The Fallacy of Federal Job Creation

Republicans and Democrats alike have tried this approach.  Gerald Ford tried it to very poor success. Now the current administration has put their own stimulus bill together and its a whopper.  The current bill anticipates spending $787 MM and for some reason is backloaded.  So far, a little more than $60 billion has been spent, while the bulk of the spending is allocated to 2010.  Why?

At the time of the passing of the bill, the admistration claimed that it would produce 3.5 million jobs, but that goalpost has not only been revised vastly lower, but various admistration officials cite different claims of its efficacy. For example, Joe Biden claimed two weeks ago that the savings were 1 million jobs, while the President has recently claimed that it saved or created a mere 640,000 jobs.

The allocation is also a problem.  A huge slice goes to transportation upgrades like building new highways.  An independent analysis by JOBMOD, an  employment estimation model, concluded that for every billion spent on highway construction, only 26,524 jobs would be created - nearly $40,000 per job. 

Other allocations of note include the following:

- an allocation to public agencies of $179 BILLION - amounting to more than 20% of the plan.
- increases in Social Security! That, despite the previously announced 0% Cost of Living adjustment.
- an allocation of at least $70 billion to school districts and states.
- an allocation of $54 to small busines via tax cuts.  Of course, you need to be PROFITABLE to receive this!
- an allocation of $87 BILLION to Medicaid.

There are also a number of errors in the adminstration's own website on the progress of the stimulus plan as uncovered and reported by ABC.  Some of these include the following:

- in Arizona's 15th district, 30 jobs saved or created.  Arizona has only 8 districts.
- in Connecticut's 42nd district, 25 jobs saved or created with ZERO dollars.  It, too doesn't exist.
- in the Virgin Islands, $8.4 MILLION spent in the 40th district which, you guessed it, doesn't exist.
- in Puero Rico, 291 jobs saved and $47.7 MILLION spent in its 99th district, which doesn't exist.

There are many, many more examples. Now I ask you, if they can't even report accurately and keep their stories consistent, is there any possibility that the stimulus bill, or any such federally funded program could really produce any reasonable result?  It would be far better to just send people checks directly.  $787 Billion divided by the roughly 300 million Americans would amount to about $25,000 per person!  I, like most Americans, could use that!

I have proposed, as have others, what is in my opinion, a much better federal solution to enhance employment called CASH FOR JOBS in a prior essay.  But that would be just too simple and transparent now wouldn't it?

The only benefit of the Obama program is that it does get money into the economy which will eventually circulate and THEN start to have more effect than it has had already.  But we're still losing jobs at a higher rate and even the administration concedes that unemployment will continue rising well into 2010.

As always, you're comments, pro or con are welcome as well as questions.

Marko's Take