Fact-Checking the Fact Checkers: Is Rick Perry Wrong To Say That the Stimulus Created Zero Jobs?

How many jobs did the stimulus create? At Monday’s GOP presidential debate, Texas Gov. Rick Perry said the number was zero, zilch, zip, nada, goose-egg. The fact-checkers at CNN say he’s wrong.

Texas Gov. Rick Perry said at Monday's CNN/Tea Party Debate that President Obama "had $800 billion worth of stimulus in the first round of stimulus. It created zero jobs. Four-hundred-plus billion in this package, and I can do the math on that one. Half of zero jobs is going to be zero jobs."

The Facts:

A more accurate jobs count may come from the nonpartisan Congressional Budget Office, which estimates the American Recovery and Reinvestment Act, also known as the stimulus bill, "increased the number of people employed by between 1.4 million and 3.3 million" in the second quarter of 2010 alone.

Perry's wrong. But the CBO estimate that CNN points to doesn't provide anything like an "accurate jobs count."

As I’ve previously pointed out here, here, here, here, and here, the CBO’s job-creation estimates don’t actually give us a reliable idea of how many jobs the stimulus created, because the agency isn’t actually counting the jobs. Instead, it’s rerunning the same multiplier-based economic model it initially used to estimate that the law would create jobs, slightly adjusted for differences in how the money’s being spent.

As CBO director Doug Elmendorf has explained, the agency’s reports do not constitute an independent check on those initial, pre-stimulus estimates. In a response to question at a March, 2010 presentation, Elmendorf confirmed that "if the stimulus bill did not do what it was originally forecast to do, then that would not have been detected by the subsequent analysis.”

So if the stimulus created tens of millions of jobs, or if it created none at all, the CBO’s reports wouldn’t tell us either way.

Perry, however, is still wrong. While we don’t know exactly how many jobs the stimulus has created, we do have independently reported, on-the-ground data that tells us that the stimulus created some full-time jobs and some part-time work. In my column today, I wrote about a survey of businesses that received stimulus funds. The survey was conducted by Dan Rothschild and Garett Jones of the Mercatus Center. Rothschild, who's now at the American Enterprise Institute, led a team of interviewers who talked with managers at those firms. Here’s the first case they share from those interviews:

Let’s begin with a success story. The owner of a construction engineering firm told our team that ARRA is ―the only reason our doors are still open. He didn’t suggest having to sacrifice quality in order to meet the ARRA’s strict deadlines. (Our interview teams rarely asked specifically about the quality-speed tradeoff, but many interviewees brought up the issue themselves). And because of ARRA, his small firm grew by about 20 workers, of which 6 had been brought off of unemployment.  

Thus, ARRA saved his firm, he found good-quality workers quickly, and he worked on a project that seemed to be no different than the usual federal construction project. That is what a success story looks like, and this is about as good a story as we found.  

Of course, the stimulus also funded make-work for tile layers, short-term project positions that were reported as “jobs created” despite existing for only a few weeks or months, and salaries that ended up being used to rehire retired employees who were already receiving pensions and were presumably not actively seeking employment. But along the way, it clearly created some number of full-time jobs as well.

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  • robc||

    Perry might not be wrong. While the stimulus clearly created some jobs, the affects of stimulus may have killed as many or more jobs.

    Thus, in net, Perry might be right with zero. Or, he might be wrong and greatly overestimating the number of jobs created as the real number is very, very negative.

    Either way, Suderman, you are more wrong than Perry.

  • rrrr||

    +1

  • rrrr||

    Further to this point, Suderman, what about the COST per job (even assuming you are correct that any jobs were actually created).

    Sigh … yeh, we know, Suderman, CNN's wrong but Perry is a Bible thumbing mouth breather, so we have to be even handed here ...

  • Flex Nasty B.I.G.||

    Yeah, Suderman is pretty much entirely missing the point on this one. One can't consider the benefits of a government program without also considering the cost. While the stimulus may have created a job here or there, we also need to consider how many jobs it destroyed - either now or in the future, when the additional tax money to fund it is taken away from participants in the private economy.

  • Cosmotarian||

    Either way, Suderman, you are more wrong than Perry.

    But Perry's icky.

  • ||

    What Perry said is wrong. What you wished he had said might be right, but that isn't what he said.

  • teh rael o2||

    lesee, whom to believe? the CBO...or posters named robc, rrr, or flex?...gosh this is soo hard...

  • ||

    In a response to question at a March, 2010 presentation, (CBO director)Elmendorf confirmed that "if the stimulus bill did not do what it was originally forecast to do, then that would not have been detected by the subsequent analysis.”
    --------------

    So "believing" the CBO doesn't really seem to be all that different a proposition anyway, does it? The major problem here doesn't even seem to be the people that believe 100% of what the CBO says and puts out but the people that choose to ignore certain parts, and in doing so make out other parts to be something they're not.

  • teh rael o2||

    march 2010? before libya & the arab spring? nah, nothing's changed since then...

  • ||

    Here's the line again:

    ""if the stimulus bill did not do what it was originally forecast to do, then that would not have been detected by the subsequent analysis.”

    What is it about "libya & the arab spring" that changes that exactly? Did they fundamentally alter the CBO techniques and/or models when we sent in drones or something?

  • Citizen Yogi||

    Exactly, robc. "Net jobs" is what we should be discussing. If I rob a liquor store and use proceeds to hire a gardner at my compound, I've created a job! When the store goes bust in a few months as a result of robbery and subsequent cash flow problems, what, then, of the equation, hmmm?

  • Citizen Nothing||

    A joke handle ain't changed back 'till it's changed back.

  • Amakudari||

    This is why they used "jobs created or saved" instead of "jobs created or saved less jobs destroyed." There's no accounting for crowding out, whether the stimulus increased labor costs, etc.

  • flye||

    That's how a profitable business would think, so it's clearly the wrong mindset for such a grand and noble policy.

  • ||

    Yes. We are on the right track here. Sure the stimulus created jobs - most of them government jobs. It also destroyed thousands of private sector jobs through crowding out, taxes, and inflation.

    Was it a net jobs gain? Obviously not.

  • ||

    Last week I was talking to the CFO where I work and somehow we got talking about Obama’s “jobs” bill. Now we are of like mind and I told him this is what I do when someone tries to justify the Keynesian nonsense. I took $5 dollars out of my pocket and told him he was the government and asked ‘how is it if I spend the $5 it isn’t a stimulus to the economy but if the government taxes or burrows the $5 and spends it it’s a stimulus’? He got a good chuckle out of it.

  • ||

    Perry, however, is still wrong. While we don’t know exactly how many jobs the stimulus has created, we do have independently reported, on-the-ground data that tells us that the stimulus created some full-time jobs and some part-time work.

    Oh bullshit. Look even if we had net plus jobs we will still have to pay for it in the long run and we will lose jobs when we do.

    Also this study:

    http://www.economics.harvard.e.....e_Debt.pdf

    says spending beyond 60% of GDP hurts the economy by as much as 2% growth...sorry dude stimulus ($800 billion of debt spending) not only did not create any jobs...it more then likely destroyed some.

  • ||

    Spending nearly a trillion dollars when we're having a budget crisis almost certainly has had a negative effect on growth, contributing to the continued/new recession and high unemployment. So Perry is more right than our current lying, cheating, defrauding government is.

  • ||

    The long run is always now. Government drag on the economy is immediate with the spending.

  • ||

    That is what the study I linked to shows.

  • Amakudari||

    Employment in the US (SA)

    So after spending about $2,700 per household in the US, we have barely a blip in employment, no matter how you parse the data. Even if the stimulus did create, say, 4 million jobs, that's at a cost of $200,000 per job, and it was in industries that were overbuilt and will shed those jobs eventually anyway. Plus, deficit spending has sparked long-term concerns about our solvency, which again makes businesses reluctant to hire (even ignoring additional costs like insurance).

    The only argument that stimulusmongerers have left is that unless the stimulus is enough it's as good as doing nothing at all. It's a little embarrassing, really. So they'll persist in arguing about technicalities -- whether ARRA created one or more jobs versus zero or less, or whether Social Security is a Ponzi game or a different kind of fraud -- and completely avoid the spirit of the argument.

  • ||

    Who gives a shit whether Perry is "right"? The fact is, unemployment is still sky high, after the government spends trillions of dollars. That's pretty much all you need to see how utterly ineffective that spending is. Whether a few jobs were "created" or not is fucking irrelevant next to the amounts that were spent on them. Yet the public just seems to let it slide; if the government had done nothing and we still had the same unemployment, we would at least not be in hock for trillions. But they had to "do something", of course. Which actually means "do nothing for trillions of dollars".

  • ||

    This is an excellent point. And let's not forget, the stimulus was sold as ending unemployment and the recession. So it's not just the jobs that are missing, it's the growth that would create new wealth and new jobs.

  • ||

    Any criticism of the bullshit that is "government will create jobs" is valid as far as I'm concerned. It's such a load of shit that you could practically outright lie about it and still be right that it's bullshit.

    I am not advocating lying, for those too stupid to understand me.

  • ||

    I am so tired of all of the lies, spin, and other mutilations of the truth. No, that's not right. I am so tired of the lies, etc., but worse than that, I am even more tired of the people who defend, ignore, or support the lies, etc.

  • ||

    The people who defend the lies have gone so far into lie-land that lying is all they can do now, ProL. That, or face an astoundingly massive admittance that they have supported an even bigger lie.

    They won't do that.

    I'm going to the beach. The ocean never lies to me.

  • ||

    Watch out for tsunamis. All of those little earthquakes up and down the Pacific seaboard are making me nervous for you Northwesterners.

  • ||

    Though at least with tsunamis, the sea will let you know it will be killing you, as it recedes the the horizon.

  • rts||

    That's only if the leading edge is the trough; it might be a peak, and you'd have no warning.

  • ||

    Ah, thanks. I always wondered about how that worked.

  • Paul||

    Though at least with tsunamis, the sea will let you know it will be killing you, as it recedes the the horizon.

    Sort of like Obama's presidential prospects?

  • ||

  • Tman||

    And according to Suderman, the "best" example we have is an engineering firm that hired 20 people. Even if that "success" story was repeated 100 times you still only have 2000 jobs created.

    So hey, only $400 million per job. Close enough for government work!

  • Amakudari||

    There's also the issue of time consistency. Unless this stimulus represents a permanent change in government spending policy -- and it doesn't because that would be awful -- businesses will only hire in the short-term, but they will lay those people off again as spending evaporates. And we'll be back where we started with employment, plus a bridge to nowhere and less a bunch of money.

    The idea is that the spending would jump-start the economy, but the pump priming argument would be laughable if it weren't real policy.

  • ||

    You know, I've got to say this: If they'd given me the $800 billion to spend, with the sole caveat that I need to kick-start a growth spurt in the U.S. economy, I think I could do quite a bit better. Me, some corporate lawyer with a mere B.S. in Finance and some lay understanding of the world. Not even a Nobel Prize to my name!

    Granted, you'd see a lot going into technology development, but it wouldn't be on stuff without a market.

  • Almanian||

    You're going to need a good HR Manager to help you with your Talent Acquisition, Development and Retention - don't want to waste that $800M.

    I also do union avoidance...(ahem)...quite well.

    And I'll do it for...hmmm....$1M/year!

    When do "we" get started, partner?

  • ||

    That shit don't work on me. I take my responsibilities seriously. In fact, I'm not even going to pay myself for this work--I'll just do it during my free time.

  • Almanian||

    You MONSTER...

    An absolute genius MONSTER...

    How I envy you...

  • ||

    I just set aside a $50 million prize for the first company that can provide safe, reliable, cheap access to the ISS for our astronauts by next June.

  • flye||

    How much can I get if I only hit two of those requirements? Any two, your choice.

  • Brett L||

    Elon Musk would have that prize by December.

  • ||

    I'm evil that way.

  • ||

    I'd throw a goddamn party. Not just any party, but the biggest party EVAH!

    The beer and drug budget alone would be $500 billion.

    See if anyone gives a shit about the recession or 'jobs' after that. I mean if we're just going throw money into the money hole it could just as well be a Beer & Drug hole.

  • Almanian||

    If your party includes hookers and blow, I *might* be interested in supporting your idea

  • ||

    Since you're first on board you'll have your own Hookers & Blow pavilion.

    Any subsequent partiers will have to setlle for a Hooker & Blow tent, or gazebo, while supplies last.

  • BakedPenguin||

    You know, I'm get a little tired of the "hookers and blow". Hookers and blow, hookers and blow, yeah, yeah, we get it.

    Some of us like opiates, you know, and hookers and oxy would be a lot more fun.

    Sorry, but it had to be said.

  • Paul||

    Pro L, if you spent it on hookers and blow, you'd be helping young women get a start in the job market and stimulating a burgeoning pharmeceutical street-market. Every bit as effective as the American Structured Securities Rescue Act for a Prudent Economy.

  • ||

    My wife has vetoed your suggestion. However, I'm willing to spread a few tens of thousands here to stimulate the underground economy. A trifle, really, considering the $750 million I have left.

  • ||

    Perry's comments sound like pure political boiler-plate. Of course he is going to say the Stimulus created zero jobs. Lots of voters hated the damn waste of money, so why the kerfuffle?

  • Almanian||

    But, but, but POLITIFACT.COM said Perry's wrong! Politifact! DOT COM! Some linky to a libleftard rag over at Teh RealClearPolitics told me so!

    Goddamn it, you can trust ANYONE any more.

    Of course, I already knew that...

  • Almanian||

    Substitute "can't" for "can" anywhere above that seems appropriate. Thanks!

  • johnl||

    You can't rust anyone anymore.

  • ||

    Isn't it perfectly possible that ARRA created negative jobs? Even if you find success stories, stories where full or part-time jobs were created from the unemployed, it doesn't catch the infamous "that which is unseen." If the money spent on ARRA had been left in private hands, or if the money borrowed to spend on ARRA had not been borrowed, "that which is unseen" *may* have created more jobs. There is really no way to test this, but it makes declarations of "jobs created" by government spending a bit hard to verify.

    Pierre

  • RandomJerk||

    Apparently Suderman never heard of Bastiat.

  • johnl||

    It's back to Economics in One Lesson for Suderman.

  • rrrr||

    Fucking broken windows ... how does that work Suderman?

  • Paul||

    What, no hat tip?

  • Paul||

    HTML, how does it work?

    Ahem, no hat tip?

    Yeah, I admit I'm not letting it go.

  • Paul||

    I haven't read through the link, but I have a huge problem with this:

    Let’s begin with a success story. The owner of a construction engineering firm told our team that ARRA is ―the only reason our doors are still open. He didn’t suggest having to sacrifice quality in order to meet the ARRA’s strict deadlines. (Our interview teams rarely asked specifically about the quality-speed tradeoff, but many interviewees brought up the issue themselves). And because of ARRA, his small firm grew by about 20 workers, of which 6 had been brought off of unemployment.

    Thus, ARRA saved his firm, he found good-quality workers quickly, and he worked on a project that seemed to be no different than the usual federal construction project. That is what a success story looks like, and this is about as good a story as we found.

    First off, a construction company who received a shit ton of cash from the government is asked if they really needed it. How many companies would say, "Nah"?

    Second, what projects does this construction company take on? The quote suggests that they primarly do federal projects.

    Which means a company which was essentially employed by the government might have had to close its doors because the economy tanked and the government stopped spending money (for a while). So the government redirected funds back to projects, re-employing this company.

    At best... at absolute best (assuming my assumptions are correct) these jobs were saved, not created.

    As evidence for stimulus success, this is pretty weak tea.

  • DK||

    I've never understood why it's that hard to calculate a fairly good estimate of net jobs.

    1) The government gets a W4 - job gain.
    2) The government doesn't receive a payroll check for an employee that they received the prior pay period - job loss.

  • Brett L||

    DK:

    This tends to undercount people who become, say, 1099 contractors or start a home business.

  • DK||

    For the self-employed and 1099ers, they eventually have to pay payroll taxes (year-end?). So, a monthly estimate would have to go by what happened in prior years. I'm not saying the net jobs calculation is completely accurate, but it seems to be better than what they're currently doing.

  • ||

    Its not just jobs. Its FTE jobs that you have to calculate, and the tax forms won't help you do that.

    If I employ one person 40 hours a week, and they want to go part-time so I hire another person to fill out the shift, that would look like a new job from the tax forms, but its still just one FTE.

  • DK||

    Oh, I guess for the self-employed it would be a W9 and not a W4. Actually, a job gain could be calculated from the opposite description of 2) - the government receives a payroll check that they didn't receive the prior period.

  • AdamJ||

    At least he learned his lesson from the first stimulus that extending unemployment benefits and giving states money doesn't really create any jobs. This new jobs (stimulus) bill is totally different.

    You know what they should do? Take this proposed stimulus money and just give it directly to teachers in Cleveland. Provide the caveat that they can only spend the money in Cleveland. Then we can see the famed multiplier at work as Cleveland turns $500 billion into $750 billion overnight!

  • Citizen Nothing||

    All that said, Perry is still an asshole.

  • Constitutionalist||

    This is Bastiat's broken window fallicy all over again. Though we cannot know with certainty, the most probable answer is that the net effect of the stimulus was negative, or near zero. Remember, we cannot see the jobs lost due to the diversion of resources created by the stimulus. So Perry is probably closer to being correct than his critics are.

  • Mop Guy||

    Sigh. Another messy thread. Guy ought to be named spoogerman considering the work his posts leave for me.

    But I'm glad to have a job. And the release for the uptight posters has got to help their stress levels.

  • ||

    Its fine to talk about anecdotal jobs here and there, but the real question is, how many of those jobs are still around? Why should they count if they lasted only as long as the federal money lasted (which is to say, not long at all)?

    Why are we better off today because some people had jobs for a few months a year or so ago?

    Its not just net jobs, as discussed above. Its net self-sustaining jobs that matter.

  • ||

    Articles like this make me wonder if Mr. Suderman will be the next "libertarian" here at Reason to become a liberal over at Huffington Post...

  • Grumpy Old Bastard||

    It clearly was a big pile of shit.

    It probably created some government jobs for cheerful assholes to calculate whatever bullshit numbers the administration wanted to present.

  • ||

    In addition to all of the arguments above, you have to account for the distortion effects of having the government pick winners and losers in the stimulus. After the stimulus ends this leaves industry over-hired in areas that are not needed and unprepared for the real challenges of the marketplace. In other words, a "jobs bubble" similar to real-estate and other bubbles created by government meddling.

    Oh, and add in an extra trillion dollar distortion in the value of the dollar and treasuries. Nice work guys.

  • Abdul||

    Look, America hasn't had much practice with a centrally planned economy. It's going to take Obama some time to work the kinks out. But soon, America will be running just as smoothly as every other country in which the economy is centrally planned.

  • Gilbert Martin||

    "Perry, however, is still wrong. While we don’t know exactly how many jobs the stimulus has created, we do have independently reported, on-the-ground data that tells us that the stimulus created some full-time jobs and some part-time work"

    But you don't know that it created any jobs on an overall net basis. And that is what counts, not whether some particular job was created. That job cost wealth that had to be extracted from somewhere else and therefore prevented those resources from being spent or invested elsewhere.

    As Bastiat said, there is the seen and the unseen.

  • 16th amendment||

    Remember, the cost per job was about 250k. In one project in LA is was about 2M per job. That estimate is a little bit unfair, because stimulus money would also be spent on buying products. Say you give money to build buildings, and it works out to 300k per job. But each worker is paid much less -- maybe more like 100k considering the employer's portion of FICA, FUTA, liability insurance etc -- and another 200k is using in buying cement, windows, etc. This obviously created or saves jobs too, though maybe some of those jobs are abroad. So analysis of the number of jobs saved must take this into account. Given the low labor costs in China, it's possible that our stimulus even created jobs in China (which probably provides lots of parts).

    And of course, there's the crowding out hypothesis that others mentioned, which is that private investment is stifled, and even that employers will prefer to work for the public employees as they will get better benefits.

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