Would those be the same economists that told us that if the Stimulus was passed...unemployment would stay below 8%? Hmmmm...perhaps one should take their "sound economic estimates" with a very large grain of salt?
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US Jobless claims fall to 4 decade low
- Thread starter sealybobo
- Start date
Would those be the same economists that told us that if the Stimulus was passed...unemployment would stay below 8%? Hmmmm...perhaps one should take their "sound economic estimates" with a very large grain of salt?
AntonToo
Diamond Member
- Jun 13, 2016
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Wonderful! Since you contend that the numbers the Obama Administration came up with for "Jobs Saved" are legitimate and un-made-up...you should have no problem at all providing the formula that was used to arrive at those numbers...right?
Umm no, not right.
You are seriously clueless what it takes to produce a macroeconomic estimate. There is actually a REASON why we need professional economists to do this stuff.
There is not one formula, there are various formulas used to calculate all kinds of different components of policy, from project spending, to grants, to various tax cuts, interest rates consideration etc. etc. which then get totaled up in the publicly made reports.
But obviously there must be a formula that is used to determine "Jobs Saved", Anton? Right? They didn't just pull that number out of thin air! So what was it?
It only stands to reason that if there are various formulas for calculating project spending, grants, tax cuts and interest rates...that there must be one for calculating "Jobs Saved"...correct?
Ok dumb ass here is the formula, are you ready?
JOBS SAVED = JOBS CREATED, because from policy evaluation point of view there is NO NET DIFFERENCE BETWEEN A JOB GAINED AND A JOB NOT LOST.
That's why CBO report even states it in this non-differential manner: "Jobs saved or gained"
Wonderful! Since you contend that the numbers the Obama Administration came up with for "Jobs Saved" are legitimate and un-made-up...you should have no problem at all providing the formula that was used to arrive at those numbers...right?
Umm no, not right.
You are seriously clueless what it takes to produce a macroeconomic estimate. There is actually a REASON why we need professional economists to do this stuff.
There is not one formula, there are various formulas used to calculate all kinds of different components of policy, from project spending, to grants, to various tax cuts, interest rates consideration etc. etc. which then get totaled up in the publicly made reports.
But obviously there must be a formula that is used to determine "Jobs Saved", Anton? Right? They didn't just pull that number out of thin air! So what was it?
It only stands to reason that if there are various formulas for calculating project spending, grants, tax cuts and interest rates...that there must be one for calculating "Jobs Saved"...correct?
Ok dumb ass here is the formula, are you ready?
JOBS SAVED = JOBS CREATED, because from policy evaluation point of view there is NO NET DIFFERENCE BETWEEN A JOB GAINED AND A JOB NOT LOST.
The difference between "Jobs Saved" and "Jobs Created" is that one is an actual number gathered to let us know how we're doing economically...the other is a number created out of whole cloth to hide how we're doing economically.
AntonToo
Diamond Member
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LOL...the reason you can't tell me what it is...is that they did indeed pull that number out of thin air! They made it up.
LOL...the reason you can't tell me what it is...is that they did indeed pull that number out of thin air! They made it up.
You might want to stick to emoticons for a bit, Anton...you're not exactly knocking stuff out of the park today! Claiming that "Jobs Saved = Jobs Created" borders on farce.
AntonToo
Diamond Member
- Jun 13, 2016
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The difference between "Jobs Saved" and "Jobs Created" is that one is an actual number gathered to let us know how we're doing economically...the other is a number created out of whole cloth to hide how we're doing economically.
No, dumb ass the two are treated the same because people are interested in NET changes in economy not turn over rates.
There are always people getting fired, hired, retiring or getting layed off - but the most important picture is one of net jobs in economy and how the policy effects it.
On the NET, the estimate states that there would be 3 million less jobs in economy in 2010 without Obamacare - you can call those jobs saved or jobs created - IT DOES NOT MATTER, in the end it would be 3 million job difference.
The difference between "Jobs Saved" and "Jobs Created" is that one is an actual number gathered to let us know how we're doing economically...the other is a number created out of whole cloth to hide how we're doing economically.
No, dumb ass the two are treated the same because people are interested in NET changes in economy not turn over rates.
There are always people getting fired, hired, retiring or getting layed off - but the most important picture is one of net jobs in economy and how the policy effects it.
On the NET, the estimate states that there would be 3 million less jobs in economy in 2010 without Obamacare - you can call those jobs saved or jobs created - IT DOES NOT MATTER, in the end it would be 3 million job difference.
Actually it does matter because there is absolutely ZERO way for determining how many jobs were "saved"! The reason the Obama Administration used jobs created or saved is that they could use any total they felt like because there was no way to prove or disprove that it was accurate.
Why would you use numbers that can't be proven to get a clear picture of how well policy is affecting the economy? The answer quite obviously is that you wouldn't! The only use for numbers that can't be proven is to blur the picture of how your policies are affecting the economy!
Rshermr
VIP Member
Farce is you, os. You are showing your stupidity. You need to start by showing why a job saved with the result of a person being employed is different from a new job with a person employed.LOL...the reason you can't tell me what it is...is that they did indeed pull that number out of thin air! They made it up.
You might want to stick to emoticons for a bit, Anton...you're not exactly knocking stuff out of the park today! Claiming that "Jobs Saved = Jobs Created" borders on farce.
Your ignorance on the issue provides proof of your inability to make a rational economic argument. Jesus, you are a waste of space.
And, again, try to remember you are a food services employee with almost no economic background
and zero understanding of the subject. So what you have to say is vacuous. Try a source some time, and a link. Otherwise just prepare to be ignored.
AntonToo
Diamond Member
- Jun 13, 2016
- 31,603
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- 1,340
The difference between "Jobs Saved" and "Jobs Created" is that one is an actual number gathered to let us know how we're doing economically...the other is a number created out of whole cloth to hide how we're doing economically.
No, dumb ass the two are treated the same because people are interested in NET changes in economy not turn over rates.
There are always people getting fired, hired, retiring or getting layed off - but the most important picture is one of net jobs in economy and how the policy effects it.
On the NET, the estimate states that there would be 3 million less jobs in economy in 2010 without Obamacare - you can call those jobs saved or jobs created - IT DOES NOT MATTER, in the end it would be 3 million job difference.
Actually it does matter because there is absolutely ZERO way for determining how many jobs were "saved"!
NO IT ACTUALLY DOESN'T.
You may think that your little political *GOCHA* bullshit has some sort of significance outside of your little narrow mindset but it absolutely DOES NOT.
What matters to the world is that in 2010 there were significantly more jobs because of Stimulus policy.
Rshermr
VIP Member
The difference between "Jobs Saved" and "Jobs Created" is that one is an actual number gathered to let us know how we're doing economically...the other is a number created out of whole cloth to hide how we're doing economically.
No, dumb ass the two are treated the same because people are interested in NET changes in economy not turn over rates.
There are always people getting fired, hired, retiring or getting layed off - but the most important picture is one of net jobs in economy and how the policy effects it.
On the NET, the estimate states that there would be 3 million less jobs in economy in 2010 without Obamacare - you can call those jobs saved or jobs created - IT DOES NOT MATTER, in the end it would be 3 million job difference.
Actually it does matter because there is absolutely ZERO way for determining how many jobs were "saved"! The reason the Obama Administration used jobs created or saved is that they could use any total they felt like because there was no way to prove or disprove that it was accurate.
Says the food services employee with no economics background, and no source to back up his ignorant claims. With no proof to his claim. Which is based only on what OS wants so badly to believe.
Cons did all they could to stop jobs being saved. Here is one of many examples: And coincidentally, what the bat shit crazy con web sites say.
"The number to watch is the total number of jobs created. A.. nd in this case, the economy added 244,000 jobs in April. That’s the third highest total since the recession started, and the single-best month when one excludes Census-related jobs. By most measures, this is the fastest job growth Americans have seen in five years.
Also note, the total would have been even higher had it not been for state and local budget cuts — the private sector added 268,000 jobs, but the public sector lost 24,000 jobs. Those were jobs that could have been saved were it not for conservative fiscal policies."
April shows surprisingly strong job growth
Why would you use numbers that can't be proven to get a clear picture of how well policy is affecting the economy? The answer quite obviously is that you wouldn't! Only to an idiot like you.The only use for numbers that can't be proven is to blur the picture of how your policies are affecting the economy! That is probably what you would use them for, because you are dishonest. Economists are simply trying to represent truth
So, oldstyle the food services employee says jobs saved does not exist, because that is what the con talking point says. Because he has no source for his drivel.
Economists say jobs saved is obviously a valid measure.:
• CBO: Between 800,000 jobs (low estimate) and 2.4 million jobs (high estimate) saved or created.
• IHS/Global Insight: 1.25 million jobs saved or created.
• Macroeconomic Advisers: 1.06 million jobs saved or created.
• Moody's economy.com: 1.59 million jobs saved or created.
So, Oldstyle versus four well respected economic organizations. That does not indicate that OS is wrong. It simply indicates he is lying and a con troll. And he is outvoted 5 to 1, where 5 represents economists and 1 indicates a food services worker with no source to back him up.
Rshermr
VIP Member
[/QUOTE]Did you miss the whole part where I showed Anton that the Obama White House was using that 3 million jobs saved number a year before the CBO came out with their estimate?
That's when he left...idiot child! LOL
I can't believe this is still going.
I'll give it one more try, one more time only.
Oldstyle, it is very simple - the numbers administration used are legitimate, un-made-up numbers confirmed by estimates CBO did. Your argumentation that they were somehow simply made up by administration is BS, no ifs, no butts.
Time to learn it and move on with your life, because when you deny the obvious you make yourself look like a idiot. Why are you so hell bent on making yourself look that way?
You want to make non-idiot argument against stimulus? Here it is, listen up:
Stimulus, and other expansionary policies Obama administration put in place during recession did in fact make for a significant jobs increase since he has been in office, these policies however have come at expense of aggravating our long term problems. The money we burrowed yesterday caused jobs, but the interest and eventual settling of the debt will ultimately cost even more jobs due to contractionary policies (increasing taxes and/or cutting spending) needed to repay it.
Yes, this is what sane, fact respecting, economically sound, conservative argument looks like - and because of those fine qualities we will rarely hear it from our challenged friends on the right.
Wonderful! Since you contend that the numbers the Obama Administration came up with for "Jobs Saved" are legitimate and un-made-up...you should have no problem at all providing the formula that was used to arrive at those numbers...right?
You folks on the left keep declaring that "Jobs Saved" is a verifiable number...yet none of you can give me the formula that one would use to arrive at that "verified" total! There's a reason for that, Anton and it's because the numbers aren't legitimate...it's because they were manufactured. Obama's economists plugged in whatever number of jobs saved that they needed to make the jobs created number look acceptable...called the fiction that they'd created "Jobs Created or Saved" and sold it to a gullible public.
Wonderful! Since you contend that the numbers the Obama Administration came up with for "Jobs Saved" are not legitimate and made-up...you should have no problem at all providing a source with economic credentials and that is impartial to back up your allegations.
You folks on the right keep declaring that "Jobs Saved" is an un-verifiable number...you keep asking for a formula you say does not exist. Any concept of how stupid that makes you look?Now oldstyle says "There's a reason for that, Anton and it's because the numbers aren't legitimate...it's because they were manufactured. Obama's economists plugged in whatever number of jobs saved that they needed to make the jobs created number look acceptable...called the fiction that they'd created "Jobs Created or Saved" and sold it to a gullible public." But Oldstyle can find no source to prove his accusations. And they remain just the argument of a ignorant food services employee and ignorant con troll. Makes oldstyle a total waste of space.
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Rshermr
VIP Member
Wonderful! Since you contend that the numbers the Obama Administration came up with for "Jobs Saved" are legitimate and un-made-up...you should have no problem at all providing the formula that was used to arrive at those numbers...right?
Umm no, not right.
You are seriously clueless what it takes to produce a macroeconomic estimate. There is actually a REASON why we need professional economists to do this stuff.
There is not one formula, there are various formulas used to calculate all kinds of different components of policy, from project spending, to grants, to various tax cuts, interest rates consideration etc. etc. which then get totaled up in the publicly made reports.
But obviously there must be a formula that is used to determine "Jobs Saved", Anton? Right? They didn't just pull that number out of thin air! So what was it?
It only stands to reason that if there are various formulas for calculating project spending, grants, tax cuts and interest rates...that there must be one for calculating "Jobs Saved"...correct?
Ok dumb ass here is the formula, are you ready?
JOBS SAVED = JOBS CREATED, because from policy evaluation point of view there is NO NET DIFFERENCE BETWEEN A JOB GAINED AND A JOB NOT LOST.
That's why CBO report even states it in this non-differential manner: "Jobs saved or gained"
Honest and true post, as usual. Problem is, as a con troll with no economics background, and just a political desire to attack Obama, it will make no difference to him. OS is a simple liar. And has no compunction about lying in a continuous basis.
Now, if you posted something I thought was wrong, I would question where you got it. And I have no doubt that you, as I, would not take offense and would post a link to what I used to validate what I said.
Oldstyle simply posts what ever con talking point he wants, and posts no proof of anything.
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Rshermr
VIP Member
[/QUOTE]I note that you didn't respond to my point that the Obama Administration was using the figure of 3 million jobs saved a year before the CBO released their findings that given the numbers that the Obama Administration gave them to crunch that 3 million jobs saved was possible.
Don't you admit when you were wrong?
BECAUSE IT IS IRRELEVANT. The bottom line, the thing that really MATTERS is that their numbers were based on sound economic estimates, as confirmed by CBO.
Tell you get it THIS TIME.
Would those be the same economists that told us that if the Stimulus was passed...unemployment would stay below 8%? Hmmmm...perhaps one should take their "sound economic estimates" with a very large grain of salt?
Well, probably what we needed was a food services employee. I am sure you were more accurate.
You probably knew how badly the republicans had screwed up the economy, where others misjudged it. So, where is the estimate that you made?? Or are you simply saying, based on the deep understanding of a food services employee we should know you got it accurately. And that we should believe you this time, since you only lie some of the time?
OH.......Can you believe it, Oldstyle did not make an estimate. He is just posting con talking points again. Can you believe it??? Nah. No one believes a con troll and food services employee.
Did you miss the whole part where I showed Anton that the Obama White House was using that 3 million jobs saved number a year before the CBO came out with their estimate?
That's when he left...idiot child! LOL
I can't believe this is still going.
I'll give it one more try, one more time only.
Oldstyle, it is very simple - the numbers administration used are legitimate, un-made-up numbers confirmed by estimates CBO did. Your argumentation that they were somehow simply made up by administration is BS, no ifs, no butts.
Time to learn it and move on with your life, because when you deny the obvious you make yourself look like a idiot. Why are you so hell bent on making yourself look that way?
You want to make non-idiot argument against stimulus? Here it is, listen up:
Stimulus, and other expansionary policies Obama administration put in place during recession did in fact make for a significant jobs increase since he has been in office, these policies however have come at expense of aggravating our long term problems. The money we burrowed yesterday caused jobs, but the interest and eventual settling of the debt will ultimately cost even more jobs due to contractionary policies (increasing taxes and/or cutting spending) needed to repay it.
Yes, this is what sane, fact respecting, economically sound, conservative argument looks like - and because of those fine qualities we will rarely hear it from our challenged friends on the right.
Wonderful! Since you contend that the numbers the Obama Administration came up with for "Jobs Saved" are legitimate and un-made-up...you should have no problem at all providing the formula that was used to arrive at those numbers...right?
You folks on the left keep declaring that "Jobs Saved" is a verifiable number...yet none of you can give me the formula that one would use to arrive at that "verified" total! There's a reason for that, Anton and it's because the numbers aren't legitimate...it's because they were manufactured. Obama's economists plugged in whatever number of jobs saved that they needed to make the jobs created number look acceptable...called the fiction that they'd created "Jobs Created or Saved" and sold it to a gullible public.
Wonderful! Since you contend that the numbers the Obama Administration came up with for "Jobs Saved" are not legitimate and made-up...you should have no problem at all providing a source with economic credentials and that is impartial to back up your allegations.
You folks on the right keep declaring that "Jobs Saved" is an un-verifiable number...you keep asking for a formula you say does not exist. Any concept of how stupid that makes you look?Now oldstyle says "There's a reason for that, Anton and it's because the numbers aren't legitimate...it's because they were manufactured. Obama's economists plugged in whatever number of jobs saved that they needed to make the jobs created number look acceptable...called the fiction that they'd created "Jobs Created or Saved" and sold it to a gullible public." But Oldstyle can find no source to prove his accusations. And they remain just the argument of a ignorant food services employee and ignorant con troll. Makes oldstyle a total waste of space.[/QUOTE]
"The trillion dollar 'stimulus' isn't working, and no amount of phony statistics can change that," said House Republican Leader John Boehner, R-Ohio. "The president and his economic team promised the 'stimulus' would create jobs 'immediately' and unemployment would stay below 8%. But America has lost more than three million jobs since then, and the unemployment rate is nearing double digits."
Boehner also pointed to a memo from Carnegie Mellon professor Allan Meltzer, who said that the White House is misleading the nation by saying the Recovery Act has saved jobs.
"One can search economic textbooks forever without finding a concept called 'jobs saved,' " wrote Meltzer, who served as an economic adviser under President Ronald Reagan. "It doesn't exist for good reason: how can anyone know that his or her job has been saved?"Stimulus creates 640,000 jobs - White House says - Oct. 30, 2009
Tony Fratto: The White House "Jobs-Saved" Deception
Tuesday, 2 Jun 2009 | 10:37 AM ETCNBC.com
63
SHARES
COMMENTSStart the Discussion
After nearly twenty years in Washington I thought I've seen every trick ever conceived, but the White House claims of "jobs saved" attributed to the stimulus bill is unrivaled. What causes the jaw to drop is not just the breathtaking deception of the claim, but the gullibility of the Washington press corps to continue reporting it.
News stories from President Obama's event last week hailing the 100-day mark since the stimulus was passed typically repeated the assertion that the stimulus has already "created or saved 150,00 jobs." ("And that's just the beginning," the President crowed.)
Here's an important note to my friends in the news media: the White House has absolutely no earthly clue how many job losses have been prevented because of the stimulus bill. None. Not Christina Romer. Not Jared Bernstein. Not Austen Goolsbee.
Each of these distinguished economists would have failed Statistics 101 for making such a laughable claim. But we see them now repeating these assertions to reporters who have seemingly abandoned all skepticism.
Forget that only a trickle of stimulus spending has yet made its way into the real economy. Set aside your views on whether or not the stimulus has any job-saving or -creating impact. And leave for another day the White House's failing to account for changing macroeconomic conditions and seasonal adjustments.
There is only one necessary data point to make the "jobs-saved" claim: an accurate measure of expected employment levels in the future. That baseline data is critical to measure what the employment level would be in the absence of the stimulus. Unfortunately for the White House, they cannot possibly know that measurement within any degree of confidence -- and they know it.
To understand just how unknowable this data point is, it's not necessary to be an economist, a mathematician or a statistician.
You only need to know this: the Bureau of Labor Statistics(BLS) - thousands of the most professional and rigorous counters and analyzers of labor data in the history of mankind - makes TWO revisions of employment data for their ESTIMATE of the PREVIOUS month! And even then the reports are mere estimates - an annual benchmark survey is required to reset the nation's payroll baseline.
That is, the best employment statisticians the world has ever known, people whose lives are dedicated to employment data, conducting labor surveys and research, constantly refining their complex models, have a difficult time telling you how many jobs were created in the PAST!
In fact, monthly BLS revisions of past job creation estimates are routinely off by tens of thousands of jobs, and on occasion by more than a hundred thousand jobs. The annual benchmark surveys always reset employment levels by hundreds of thousands of jobs.
And we're supposed to believe that the Council of Economic advisors have acquired the clairvoyant ability to estimate payrolls in the future? Please.
Romer, Goolsbee and Bernstein are smart people, and yet they haven't learned from even their recent misadventures with payroll data projections -- having already experienced the folly of attempting to project the range of possible jobs levels if the stimulus were passed. Projecting job creation with any degree of accuracy was always inherantly impossible, and should never have been taken seriously.
If I -- or even my predecessors in the Clinton Administration -- had tried to pull off this ridiculous gimmick we would have been run out of town. I don't even believe it's possible to look back and accurately measure the "job-saving" impact of Bush or Clinton Administration policies, let alone to measure in real time, or project into the future.
On Friday the BLS will release its estimate of May job losses. They will also report their revisions for March and April. And White House officials will once again gear up the spin machine on how many jobs have been "saved".
A self-respecting press corps would vigorously question the White House on their claims. We'll see if we have one.
______________________
Tony Fratto is a CNBC on-air contributor and most recently served as Deputy Assistant to the President and Deputy Press Secretary for the Bush Administration.
by Taboola
MORE FROM CNBC
Tuesday, 2 Jun 2009 | 10:37 AM ETCNBC.com
63
SHARES
COMMENTSStart the Discussion
After nearly twenty years in Washington I thought I've seen every trick ever conceived, but the White House claims of "jobs saved" attributed to the stimulus bill is unrivaled. What causes the jaw to drop is not just the breathtaking deception of the claim, but the gullibility of the Washington press corps to continue reporting it.
News stories from President Obama's event last week hailing the 100-day mark since the stimulus was passed typically repeated the assertion that the stimulus has already "created or saved 150,00 jobs." ("And that's just the beginning," the President crowed.)
Here's an important note to my friends in the news media: the White House has absolutely no earthly clue how many job losses have been prevented because of the stimulus bill. None. Not Christina Romer. Not Jared Bernstein. Not Austen Goolsbee.
Each of these distinguished economists would have failed Statistics 101 for making such a laughable claim. But we see them now repeating these assertions to reporters who have seemingly abandoned all skepticism.
Forget that only a trickle of stimulus spending has yet made its way into the real economy. Set aside your views on whether or not the stimulus has any job-saving or -creating impact. And leave for another day the White House's failing to account for changing macroeconomic conditions and seasonal adjustments.
There is only one necessary data point to make the "jobs-saved" claim: an accurate measure of expected employment levels in the future. That baseline data is critical to measure what the employment level would be in the absence of the stimulus. Unfortunately for the White House, they cannot possibly know that measurement within any degree of confidence -- and they know it.
To understand just how unknowable this data point is, it's not necessary to be an economist, a mathematician or a statistician.
You only need to know this: the Bureau of Labor Statistics(BLS) - thousands of the most professional and rigorous counters and analyzers of labor data in the history of mankind - makes TWO revisions of employment data for their ESTIMATE of the PREVIOUS month! And even then the reports are mere estimates - an annual benchmark survey is required to reset the nation's payroll baseline.
That is, the best employment statisticians the world has ever known, people whose lives are dedicated to employment data, conducting labor surveys and research, constantly refining their complex models, have a difficult time telling you how many jobs were created in the PAST!
In fact, monthly BLS revisions of past job creation estimates are routinely off by tens of thousands of jobs, and on occasion by more than a hundred thousand jobs. The annual benchmark surveys always reset employment levels by hundreds of thousands of jobs.
And we're supposed to believe that the Council of Economic advisors have acquired the clairvoyant ability to estimate payrolls in the future? Please.
Romer, Goolsbee and Bernstein are smart people, and yet they haven't learned from even their recent misadventures with payroll data projections -- having already experienced the folly of attempting to project the range of possible jobs levels if the stimulus were passed. Projecting job creation with any degree of accuracy was always inherantly impossible, and should never have been taken seriously.
If I -- or even my predecessors in the Clinton Administration -- had tried to pull off this ridiculous gimmick we would have been run out of town. I don't even believe it's possible to look back and accurately measure the "job-saving" impact of Bush or Clinton Administration policies, let alone to measure in real time, or project into the future.
On Friday the BLS will release its estimate of May job losses. They will also report their revisions for March and April. And White House officials will once again gear up the spin machine on how many jobs have been "saved".
A self-respecting press corps would vigorously question the White House on their claims. We'll see if we have one.
______________________
Tony Fratto is a CNBC on-air contributor and most recently served as Deputy Assistant to the President and Deputy Press Secretary for the Bush Administration.
by Taboola
MORE FROM CNBC
The Myth of the Multiplier
Why the stimulus package hasn't reduced unemployment
Veronique de Rugy from the November 2009 issue - view article in the Digital Edition
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Measuring total jobs “saved” by a piece of legislation is as difficult as measuring total crimes prevented by police patrols. That’s why no agency—not the Labor Department, not the Treasury, not the Bureau of Labor Statistics— actually calculates “jobs saved.” As the University of Chicago economist Steven J. Davis told the Associated Press, using saved jobs as a yardstick “was a clever political gimmick to make it even harder to determine whether this policy has any effect.”
A look at the CEA’s job creation model undercuts its promises even more. The model’s calculation of saved or created jobs is based on a macroeconomic estimate, not on actual data. According to the authors, the estimate rests on a “rough correspondence over history” that indicates a 1 percent increase in gross domestic product (GDP) represents an increase of 1 million jobs. They might as well have said the estimate was picked at random.
How did they come up with the 1 percent figure? Since government spending is increasing, and since such spending is a component of GDP, they assumed GDP would grow whether or not the spending produced real growth in the economy. This is akin to assuming I will have a baby in nine months whether or not I am pregnant.
The May report concedes that while the CEA will attempt to measure job creation through data collected from stimulus recipients, the results will contain errors and inconsistencies. “Because of these limitations,” it warns, “the reported jobs numbers will need to [be] used with caution and as part of a more complex estimation strategy.”
Since then, Romer has told CNBC she couldn’t say for sure how many jobs would be created, since we can’t know what would have happened without the stimulus. But didn’t her report pro-ject what would happen if the stimulus wasn’t passed? Wasn’t the 3.5 million number supposed to be the difference between employment with the stimulus and employment without it?
The confusion flows from the faulty theory underlying the stimulus bill. In Keynesian thought, a decline in demand causes a decline in spending; since one person’s spending is someone else’s income, a fall in demand makes a nation poorer. As a poorer nation cuts back on spending, it sets off another wave of declining income. So any big shock to consumer spending or business confidence can set off waves of job losses and layoffs, as fewer goods are demanded and more workers become useless.
Under this logic, one possible remedy is for public spending to take the place of private spending. As government increases its spending, the money creates new employment. That, in turn, spurs those new workers to consume more and prompts businesses to buy more machines and equipment to meet the government-induced demand. Economists call this increase in aggregate income the “multiplier” effect. One dollar of government spending, the theory goes, ends up creating more than a dollar of new income. It’s a rare free lunch.
As appealing as the Keynesian story sounds, many economists have long doubted it. In 1991, looking across 100 countries, Robert Barro of Harvard presented historical evidence that high government spending actually hurts economies in the long run by crowding out private spending and shifting resources to the uses preferred by politicians rather than consumers. For a dollar of government spending, we end up seeing less than a dollar of growth. Can long-term poison be short-term medicine?
Even in the short run, if there’s a big decline in the demand for workers, why should that alone cause mass unemployment? If all those workers really want to work, why won’t wages just fall until all the workers have jobs? That’s how markets end a glut, whether it’s a glut of employees or a glut of blue jeans: with lower prices. If recessions really are caused by a fall in demand (and nothing else), why don’t wages fall enough to keep people from losing their jobs?
It’s because wages are sticky, Keynesians argue. Wages and salaries don’t change on a daily basis the way stock prices and gas prices do, so if a company hits a sales slump, salespeople might earn fewer commissions, but the vast majority of workers don’t get a pay cut. There’s something about the market for workers that keeps businesses from cutting wages in a slump. As long as wages are sticky, in the wake of a nationwide collapse in sales, entrepreneurs will start firing people.
If a decline in demand means mass firing, a rise in demand can mean mass hiring. Even if government spending is inefficient, pork-laden, and financed by future tax increases, the theory goes, it can still create some real jobs, some real output, in both the public and private sectors.
So what do the data say? There aren’t many studies of the issue. But two stand out: Robert Barro’s work and research by Valerie Ramey, an economist at the University of California–San Diego, on how military spending influences GDP. Both studies found that government spending crowds out the private sector, at least a little. And both found multipliers close to one: Barro’s estimate is 0.8, while Ramey’s estimate is 1.2. This means that every dollar of government spending produces either less than a dollar of economic growth or just a little over a dollar. That’s quite different from the administration’s favored multiplier of four. What’s more, Ramey also found evidence that consumer and business spending actually decline after an increase in government purchases.
Why this crowding out of private spending? Government spending comes from three sources: debt, new money, or taxes. In other words, the government can’t inject money into the economy without first taking money out of the economy.
Take taxation: Taxes simply transfer resources from consumers to government, displacing private spending and investment. Families whose taxes have increased will have less money to spend on themselves. They are poorer and will consume less. They also save less money, which in turn reduces the resources available for lending.
In addition, higher taxation encourages people to change their behavior to avoid taxes. They might switch their efforts to nontaxed activities, such as household production, or to the untaxed underground economy. Economists call this a deadweight loss, because people give up the taxed activity or good they prefer.
There are high costs to the other options as well. If the government borrows money, that leaves less capital for the private sector to borrow for its own consumption. If the government prints new money, it will create inflation, which reduces the value of the money we own and decreases everyone’s purchasing power.
Overall, government spending doesn’t boost national income or standard of living. It merely redistributes it—minus the share it spends on the bureaucracy that collects and spends our tax dollars. The pie is sliced differently, but it’s not any bigger. In fact, it’s smaller.
Contributing Editor Veronique de Rugy ([email protected]) is a senior research fellow at the Mercatus Center at George Mason University.
The Myth of the Multiplier
Why the stimulus package hasn't reduced unemployment
Veronique de Rugy from the November 2009 issue - view article in the Digital Edition
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Measuring total jobs “saved” by a piece of legislation is as difficult as measuring total crimes prevented by police patrols. That’s why no agency—not the Labor Department, not the Treasury, not the Bureau of Labor Statistics— actually calculates “jobs saved.” As the University of Chicago economist Steven J. Davis told the Associated Press, using saved jobs as a yardstick “was a clever political gimmick to make it even harder to determine whether this policy has any effect.”
A look at the CEA’s job creation model undercuts its promises even more. The model’s calculation of saved or created jobs is based on a macroeconomic estimate, not on actual data. According to the authors, the estimate rests on a “rough correspondence over history” that indicates a 1 percent increase in gross domestic product (GDP) represents an increase of 1 million jobs. They might as well have said the estimate was picked at random.
How did they come up with the 1 percent figure? Since government spending is increasing, and since such spending is a component of GDP, they assumed GDP would grow whether or not the spending produced real growth in the economy. This is akin to assuming I will have a baby in nine months whether or not I am pregnant.
The May report concedes that while the CEA will attempt to measure job creation through data collected from stimulus recipients, the results will contain errors and inconsistencies. “Because of these limitations,” it warns, “the reported jobs numbers will need to [be] used with caution and as part of a more complex estimation strategy.”
Since then, Romer has told CNBC she couldn’t say for sure how many jobs would be created, since we can’t know what would have happened without the stimulus. But didn’t her report pro-ject what would happen if the stimulus wasn’t passed? Wasn’t the 3.5 million number supposed to be the difference between employment with the stimulus and employment without it?
The confusion flows from the faulty theory underlying the stimulus bill. In Keynesian thought, a decline in demand causes a decline in spending; since one person’s spending is someone else’s income, a fall in demand makes a nation poorer. As a poorer nation cuts back on spending, it sets off another wave of declining income. So any big shock to consumer spending or business confidence can set off waves of job losses and layoffs, as fewer goods are demanded and more workers become useless.
Under this logic, one possible remedy is for public spending to take the place of private spending. As government increases its spending, the money creates new employment. That, in turn, spurs those new workers to consume more and prompts businesses to buy more machines and equipment to meet the government-induced demand. Economists call this increase in aggregate income the “multiplier” effect. One dollar of government spending, the theory goes, ends up creating more than a dollar of new income. It’s a rare free lunch.
As appealing as the Keynesian story sounds, many economists have long doubted it. In 1991, looking across 100 countries, Robert Barro of Harvard presented historical evidence that high government spending actually hurts economies in the long run by crowding out private spending and shifting resources to the uses preferred by politicians rather than consumers. For a dollar of government spending, we end up seeing less than a dollar of growth. Can long-term poison be short-term medicine?
Even in the short run, if there’s a big decline in the demand for workers, why should that alone cause mass unemployment? If all those workers really want to work, why won’t wages just fall until all the workers have jobs? That’s how markets end a glut, whether it’s a glut of employees or a glut of blue jeans: with lower prices. If recessions really are caused by a fall in demand (and nothing else), why don’t wages fall enough to keep people from losing their jobs?
It’s because wages are sticky, Keynesians argue. Wages and salaries don’t change on a daily basis the way stock prices and gas prices do, so if a company hits a sales slump, salespeople might earn fewer commissions, but the vast majority of workers don’t get a pay cut. There’s something about the market for workers that keeps businesses from cutting wages in a slump. As long as wages are sticky, in the wake of a nationwide collapse in sales, entrepreneurs will start firing people.
If a decline in demand means mass firing, a rise in demand can mean mass hiring. Even if government spending is inefficient, pork-laden, and financed by future tax increases, the theory goes, it can still create some real jobs, some real output, in both the public and private sectors.
So what do the data say? There aren’t many studies of the issue. But two stand out: Robert Barro’s work and research by Valerie Ramey, an economist at the University of California–San Diego, on how military spending influences GDP. Both studies found that government spending crowds out the private sector, at least a little. And both found multipliers close to one: Barro’s estimate is 0.8, while Ramey’s estimate is 1.2. This means that every dollar of government spending produces either less than a dollar of economic growth or just a little over a dollar. That’s quite different from the administration’s favored multiplier of four. What’s more, Ramey also found evidence that consumer and business spending actually decline after an increase in government purchases.
Why this crowding out of private spending? Government spending comes from three sources: debt, new money, or taxes. In other words, the government can’t inject money into the economy without first taking money out of the economy.
Take taxation: Taxes simply transfer resources from consumers to government, displacing private spending and investment. Families whose taxes have increased will have less money to spend on themselves. They are poorer and will consume less. They also save less money, which in turn reduces the resources available for lending.
In addition, higher taxation encourages people to change their behavior to avoid taxes. They might switch their efforts to nontaxed activities, such as household production, or to the untaxed underground economy. Economists call this a deadweight loss, because people give up the taxed activity or good they prefer.
There are high costs to the other options as well. If the government borrows money, that leaves less capital for the private sector to borrow for its own consumption. If the government prints new money, it will create inflation, which reduces the value of the money we own and decreases everyone’s purchasing power.
Overall, government spending doesn’t boost national income or standard of living. It merely redistributes it—minus the share it spends on the bureaucracy that collects and spends our tax dollars. The pie is sliced differently, but it’s not any bigger. In fact, it’s smaller.
Contributing Editor Veronique de Rugy ([email protected]) is a senior research fellow at the Mercatus Center at George Mason University.
The Myth of the Multiplier
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"The trillion dollar 'stimulus' isn't working, and no amount of phony statistics can change that," said House Republican Leader John Boehner, R-Ohio. "The president and his economic team promised the 'stimulus' would create jobs 'immediately' and unemployment would stay below 8%. But America has lost more than three million jobs since then, and the unemployment rate is nearing double digits."Did you miss the whole part where I showed Anton that the Obama White House was using that 3 million jobs saved number a year before the CBO came out with their estimate?
That's when he left...idiot child! LOL
I can't believe this is still going.
I'll give it one more try, one more time only.
Oldstyle, it is very simple - the numbers administration used are legitimate, un-made-up numbers confirmed by estimates CBO did. Your argumentation that they were somehow simply made up by administration is BS, no ifs, no butts.
Time to learn it and move on with your life, because when you deny the obvious you make yourself look like a idiot. Why are you so hell bent on making yourself look that way?
You want to make non-idiot argument against stimulus? Here it is, listen up:
Stimulus, and other expansionary policies Obama administration put in place during recession did in fact make for a significant jobs increase since he has been in office, these policies however have come at expense of aggravating our long term problems. The money we burrowed yesterday caused jobs, but the interest and eventual settling of the debt will ultimately cost even more jobs due to contractionary policies (increasing taxes and/or cutting spending) needed to repay it.
Yes, this is what sane, fact respecting, economically sound, conservative argument looks like - and because of those fine qualities we will rarely hear it from our challenged friends on the right.
Wonderful! Since you contend that the numbers the Obama Administration came up with for "Jobs Saved" are legitimate and un-made-up...you should have no problem at all providing the formula that was used to arrive at those numbers...right?
You folks on the left keep declaring that "Jobs Saved" is a verifiable number...yet none of you can give me the formula that one would use to arrive at that "verified" total! There's a reason for that, Anton and it's because the numbers aren't legitimate...it's because they were manufactured. Obama's economists plugged in whatever number of jobs saved that they needed to make the jobs created number look acceptable...called the fiction that they'd created "Jobs Created or Saved" and sold it to a gullible public.
Wonderful! Since you contend that the numbers the Obama Administration came up with for "Jobs Saved" are not legitimate and made-up...you should have no problem at all providing a source with economic credentials and that is impartial to back up your allegations.
You folks on the right keep declaring that "Jobs Saved" is an un-verifiable number...you keep asking for a formula you say does not exist. Any concept of how stupid that makes you look?Now oldstyle says "There's a reason for that, Anton and it's because the numbers aren't legitimate...it's because they were manufactured. Obama's economists plugged in whatever number of jobs saved that they needed to make the jobs created number look acceptable...called the fiction that they'd created "Jobs Created or Saved" and sold it to a gullible public." But Oldstyle can find no source to prove his accusations. And they remain just the argument of a ignorant food services employee and ignorant con troll. Makes oldstyle a total waste of space.
Boehner also pointed to a memo from Carnegie Mellon professor Allan Meltzer, who said that the White House is misleading the nation by saying the Recovery Act has saved jobs.
"One can search economic textbooks forever without finding a concept called 'jobs saved,' " wrote Meltzer, who served as an economic adviser under President Ronald Reagan. "It doesn't exist for good reason: how can anyone know that his or her job has been saved?"Stimulus creates 640,000 jobs - White House says - Oct. 30, 2009[/QUOTE]
What's wrong with 640,000 jobs?
What's wrong with 640,000 jobs?[/QUOTE]"The trillion dollar 'stimulus' isn't working, and no amount of phony statistics can change that," said House Republican Leader John Boehner, R-Ohio. "The president and his economic team promised the 'stimulus' would create jobs 'immediately' and unemployment would stay below 8%. But America has lost more than three million jobs since then, and the unemployment rate is nearing double digits."Did you miss the whole part where I showed Anton that the Obama White House was using that 3 million jobs saved number a year before the CBO came out with their estimate?
That's when he left...idiot child! LOL
I can't believe this is still going.
I'll give it one more try, one more time only.
Oldstyle, it is very simple - the numbers administration used are legitimate, un-made-up numbers confirmed by estimates CBO did. Your argumentation that they were somehow simply made up by administration is BS, no ifs, no butts.
Time to learn it and move on with your life, because when you deny the obvious you make yourself look like a idiot. Why are you so hell bent on making yourself look that way?
You want to make non-idiot argument against stimulus? Here it is, listen up:
Stimulus, and other expansionary policies Obama administration put in place during recession did in fact make for a significant jobs increase since he has been in office, these policies however have come at expense of aggravating our long term problems. The money we burrowed yesterday caused jobs, but the interest and eventual settling of the debt will ultimately cost even more jobs due to contractionary policies (increasing taxes and/or cutting spending) needed to repay it.
Yes, this is what sane, fact respecting, economically sound, conservative argument looks like - and because of those fine qualities we will rarely hear it from our challenged friends on the right.
Wonderful! Since you contend that the numbers the Obama Administration came up with for "Jobs Saved" are legitimate and un-made-up...you should have no problem at all providing the formula that was used to arrive at those numbers...right?
You folks on the left keep declaring that "Jobs Saved" is a verifiable number...yet none of you can give me the formula that one would use to arrive at that "verified" total! There's a reason for that, Anton and it's because the numbers aren't legitimate...it's because they were manufactured. Obama's economists plugged in whatever number of jobs saved that they needed to make the jobs created number look acceptable...called the fiction that they'd created "Jobs Created or Saved" and sold it to a gullible public.
Wonderful! Since you contend that the numbers the Obama Administration came up with for "Jobs Saved" are not legitimate and made-up...you should have no problem at all providing a source with economic credentials and that is impartial to back up your allegations.
You folks on the right keep declaring that "Jobs Saved" is an un-verifiable number...you keep asking for a formula you say does not exist. Any concept of how stupid that makes you look?Now oldstyle says "There's a reason for that, Anton and it's because the numbers aren't legitimate...it's because they were manufactured. Obama's economists plugged in whatever number of jobs saved that they needed to make the jobs created number look acceptable...called the fiction that they'd created "Jobs Created or Saved" and sold it to a gullible public." But Oldstyle can find no source to prove his accusations. And they remain just the argument of a ignorant food services employee and ignorant con troll. Makes oldstyle a total waste of space.
Boehner also pointed to a memo from Carnegie Mellon professor Allan Meltzer, who said that the White House is misleading the nation by saying the Recovery Act has saved jobs.
"One can search economic textbooks forever without finding a concept called 'jobs saved,' " wrote Meltzer, who served as an economic adviser under President Ronald Reagan. "It doesn't exist for good reason: how can anyone know that his or her job has been saved?"Stimulus creates 640,000 jobs - White House says - Oct. 30, 2009
Read the article and it will explain to you what's "wrong" with the claim that 640,000 jobs were created or saved!
Felix Salmon
How the government fudges job statistics
By Felix Salmon
February 17, 2010
In the Marketplace letters segment yesterday, Representative Peter DeFazio (D-Oregon) took issue with me saying that infrastructure investment is an extremely expensive way of creating jobs and "costs a good $200,000 per job". Just as well I didn't use the $1 million figure here, which I stand by, and which was fact-checked by the Atlantic! " data-share-img="" data-share="twitter,facebook,linkedin,reddit,google,mail" data-share-count="false">
Tags:
employment
In the Marketplace letters segment yesterday, Representative Peter DeFazio (D-Oregon) took issue with me saying that infrastructure investment is an extremely expensive way of creating jobs and “costs a good $200,000 per job”. Just as well I didn’t use the $1 million figure here, which I stand by, and which was fact-checked by the Atlantic!
The host, Kai Ryssdal, had no time to read out the letter in full, but has allowed me to reprint it:
Dear Mr. Ryssdal:
I have always enjoyed your show and have enjoyed past opportunities to discuss issues as your guest. However, I was distressed last Friday to hear a purported expert guest, Reuters blogger Felix Salmon, state with great certainty that infrastructure investment is an inefficient jobs creator because those jobs are so expensive to create. To back up his argument he claimed that it costs $200,000 to create one infrastructure job. However, he provided no source for this claim and you failed to challenge his assertion.
The Council of Economic Advisors has estimated that $92,000 in direct government spending creates one job-year, regardless of the sector of the economy. The U.S. Department of Transportation, arguably the most knowledgeable government agency when it comes to transportation spending and the resulting job creation, states that an investment of $35,941 creates one infrastructure-related job. Those two confirmable estimates are a far cry from the dubious $200,000-per-job claim from Mr. Salmon. Unfortunately Mr. Salmon’s assertion went unchallenged while the other guest, Heidi Moore of The Big Money, seemed to tacitly agree with him.
I am particularly sensitive about this issue since the AP ran an article last month on an “analysis” by AP reporters that used incomplete information to draw inaccurate and misleading conclusions about the success of the transportation infrastructure component of the American Recovery and Reinvestment Act (ARRA). The article claimed that “a surge in spending on roads and bridges has had no effect on local unemployment ” based on the reporters’ finding that “local unemployment rates rose and fell regardless of how much stimulus money Washington poured out for transportation.” However, instead of examining the impact of ARRA’s transportation investment on jobs in the transportation industry – an appropriate comparison – the reporters compared the transportation funding, which comprised only 6 percent of spending in the Recovery Act, to the overall unemployment rate. This led to a specious conclusion and ignores the fact that transportation projects funded by ARRA have created or sustained more than 250,000 direct, on-project jobs, with payroll expenditures of $1.3 billion.
I continue to support infrastructure investment as both a justified investment that future generations will benefit from as well as one of the most efficient creators of jobs, contrary to the beliefs of purported experts like Mr. Salmon and the so-called investigative reporters from the AP. I hope you will set the record straight. If you would like to discuss this further you can contact me directly at [redacted].
Sincerely,
Peter A. DeFazio, M.C.
Chairman, Subcommittee on Highways and Transit
(In case you were wondering, the “M.C.” just means Member of Congress.)
I have no dog in DeFazio’s fight with the AP. But his attacks on me are just plain wrong. Infrastructure investments are simply not “one of the most efficient creators of jobs”, no matter how much DeFazio might want them to be, and the sources he cites to back up that claim don’t support it.
What’s at issue here is a ratio: I’m talking about dollars per job created. To get that number, you take the number of dollars spent, and divide it by the number of jobs created. DeFazio, by contrast, subtly tries to change the denominator when he says that “$92,000 in direct government spending creates one job-year”: he’s taking dollars, dividing by jobs created, and then dividing again by the number of years that each job is expected to last.
In the real world, of course, if you spend $300,000 to create a job which lasts three years, then that’s one job created with your $300,000, not three jobs. Only in DC would people attempt to claim that their $300,000 had created three “job-years”.
What’s more, the $92,000 estimate covers government spending in general, not just infrastructure spending. Infrastructure spending gets you low bang for the buck, in terms of job creation, compared to other kinds of spending — my example on the show was arts subsidies. A lot of government spending goes on creating new federal jobs: you get much more job creation per buck that way than you do building infrastructure.
And if you look at the CEA report, you’ll see that it carefully fudges the difference between jobs created, on the one hand, and jobs saved, on the other; in fact, it seems to used “created” and “created or saved” as synonyms. So if you’ve had a job for years, and you’re still in that job, you can still be counted in these job-creation statistics if the government somehow determines that you might not be in that job had the stimulus bill not passed.
The fact is that if you move away from vague country-level statistics and start drilling down to the actual number of jobs created by actual infrastructure projects, you never get anywhere near $92,000 per job. For instance, have a look at the job-creation statistics on this page.
A 5-mile stretch of highway, costing $50 million, creates a total of 79 jobs. That’s over $600,000 per job. Even if you divide that by two on the grounds that it’s a two-year project, that’s still $300,000 per job-year. In railways, a $15 million investment creates 12 jobs — that’s $1.25 million per job, and it’s a one-year project.
I’ve seen similar numbers surrounding hospitals, and higher numbers surrounding nuclear power stations — basically, infrastructure investment is an incredibly inefficient way of creating jobs.
But what of DeFazio’s $35,941 figure? I finally tracked it down to here — a report which does not say that spending $35,941 “creates one infrastructure-related job”. Again, it’s talking job-years, not jobs, but more importantly, it says this:
The FHWA analysis refers to jobs supported by highway investments, this includes ‘new jobs’ to the extent unemployed labor is hired; ‘better jobs’ as currently employed workers move into jobs with better compensation and/or full time positions; and ‘sustained jobs’ as current employees are retained with the expenditure.
This is an even looser definition than “created or saved” — it also includes substantially everybody who just gets a promotion as well, along with that ill-defined definition of “sustained jobs”, comprising people who just stay in the same job they’ve had all along.
Finally, what is DeFazio talking about when he says that “transportation projects funded by ARRA have created or sustained more than 250,000 direct, on-project jobs, with payroll expenditures of $1.3 billion”? Simple division here would seem to imply that each worker is earning no more than $5,200 a year, which can’t be right. But again, look at the footnotes — specifically in this report, which is the source of DeFazio’s statistic:
Consistent with the U.S. Department of Transportation’s reporting requirements, the number of direct jobs is based on direct, on-project full-time-equivalent (FTE) job months. One person working full time or two people working one-half time for one month represents one FTE job month. FTE job months are calculated by dividing cumulative job hours created or sustained by 173 hours (40 hours per week times 52 weeks divided by 12 months = 173 hours).
Yes, for the purposes of this report, the government has calculated the number of jobs created by taking the number of hours worked and dividing by 173. If you pay a man to wield a shovel for one year, working 40 hours a week, then hey, you’ve created 12 jobs! If you pay him overtime, and he works 60 hours a week, then you’ve created 18 jobs! If he keeps on working at that pace for three years, then you’re up to 54 jobs! All from one man earning one paycheck.
So it’s not just DeFazio, then: everybody in the government seems to be happy fudging job-creation statistics, especially by using job-years or even job-months rather than actual jobs, and also by eliding the distinction between jobs created, on the one hand, and jobs improved or saved, on the other. That’s worth remembering, next time you hear a politician kvelling about how the government is creating millions of new jobs.
How the government fudges job statistics
How the government fudges job statistics
By Felix Salmon
February 17, 2010
In the Marketplace letters segment yesterday, Representative Peter DeFazio (D-Oregon) took issue with me saying that infrastructure investment is an extremely expensive way of creating jobs and "costs a good $200,000 per job". Just as well I didn't use the $1 million figure here, which I stand by, and which was fact-checked by the Atlantic! " data-share-img="" data-share="twitter,facebook,linkedin,reddit,google,mail" data-share-count="false">
Tags:
employment
In the Marketplace letters segment yesterday, Representative Peter DeFazio (D-Oregon) took issue with me saying that infrastructure investment is an extremely expensive way of creating jobs and “costs a good $200,000 per job”. Just as well I didn’t use the $1 million figure here, which I stand by, and which was fact-checked by the Atlantic!
The host, Kai Ryssdal, had no time to read out the letter in full, but has allowed me to reprint it:
Dear Mr. Ryssdal:
I have always enjoyed your show and have enjoyed past opportunities to discuss issues as your guest. However, I was distressed last Friday to hear a purported expert guest, Reuters blogger Felix Salmon, state with great certainty that infrastructure investment is an inefficient jobs creator because those jobs are so expensive to create. To back up his argument he claimed that it costs $200,000 to create one infrastructure job. However, he provided no source for this claim and you failed to challenge his assertion.
The Council of Economic Advisors has estimated that $92,000 in direct government spending creates one job-year, regardless of the sector of the economy. The U.S. Department of Transportation, arguably the most knowledgeable government agency when it comes to transportation spending and the resulting job creation, states that an investment of $35,941 creates one infrastructure-related job. Those two confirmable estimates are a far cry from the dubious $200,000-per-job claim from Mr. Salmon. Unfortunately Mr. Salmon’s assertion went unchallenged while the other guest, Heidi Moore of The Big Money, seemed to tacitly agree with him.
I am particularly sensitive about this issue since the AP ran an article last month on an “analysis” by AP reporters that used incomplete information to draw inaccurate and misleading conclusions about the success of the transportation infrastructure component of the American Recovery and Reinvestment Act (ARRA). The article claimed that “a surge in spending on roads and bridges has had no effect on local unemployment ” based on the reporters’ finding that “local unemployment rates rose and fell regardless of how much stimulus money Washington poured out for transportation.” However, instead of examining the impact of ARRA’s transportation investment on jobs in the transportation industry – an appropriate comparison – the reporters compared the transportation funding, which comprised only 6 percent of spending in the Recovery Act, to the overall unemployment rate. This led to a specious conclusion and ignores the fact that transportation projects funded by ARRA have created or sustained more than 250,000 direct, on-project jobs, with payroll expenditures of $1.3 billion.
I continue to support infrastructure investment as both a justified investment that future generations will benefit from as well as one of the most efficient creators of jobs, contrary to the beliefs of purported experts like Mr. Salmon and the so-called investigative reporters from the AP. I hope you will set the record straight. If you would like to discuss this further you can contact me directly at [redacted].
Sincerely,
Peter A. DeFazio, M.C.
Chairman, Subcommittee on Highways and Transit
(In case you were wondering, the “M.C.” just means Member of Congress.)
I have no dog in DeFazio’s fight with the AP. But his attacks on me are just plain wrong. Infrastructure investments are simply not “one of the most efficient creators of jobs”, no matter how much DeFazio might want them to be, and the sources he cites to back up that claim don’t support it.
What’s at issue here is a ratio: I’m talking about dollars per job created. To get that number, you take the number of dollars spent, and divide it by the number of jobs created. DeFazio, by contrast, subtly tries to change the denominator when he says that “$92,000 in direct government spending creates one job-year”: he’s taking dollars, dividing by jobs created, and then dividing again by the number of years that each job is expected to last.
In the real world, of course, if you spend $300,000 to create a job which lasts three years, then that’s one job created with your $300,000, not three jobs. Only in DC would people attempt to claim that their $300,000 had created three “job-years”.
What’s more, the $92,000 estimate covers government spending in general, not just infrastructure spending. Infrastructure spending gets you low bang for the buck, in terms of job creation, compared to other kinds of spending — my example on the show was arts subsidies. A lot of government spending goes on creating new federal jobs: you get much more job creation per buck that way than you do building infrastructure.
And if you look at the CEA report, you’ll see that it carefully fudges the difference between jobs created, on the one hand, and jobs saved, on the other; in fact, it seems to used “created” and “created or saved” as synonyms. So if you’ve had a job for years, and you’re still in that job, you can still be counted in these job-creation statistics if the government somehow determines that you might not be in that job had the stimulus bill not passed.
The fact is that if you move away from vague country-level statistics and start drilling down to the actual number of jobs created by actual infrastructure projects, you never get anywhere near $92,000 per job. For instance, have a look at the job-creation statistics on this page.
A 5-mile stretch of highway, costing $50 million, creates a total of 79 jobs. That’s over $600,000 per job. Even if you divide that by two on the grounds that it’s a two-year project, that’s still $300,000 per job-year. In railways, a $15 million investment creates 12 jobs — that’s $1.25 million per job, and it’s a one-year project.
I’ve seen similar numbers surrounding hospitals, and higher numbers surrounding nuclear power stations — basically, infrastructure investment is an incredibly inefficient way of creating jobs.
But what of DeFazio’s $35,941 figure? I finally tracked it down to here — a report which does not say that spending $35,941 “creates one infrastructure-related job”. Again, it’s talking job-years, not jobs, but more importantly, it says this:
The FHWA analysis refers to jobs supported by highway investments, this includes ‘new jobs’ to the extent unemployed labor is hired; ‘better jobs’ as currently employed workers move into jobs with better compensation and/or full time positions; and ‘sustained jobs’ as current employees are retained with the expenditure.
This is an even looser definition than “created or saved” — it also includes substantially everybody who just gets a promotion as well, along with that ill-defined definition of “sustained jobs”, comprising people who just stay in the same job they’ve had all along.
Finally, what is DeFazio talking about when he says that “transportation projects funded by ARRA have created or sustained more than 250,000 direct, on-project jobs, with payroll expenditures of $1.3 billion”? Simple division here would seem to imply that each worker is earning no more than $5,200 a year, which can’t be right. But again, look at the footnotes — specifically in this report, which is the source of DeFazio’s statistic:
Consistent with the U.S. Department of Transportation’s reporting requirements, the number of direct jobs is based on direct, on-project full-time-equivalent (FTE) job months. One person working full time or two people working one-half time for one month represents one FTE job month. FTE job months are calculated by dividing cumulative job hours created or sustained by 173 hours (40 hours per week times 52 weeks divided by 12 months = 173 hours).
Yes, for the purposes of this report, the government has calculated the number of jobs created by taking the number of hours worked and dividing by 173. If you pay a man to wield a shovel for one year, working 40 hours a week, then hey, you’ve created 12 jobs! If you pay him overtime, and he works 60 hours a week, then you’ve created 18 jobs! If he keeps on working at that pace for three years, then you’re up to 54 jobs! All from one man earning one paycheck.
So it’s not just DeFazio, then: everybody in the government seems to be happy fudging job-creation statistics, especially by using job-years or even job-months rather than actual jobs, and also by eliding the distinction between jobs created, on the one hand, and jobs improved or saved, on the other. That’s worth remembering, next time you hear a politician kvelling about how the government is creating millions of new jobs.
How the government fudges job statistics
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