from CNSN of all places??? As pointed out above, what percentage of the stimulus went to job creation, rather than say,,,,tax cuts, or unemployment payments, or housing assistance, or long tem investments in energy, or education grants etc?
Shannon Love

February 24, 2011 at 9:07 pm

I am not a fan of the stimulus but I feel compelled to point out that it takes a lot of capital to create a job, especially a good, productive middle-class job.

If you define a “job” as an economic niche where somebody will be working (not necessarily the same person overtime) then it takes a lot of capital to create that job. It’s not too unusual to find that it takes the equivalent of several years worth of compensation to create the niche for a job. E.g. A factory that employs 100 people at 50k a year cost 50-100 dollars in capital up front to build. Even just adding on office workers can cost two to three times the wages paid to the worker.

So, the high cost per job in the stimulus might just be reflecting the true cost of creating a niche for someone to work in. On the other hand, businesses and investors have been trying to explain for decades just how expensive it is to create a job niches and just how powerfully business and capital gains taxes increase both the expense and risk.

Most people who support the stimulus and high taxes might learn a little something if the programs they support ending up costing a lot more per job than they expected.
anjin-san

February 24, 2011 at 9:24 pm

http://www.whitehouse.gov/blog/2010/08/10/caldecott-tunnel-fourth-bore-a-stimulus-success-story-project-add-desperately-needed

Granted this is a White House link, but it is quite accurate. A vital infrastructure project near where I live that has been dead in the water for decades, now well underway with stimulus funding.

160k drivers a day have an extra 10-25 minutes in traffic because this tunnel is so badly inadequate. How many man hours a year will be gifted to commuters? What is the value of all that time? And we are not even talking about gas saved and air pollution not coming out of tailpipes.

Note to Doug. Engage brain before typing.
TG Chicago

February 24, 2011 at 9:33 pm

I think there is a major error in Doug’s math. Can’t say I’m totally certain, but here’s what I’m seeing.

He’s taking the full amount of the stimulus from the CBO report — $821 billion — and dividing that between the number of jobs listed in the report (Doug typos 3.6 million instead of 3.5, but that’s a minor error).

However, that number of jobs is listed in the CBO report as being one of the “effects in the fourth quarter of calendar year 2010” (emphasis mine)

(It should be noted that the report is entitled “Estimated Impact of the American Recovery and Reinvestment Act on Employment and Economic Output From October 2010 Through December 2010”)

So unless I’m misreading something, it’s totally unfair to suggesst that the number of jobs listed in this report is the grand total of jobs saved or created by the stimulus package. For instance, looking quickly, there’s another CBO report linked from the page of this report that covers April 2010 – June 2010. That one lists 1.4 to 3.3 million jobs saved or created for the second quarter of the year.
TG Chicago

February 24, 2011 at 9:35 pm

(whoops, misread — forget the part where I mentioned a typo. It wasn’t.)
marmico

February 25, 2011 at 4:13 am

Only 20% of the total ARRA stimulus package is encompassed by the “jobs saved or created” metric in the CBO Report. .

Therefore, the cumulative cost of each “job” , depending on the multiplier is between $47,000 and $127,000.
Axel Edgren

February 25, 2011 at 7:14 am

Who the heck knows if that is too steep a price?

Factor in costs of people being unemployed, or factor in the taxes they can pay.

It’s like, this isn’t a layman’s issue.
TG Chicago

February 25, 2011 at 9:39 am

On the CBO blog, I happened to notice that the post before the one about ARRA 2010 Q4 was entitled Cost Estimate for H.R. 2, Repealing the Job-Killing Health Care Law Act.

http://cboblog.cbo.gov/?p=1844

It says:

Impact on the Federal Budget in the First Decade

CBO and JCT estimate that, on balance, the direct spending and revenue effects of enacting H.R. 2 would cause a net increase in federal budget deficits of $210 billion over the 2012-2021 period. By comparison, last March CBO and JCT estimated that enacting PPACA and the health-related provisions of the Reconciliation Act would reduce federal deficits by $124 billion over the 2010-2019 period. The difference between the two estimates for the 10-year projection periods is primarily attributable to the different time periods they cover. Over the eight years that are common to the two analyses (2012-2019), enactment of PPACA and the health-related provisions of the Reconciliation Act was projected last March to reduce federal deficits by $132 billion, whereas the repeal of that legislation is projected now to increase deficits by $119 billion.

Those projections do not include any potential savings in discretionary spending, which is governed by annual appropriation acts. By CBO’s estimates, repeal of the health care legislation would probably reduce the appropriations needed by the Internal Revenue Service by between $5 billion and $10 billion over 10 years. Similar savings would accrue to the Department of Health and Human Services.
Westie

February 25, 2011 at 11:03 am

Another example of the absolute inefficiency of government in creating value. The opportunity cost of each job ‘created’ should include the number of jobs not created by the private sector, the effects on future job creation of non-available capital investment dollars, the type of jobs created Public or Private, the bleed off of money to failed programs and projects aka Green Jobs/Cronyism and many other factors. I think a fuller modeling of this stimulus would indicate that it failed completely unless the objective was to continue to destroy certain sectors of this economy. I wonder how much discussion this will receive in out vaulted government media?
Gerry W.

February 25, 2011 at 11:42 am

800 billion dollars of Bush tax cuts did not create jobs and did not create prosperity. If our country continues to ignore the problems, then any kind of stimulus is worthless.
Shannon Love

February 25, 2011 at 5:45 pm

I would point out that saying that the stimulus rebuilt needed infrastructure or performed other non-job related goals is to move the goal post.

The entire stimulus was sold on the idea that it would create or save jobs and the President made very specific claims about how many jobs would be saved and what the unemployment rate would be with and without the stimulus. Compared to what was claimed, the stimulus has been an abysmal failure.

It is also fair to use the entire cost of the stimulus to evaluate the cost per job because all the stimulus funding one way or another is supposed to generate jobs. For example, for a bridge project, you might hire just 100 guys to work on the bridge but those kinds can’t do anything if you don’t pay for the equipment and materials they require to build the bridge.

The real problem with the stimulus is that there is no correlation between where they spent the money and the magnitude of the bad economy. Booming Texas got almost as much per captia as did devastated California. Construction is the most impacted industry yet it got well under half (for all the talk about infrastructure) and about 70% of job less is by men yet over 50% of the spending was intentionally targeted at jobs dominated by women.

The real world political system simply cannot effeciently allocate resources of this scale and in that short of time. We ended with a shotgun, everybody-gets-a-bite-whether-they-it-or-not distribution.
anjin-san

February 25, 2011 at 6:46 pm

> It is also fair to use the entire cost of the stimulus to evaluate the cost per job because all the stimulus funding one way or another is supposed to generate jobs

If you are only interesting in repeating Fox talking points, sure. After all, the right pretty much hates infrastructure projects. Well at least they hate infrastructure projects that are in America and not Iraq…

> Booming Texas

Yea, booming, broke Texas. Where Perry trashes Obama out of one side of his mouth and begs for more stimulus money from the other.
Chilisize

February 25, 2011 at 9:01 pm

Really? So the economy as a whole would be better off without those “expensive” jobs? So without those jobs, everyone else would still have their jobs?
anjin-san

February 26, 2011 at 11:44 am

> The entire stimulus was sold on the idea that it would create or save jobs

Cool. Just provide a link that shows us where Obama said the only function of the stimulus is to create or save jobs.
TG Chicago

February 26, 2011 at 1:17 pm

It’s certainly a mistake to use the complete value of the ARRA then divide by the number of jobs created and claim that that is a valid measurement.

Clearly, not all parts of the ARRA were intended to be job-creating. For instance, $86.8 billion for Medicaid or $40 billion to extend unemployment benefits. Those are measures designed to ease the pain for poor and/or unemployed people, not to create jobs. Those two measures alone (which I grabbed quickly from the wiki page) constitute ~15% of total ARRA spending. That’s a pretty big chunk.

It’s quite disingenuous to pretend the sole purpose of the ARRA was to save and create jobs.
Leftshot

February 28, 2011 at 4:30 pm

Well John if you “assume the jobs created or saved last some number of years” that would be a very bad assumption. Your blood will boil when you realize the vast majority of ‘jobs created or saved’ are mostly being reported by government agencies, because the overwhelming percentage of the stimulus money and job creation being reported is in the public sector. For example, in Wisconsin almost 80% of the stimulus money went to public sector union jobs. Add in non-union public sector jobs and other public sector spending such as university grants and you’ve accounted for almost all the money spent.

All that’s happened here is the government just found another way to spend money they don’t have to keep the bloated government going.

That’s right, very little of this money went to the private sector. That’s one reason why public sector unemployment is 3%, while the much larger private sector unemployment is in the teens.

Also, when you realize the CBO data really are estimating the cost at between $228,055 and $631,548 per job, and that’s what we’re paying to keep government jobs and bureaucrats in place it speaks of both collusion and a huge amount of waste for no discernible benefit toward getting the economy going (because it’s the private sector that creates things and creates wealth, the public sector for the most part does not.