Reason.com - Free Minds and Free Markets
Reason logo Reason logo
  • Latest
  • Magazine
    • Current Issue
    • Archives
    • Subscribe
    • Crossword
  • Video
  • Podcasts
    • All Shows
    • The Reason Roundtable
    • The Reason Interview With Nick Gillespie
    • The Soho Forum Debates
    • Just Asking Questions
    • The Best of Reason Magazine
    • Why We Can't Have Nice Things
  • Volokh
  • Newsletters
  • Donate
    • Donate Online
    • Donate Crypto
    • Ways To Give To Reason Foundation
    • Torchbearer Society
    • Planned Giving
  • Subscribe
    • Reason Plus Subscription
    • Print Subscription
    • Gift Subscriptions
    • Subscriber Support

Login Form

Create new account
Forgot password

Bailouts

Federal COVID Aid to States and Localities Cost $855,000 Per Job Saved

A new paper reveals that the state and local bailout was not only unnecessary but incredibly wasteful.

Eric Boehm | 6.21.2022 4:00 PM

Share on FacebookShare on XShare on RedditShare by emailPrint friendly versionCopy page URL
Media Contact & Reprint Requests
Tipped over cup of U.S. dollars on an off-white background | Photo 7509973 © 3desc | Dreamstime.com; Illustration by Lex Villena
(Photo 7509973 © 3desc | Dreamstime.com; Illustration by Lex Villena)

A massive federal bailout of state and local governments during the pandemic had a negligible effect on overall employment levels despite costing taxpayers an estimated $855,000 per job saved.

That's the bottom line of a new National Bureau of Economic Research working paper published this week. In the paper, a trio of researchers attempted to determine the effectiveness of nearly $1 trillion in pandemic-era aid distributed to state and local governments—the majority of which was delivered as part of the $1.9 trillion American Rescue Plan passed in March 2021.

Despite the eye-watering price tag, however, the stimulus spending had only "a modest impact on government employment and has not translated into detectable gains for private businesses or for states' overall economic recoveries," conclude University of California, San Diego economists Jeffrey Clemens and Philip Hoxie and American Enterprise Institute senior fellow Stan Veuger, the paper's three authors.

The aid to states and local governments did not meaningfully affect the broader economy either, the paper argues, in part because of other government responses to the pandemic. "Both voluntary and mandated limits on economic activity inhibit standard transmission mechanisms that can make fiscal stimulus effective under other circumstances," Clemens wrote on Twitter.

The case for bailing out state and local governments was always paper-thin. Despite fears of massive budget shortfalls due to a combination of government-imposed lockdowns and changing consumer behavior during the pandemic, those deficits mostly did not materialize. Before the American Rescue Plan passed, there was widespread skepticism about the proposed bailout, in part because three other pandemic-era spending bills had already sent about $360 billion in aid to states and localities.

But instead of stimulating the economy or filling budget holes that mostly didn't exist, the aid to states and local governments just left them flush with cash. As Reason has reported, some of that money was spent on unrelated things like money-losing, government-owned golf courses.

And while saving jobs or preventing layoffs was not the sole purpose of the American Rescue Plan's spending on state and local governments, that was and remains a centrally stated goal of the bailout. "These funds ensure that governments across the country have the flexibility they need to vaccinate their communities, keep schools open, support small businesses, prevent layoffs, and ensure a long-term recovery," Deputy Treasury Secretary Wally Adeyemo said in January of this year, as the Biden administration loosened some of the restrictions on how those funds could be used.

Even within the context of other federal emergency spending plans, the state and local bailout looks massively wasteful. Clemens, Hoxie, and Veuger point out that the $855,000 per-job figure dwarfs estimates of other emergency government bailouts.

Estimates suggest that the $770 billion Paycheck Protection Program, for example, ended up costing between $169,000 and $258,000 per job saved—though other researchers have claimed the cost was only about $50,000 per job. The Obama-era American Recovery and Reinvestment Act (ARRA) ended up spending between $50,000 and $112,000 per job created or saved.

The federal bailout of state and local governments during the COVID-19 pandemic has already gone down as one of the most unnecessary responses to that crisis. Now, it might also be remembered as the most wasteful.

Start your day with Reason. Get a daily brief of the most important stories and trends every weekday morning when you subscribe to Reason Roundup.

This field is for validation purposes and should be left unchanged.

NEXT: Texas State Police Chief: Uvalde Was 'Abject Failure,' Police Could Have Stopped Gunman in 3 Minutes

Eric Boehm is a reporter at Reason.

BailoutsGovernment WasteGovernment SpendingBiden AdministrationState Governments
Share on FacebookShare on XShare on RedditShare by emailPrint friendly versionCopy page URL
Media Contact & Reprint Requests

Hide Comments (16)

Editor's Note: As of February 29, 2024, commenting privileges on reason.com posts are limited to Reason Plus subscribers. Past commenters are grandfathered in for a temporary period. Subscribe here to preserve your ability to comment. Your Reason Plus subscription also gives you an ad-free version of reason.com, along with full access to the digital edition and archives of Reason magazine. We request that comments be civil and on-topic. We do not moderate or assume any responsibility for comments, which are owned by the readers who post them. Comments do not represent the views of reason.com or Reason Foundation. We reserve the right to delete any comment and ban commenters for any reason at any time. Comments may only be edited within 5 minutes of posting. Report abuses.

  1. Stuck in California   3 years ago

    In getting with the modern times, I'm going to go ahead and say the only thing wrong with these massive numbers is that I didn't get a check, personally.

    I mean, we're all fucked here and paying a massive price economy wide for this shitshow. Might as well join the masses and accept some government largess. I just need to stoke up a good sense of entitlement somehow.

    Sweet, sweet other people's money. That's the best.

    1. Earth-based Human Skeptic   3 years ago

      Me neither, but at least my kids did. But did they share? Nooooooo.

      1. Diane Reynolds (Paul.)   3 years ago

        Take it out of their college fund.

        1. Stuck in California   3 years ago

          They'll just get big 'ol loans and let Biden (or Warren or Bernie or whoever) cancel them.

          1. JuanCPorter   3 years ago

            I even have made $30,030 simply in five weeks clearly working parttime from my loft. (res-32) Immediately when I've lost my last business, I was depleted and fortunately I tracked down this top web-based task and with this I am in a situation to get thousands straightforwardly through my home. Everyone can get this best vocation and can acquire dollars on-line going this website.> https://oldprofits.blogspot.com/

  2. Dillinger   3 years ago

    >>state and local bailout was not only unnecessary but incredibly wasteful

    Bernie-Bro friend tried to mock me the other day on a text thread because I call his political heroes Graft Agents ... guess he only knows the medical use of the term

  3. SQRLSY One   3 years ago

    Pandemic ridiculous over-spending happened... Under Trump, Our Savior!!! WHY isn't this mentioned here?

    (Thank You, Trump... AND Congress, to be fair... For those $855,000-each jobs!!!! Where is MY $855,000 job, by the way?)

    1. Overt   3 years ago

      " In the paper, a trio of researchers attempted to determine the effectiveness of nearly $1 trillion in pandemic-era aid distributed to state and local governments—the majority of which was delivered as part of the $1.9 trillion American Rescue Plan passed in March 2021."

      Perhaps they aren't mentioning Trump, because this specific paper was discussing the bailout of states- something that only happened in 2021.

      1. SQRLSY One   3 years ago

        OK, thanks, I stand corrected!

        Skids were greased for this ahead of time, though...

        "Before the American Rescue Plan passed, there was widespread skepticism about the proposed bailout, in part because three other pandemic-era spending bills had already sent about $360 billion in aid to states and localities."

        Various forms of Government Almighty helped OTHER forms of Government Almighty, and did nothing for me! Or for you!

      2. DesigNate   3 years ago

        Poor SQRLSY was completely mind fucked by Trump.

    2. CE   3 years ago

      Trump did start it (or at least failed to veto it). But Biden piled on once the potential economic crisis was long past.

  4. Earth-based Human Skeptic   3 years ago

    Why all the fuss? "Money" is just numbers for things that have nothing to do with each other. A job is a good thing, right? And we want more of them, right? So who cares about money?

  5. CE   3 years ago

    California had record tax revenues and budget surpluses during the lockdowns, due primarily to runaway capital gains on housing and the stock market, and the highest salaried workers being able to continue working from home.

    The stock market crash this year (and the housing market crash that's about to start) will wipe out a lot of that, but you can only write off 3K per year in capital losses. Tough break -- no inflation adjustment for that in my lifetime.

  6. TJJ2000   3 years ago

    AND the BIG picture of it all....................................
    How to INJECT a Nazi(National Socialist)/Communist Regime into the USA Under the Covers (i.e. fiat communism)...

    1. Diane Reynolds (Paul.)   3 years ago

      Make it wave a rainbow flag.

  7. d   3 years ago

    Nice post! Your writing efforts shows in your content that have amazing information. Thanks for this article. Keep up the good work!! Also visit here for Diet for Digestion

Please log in to post comments

Mute this user?

  • Mute User
  • Cancel

Ban this user?

  • Ban User
  • Cancel

Un-ban this user?

  • Un-ban User
  • Cancel

Nuke this user?

  • Nuke User
  • Cancel

Un-nuke this user?

  • Un-nuke User
  • Cancel

Flag this comment?

  • Flag Comment
  • Cancel

Un-flag this comment?

  • Un-flag Comment
  • Cancel

Latest

Trump Wants Harvard To Hand Over Info on Over 10,000 International Students

Autumn Billings | 7.10.2025 5:18 PM

The People Who Wrecked N.Y. Schools Love Zohran Mamdani

Matt Welch | 7.10.2025 5:03 PM

The Department of Homeland Security Says Trump's Immigration Enforcers Are on a Mission From God

Jacob Sullum | 7.10.2025 3:15 PM

Trump's 50 Percent Copper Tariff Will Drive Up Prices for Tech, Homes, Military Equipment, and More

Eric Boehm | 7.10.2025 2:30 PM

Did the Secret Service Surveil James Comey Without a Warrant After '86 47' Post?

Joe Lancaster | 7.10.2025 2:00 PM

Recommended

  • About
  • Browse Topics
  • Events
  • Staff
  • Jobs
  • Donate
  • Advertise
  • Subscribe
  • Contact
  • Media
  • Shop
  • Amazon
Reason Facebook@reason on XReason InstagramReason TikTokReason YoutubeApple PodcastsReason on FlipboardReason RSS

© 2024 Reason Foundation | Accessibility | Privacy Policy | Terms Of Use

This site is protected by reCAPTCHA and the Google Privacy Policy and Terms of Service apply.

r

Do you care about free minds and free markets? Sign up to get the biggest stories from Reason in your inbox every afternoon.

This field is for validation purposes and should be left unchanged.

This modal will close in 10

Reason Plus

Special Offer!

  • Full digital edition access
  • No ads
  • Commenting privileges

Just $25 per year

Join Today!