Economics

The State of The Stimulus: Not So Stimulatin' When It Comes to Jobs

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Over at The American, Reason columnist and Mercatus Center economist Veronique de Rugy takes a look at whether the Obama administration's claims about stimulus spending and job creation/retention hold water.

The solid green line estimates what the number of jobs created or saved should look like if the administration were allocating relatively more money to the states with higher unemployment rates and if that money, in turn, created more jobs.

However, the data show that this is not the case. The chart shows that many higher-unemployment states (the states on the right) saw similar numbers of jobs created as lower-unemployment states (the states on the left), or even worse, saw relatively fewer jobs created….

So what does it all mean? At least three things, none of them good:

First, the data show that much of the money has been allocated randomly among states without regard for the level of unemployment in those states.

Second, much of the money has been spent to close budget gaps in the states, which often means keeping union-protected school teachers in their jobs and paying for public-sector jobs rather than creating jobs in the private sector. For instance, according to Recovery.gov data, so far a little over 13,000 contracts went to independent contractors and over 116,000 grants went to public agencies. Also, reports have shown that the stimulus funds have been used to pay for employees whose jobs were never in danger (see California for instance).

Finally, the data on Recovery.gov reveals that many private-sector jobs were created at very high cost to taxpayers. For instance, $437,675,000 was awarded to CH2M WG IDAHO, LLC, in Washington to create 496 jobs. That's $882,409 per job. That's not as bad as the $257,613,800 awarded to the Brookhaven Science Associates, LLC, in New York to create 25 jobs. That's over $10.3 million per job.

Whole thing here.

Back on November 3, de Rugy decoded "The Secret Message of Stimulus Spending" for Reason.com. (Note to surly commenters: That article looked stimulus funds spent per person and unemployment, which generates a chart similar in shape but different in detail. Which also affirms a basic point: This stimulis spending ain't what it's cracked up to be.)

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  1. Didn’t we shit all over this same chart last week?

    1. This is more interesting:

      Hasan’s slide presentation

      http://www.washingtonpost.com/…..00920.html

    2. SEOUL, South Korea ? The navies of North and South Korea clashed at sea Tuesday for the first time in seven years in what some analysts said was a provocation by the communist nation a week before President Barack Obama’s visit to Seoul.

      The North Korean ship retreated in flames, South Korean Prime Minister Chung Un-chan said, and the South’s YTN television reported that one North Korean officer was killed and three other sailors were wounded.

      http://news.yahoo.com/s/ap/200…..aval_clash

  2. Damn my sorry memory. I heard someone say on the teevee “news” that when an economy rebounds from recession the way ours is, jobs are one of the last things to come back up.

    Things are lookin’ up. Just be patient people.

    1. 1. On Friday, Reason – which is located in DC – could easily go to CAP and ask Janet Napolitano this question about unemployment. If they do it right, they could make her and the BHO admin look bad and have an impact on what they do. Therefore, in order to keep the DC party invites coming, they won’t do that. However, you’re free to organize efforts to do what Reason won’t do.

      2. Check out this WaPo quiz that mentions libertarians: link. I’d really like to know whether they’re dumb or whether they’re playing a game.

      1. Who’s boiling a turd in here?

  3. Ahh the farce that is Keynesian economics. Someone should tell these people about Adam Smith.

  4. Odds & Ends
    A collection of Sowellisms.

    By Thomas Sowell

    Random thoughts on the passing scene:

    If politicians stopped meddling with things they didn’t understand, there would be a more drastic reduction in the size of government than anyone in either party advocates.

    It was fascinating to see Barack Obama warning us not to leap to conclusions about the killings at Fort Hood, Texas ? after the way he leaped to conclusions over the arrest of Henry Louis Gates, when he knew less about the facts than we already know about the massacre at Fort Hood.

    My first column, more than 30 years ago, was titled “The Profits of Doom.” Recent news stories about the millions of dollars that Al Gore has made out of his “global warming” hysteria suggest that some things haven’t changed much in three decades.

    More at:

    http://article.nationalreview……JlMmM1Mzk=

    1. It was fascinating to see Barack Obama warning us not to leap to conclusions about the killings at Fort Hood, Texas ? after the way he leaped to conclusions over the arrest of Henry Louis Gates, when he knew less about the facts than we already know about the massacre at Fort Hood.

      Here’s your secret decoder ring to help unravel the mystery: Obama doesn’t care much for white people.

  5. I must add that the man said basically that the stimulus packages worked very well and that the jobs are on the way. They just show up last.

    1. If you saw it on TV, it must be true.

  6. Tripdizzle,

    This wasn’t even Kenyesian economics. Liberals are uniformly ignorant and have no idea what people like Keynes actually said. I will give you a hint, the kind of stimulus he was advocating had nothing to do with paying off public employees unions.

    Liberals are of two strips. They are either moron proles who believe anything no matter how rediculous as long it supports their team (see e.g. typical Kos poster) or they are craven insiders who don’t care about anything beyond power and wealth. In the case of the stimulus, the craven insiders stole $700 billion and the proles were so stupid they actually thought it was a stimulus package.

    1. I was always assuming that the driving force behind Keynesian econ was that government spending creates some type of multiplier affect which positively affects the macroeconomy (I have no problem with being corrected), but the practice has never proven to be true, because this money that is supposed to trigger the multiplier affect has to either be taken from the private sector via taxes, or printed, which leads to a higher rate of inflation.

      1. Keynes actually concluded in the 1940s that big construction projects were not the way to stimulate the economy. He concluded that direct transfer payments and tax cuts were more efficient.

        The whole idea behind Keynes was that if the economy went down so far it could get into what is called a liquidity trap. People don’t have enough money so they save more because they are insecure which depresses demand and makes people less secure and causes them to spend less. So, his sollution was for the government to pump money into the economy and get us out of the trap by “priming the pump”.

        It is not crazy thinking. But liberals who were running around yelling “liquidity trap” last spring like they knew what the term meant failed to consider something really important. It is not 1932. In 1932, the federal government in real terms was the size of PBS. There weren’t any transfer programs and very little public spending. In contrast today, we have huge entitlements and transfer programs like Social Security and huge numbers of government workers whose paychecks were unaffected by the recession. In short, there was no way in hell we were in anything approaching the liquidity trap in 2009 that Keynes thought we were in in 1932.

        1. When you look at IMF policy and its effects throughout the first fifty years, especially during the era of the grand plans of the 50s-70s, the question should come up, how does this fit into the Keynes narrative? You have what is a permenant liquidity trap where people save their meager means against the future due to uncertainties we can only imagine, you have nothing near the ideal of full employment, yet the subsidies for public projects only exacerbated the depths of human misery.

          The failure here that the Keynesian doesn’t account for is the structure of production. The underlying system upon which prosperity is created that paper shuffling bureaucracy and hand outs of fiat currency are not actual substitutes.

          1. I said it wasn’t crazy thinking. I didn’t say it was correct. I think it is pretty clear that Keynes was wrong.

            1. No worries, didn’t think that you did. I just thought it may be a useful point for Vanneman to think about in his spiritual growth away from the father figure of Keynes.

              1. Good to do your part.

        2. It never worked in 1932 either.

          Transfer payments create nothing of value and do not create any “multiplier” effect.

          Any benefit to transferees is cancelled out by exactly equal detriment to the transferors.

  7. much of the money has been allocated randomly

    It’s not random. It’s just not in keeping with the Keynesian premise. It is in keeping with Keynesian practice. The money goes where votes have been delivered, and where further deliveries are requested.

  8. Woohoo! Quick.. somebody get a calculator and calculate how much stimulus we need to employ everybody!

  9. Lee Cruz, count me out, I have no need for a job.

    1. Then we will put you in prison. Everyone works.

  10. Didn’t we see this before? Didn’t I post this comment before?

    There was a time when I would read anything written by anyone named Veronique, not to mention Veronique de Rugy. I blame you, Nick. I blame you a lot.

    1. WTF is that supposed to mean? You are such a drive by dumb ass Vanneman.

      1. C’mon John, lighten up. Veronique de Rugy is such a burlesque name.

        1. I love her name. I am with him on that. But I took the point to be that she is a bad writer and that has caused him to reconsider reading everything written by someone named Veronique, which seems to be a really unwarrented shot at de Rugy.

  11. New Policy Initiative: Fine everybody who doesn’t accept a stimulus job! Where do I come up w/ this stuff???

  12. John, I think that their is a third. Those of us that understand the economy but are jealous/angry/childish/vindictive assholes that use the govt to stick it to large groups of self-made succesful people.

  13. please feel free to disignore the spelling in my last post

    1. Those without sin.

  14. Look at Montana! Those dental floss farms must be booming under the stimulation!

    1. Riding my pygmy pony in the moonlight. Yippee Yi Yo TieYaay!

  15. “Stimulation”

    Yahoo! This is your stimulation.
    Yahoo! This is your stimulation.

    Stimulate good times, come on! (Let’s stimulate.)
    Stimulate good times, come on! (Let’s stimulate.)

    There’s a party goin’ on right here,
    A stimulation to last throughout the years.
    So bring your partisans, and your laughter, too.
    We gonna stimulate your party with you.

    Come on now.

    Stimulation.
    Let’s all stimulate and have a good time.
    Stimulation.
    We gonna stimulate and have a good time.

    It’s time to spend together.
    It’s up to you, what’s your pleasure?

    Everyone in Democratic world,
    Come on!

    Yahoo! It’s a stimulation.
    Yahoo!

    Stimulate good times, come on!
    It’s a stimulation.
    Stimulate good times, come on!
    Let’s stimulate.

    We’re gonna have a good time tonight.
    Let’s stimulate, it’s all right.
    We’re gonna have a good time tonight,
    Let’s stimulate, it’s all right.

    Baby. . .

    We’re gonna have a good time tonight, (Stim-u-la-tion)
    Let’s stimulate, it’s all right.
    We’re gonna have a good time tonight, (Stim-u-la-tion)
    Let’s stimulate, it’s all right

    Yahoo!
    Yahoo!

    Stimulate good times, come on! (Let’s stimulate.)
    Stimulate good times, come on!
    It’s a stimulation!
    Stimulate good times, come on! (Let’s stimulate.)

    Come on and stimulate, good times, tonight (Stimulate good times, come on!)
    ‘Cause everything’s gonna be all right,
    Let’s stimulate (Stimulate good times, come on!)
    (Let’s celebrate.)

    1. I can imagine Obama in his 1980s pimp hat smoking a joint singing that with Pelosi and Reid as his back up singers. It works.

        1. Rather than stimulate good times, perhaps they’re simulating good times.

          1. Don’t post it unless you’re going to boogie to it ProL.

            I was just telling my wife over the weekend how nice it was to have the 70’s back again. Double-digit unemployment, civil unrest, rising energy prices, uncertainty, a Democratic president screwing up beyond recovery mostly everything in sight. Ahhhhh, good times. All that’s missing are the elephant flair jeans. I’m sure some hippy is wearing them somewhere.

            Now, all we need is a punk revival. How are we going to do that without CBGB?

            Now, if we can just get Obama to deregulate some industries like Carter did.

    2. And what’s with this “yahoo!”? That was clearly a “woohoo!” in the original version.

      1. The perils of copying and pasting. I was thinking the same thing. Though perhaps I should’ve changed yahoo/woo-hoo to “fuck you.”

        1. It sounds more like “Wa-hoo!” to me. And it fits the cadence better than Woo-Hoo!

          Cel-le-brate good times… Wa-hoo! Let’s Celebrate, it’sallright.

          1. I’m indifferent. Of course, for my purposes, “yahoo” does have an alternative meaning: “And, it must be owned that seven Months were a sufficient Time to correct every Vice and Folly to which Yahoos are subject, if their Natures had been capable of the least Disposition to Virtue or Wisdom.”

  16. I work in the electric power industry and I can tell you that the economy is not improving. How do I know? Because electricity isn’t selling. More power plants are offline now than in recent memory and power pricing in the MISO and PJM markets is abysmal. Nobody is using energy and that means production is down, offices aren’t being heated, and jobs won’t recover anywhere near as soon as the stimulus cheerleaders want you to believe.

    1. db,

      It’s all the green energy, man!

    2. Get back to work.

    3. I have noticed that my city, which has a relatively low unemployment rate (7%) continues to see businesses close. There don’t appear to be any replacements moving into the empty buildings. I can only imagine uwhat it’s like in cities with nemploment rates of 10% and above.

    4. Well, during the period of skyrocketing energy costs immediately preceding this recession, a lot of businesses and individuals found ways to get by with less energy. That might be responsible for some of the decreased demand.

      1. Nope. Sorry. Go back and look up the Local Marginal Pricing data on MISO’s and PJM’s web sites for the time frame you mention. You won’t see electricity prices jump anywhere near the peaks that oil did.

  17. I’ve noticed much ado being made — and rightly so — about the cost-per-job metric.

    However, to what extent can that be attributed to non-payroll costs, i.e., capital expenditures like materials and heavy equipment, etc. The margins are of course too big to honestly attribute all of the excess thereto, but the fact remains that the money is being spent, somewhere. So what the fuck are they buying, exactly?

    1. Votes. Those are expensive.

  18. I’m waiting for the Administration to suggest that millions of jobs be created by simply banning federal highway funds to any state that uses mechanical road work equipment. Think of all the jobs they could create if construction workers had to use only picks, shovels and wheelbarrows! Better yet, garden trowels and kiddy sand buckets!

    1. I like your thinking. In my America, the construction workers will use plastic sporks only.

    2. Yes and we can lower those sea levels as the ONE has promised by assembling vast armies of people with teaspoons to dip the water out of the oceans.

      Ah, the prosperity!!!

  19. As I’m sure Krugman is quite prepared to preach, there’s no such thing as a failed stimulus, only an insufficiently grandiose one.

  20. Just like with the other chart, showing us what the line should look like, instead of showing the actual best fit, is rhetorical garbage. It is dishonest and misleading. This is a valuable debunking of the stimulus-as-savior story and it is just undermined by that stupid line.

  21. Trying to measure “jobs created or saved” is a fools errand on one hand, and trivially easy on the other. If you actually try to figure which job you saved, you are attempting the impossible. On the other hand, every time you spend around $60,000 ON ANYTHING, you create approximately one middle class job for one year somewhere in the economy…or more specifically, hundreds of fractional jobs that add up to about one job. It really isn’t hard to understand.

    Most elements of the stimulus are not targeted at states with high unemployment. Should they be? If there is a good project in North Dakota, should we turn it down in favor of an inferior project in Michigan? That’s an odd argument for a libertarian to make.

  22. Being a Republican, I would prefer them to lose just enough seats to maintain a bare majority of the House in 2011, so they can get the blame for 2012.

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