$646,214 Per Government Job

[Charles_Main]

by Alan Reynolds

Alan Reynolds is a senior fellow with the Cato Institute and the author of Income and Wealth (Greenwood Press, 2006).

Added to cato.org on January 28, 2009

This article appeared in The Wall Street Journal on January 28, 2009.

House Democrats propose to spend $550 billion of their two-year, $825 billion "stimulus bill" (the rest of it being tax cuts). Most of the spending is unlikely to be timely or temporary. Strangely, most of it is targeted toward sectors of the economy where unemployment is the lowest.

The December unemployment rate was only 2.3% for government workers and 3.8% in education and health. Unemployment rates in manufacturing and construction, by contrast, were 8.3% and 15.2% respectively. Yet 39% of the $550 billion in the bill would go to state and local governments. Another 17.3% would go to health and education -- sectors where relatively secure government jobs are also prevalent.

Alan Reynolds is a senior fellow with the Cato Institute and the author of Income and Wealth (Greenwood Press, 2006).
More by Alan Reynolds

If the intent of the plan is to alleviate unemployment, why spend over half of the money on sectors where unemployment is lowest? Another 22.5% of the $550 billion would go to social programs, such as expanding food stamps and extending benefits for the unemployed and subsidizing their health insurance.

After subtracting what House Democrats hope to spend on government payrolls, health, education and welfare, only a fifth of the original $550 billion is left for notoriously slow infrastructure projects, such as rebuilding highways and the electricity grid.

The Obama administration claims the stimulus bill will "create or save three or four million jobs over the next two years . . . with over 90% [of those jobs] in the private sector." To prove it, they issued a report from Christina Romer, chairman of the Council of Economic Advisers, and Jared Bernstein, chief economic adviser to Vice President Joe Biden. Its key estimates, however, were simply lifted from an outdated paper by Mark Zandi of Moody's economy.com.

Mr. Zandi's current estimates have government employment growing by 330,400 over two years as a result of the House bill (compared with 244,000 in Bernstein-Romer paper). Yet even that updated figure still amounts to only 8.3% of total jobs added, even though state and local governments are to receive 39% of the funds ($214.5 billion). Spending $214.5 billion to create or save 330,400 government jobs implies that taxpayers are being asked to spend $646,214 per job.

Does that make sense?

Simulations with his macroeconomic model, according to Mr. Zandi, reveal that "every dollar spent on unemployment benefits generates an estimated $1.63 in near-term GDP." By contrast, such "multipliers" simulate that tax cuts for business or investors would add only 30-38 cents on the dollar.

But econometric models are parables, not facts. The big multipliers for transfer payments and tiny multipliers for capital taxes in Mr. Zandi's model reveal more about the way the model was constructed than about the way the economy works. If model builders make Keynesian assumptions, their model will generate Keynesian results. Yet as Harvard economist Robert Barro recently pointed out on this page, contemporary academic economic research does not support the multipliers used to justify the House stimulus bill.

Full Article here $646,214 Per Government Job

 

[Charles_Main]

No comment on this supper efficient use of our money?

LOL

what a sad joke this new change is.

 

[Truthmatters]

Every job created comes with a profit made for their employer.

It is what a stimulus package does.

 

[Charles_Main]

Every job created comes with a profit made for their employer.

It is what a stimulus package does.

To bad this is not a stimulus package.

 

[mash107]

Wow, that's 1 gov't job for the price of 10 private market jobs

And all they're going to do is dig holes one day and refill them the next instead of producing things that people around the world may actually want...

 

[auditor0007]

I was all for the stimulus bill....... Then I heard what was in it.