He had a post last week regarding the economic impact of ARRA, (09 stimulus). In his blog Elmendorf went out his way to defuse a political bomb. I doubt he was successful. We will hear more on this in the next two months.
The report touts the success of ARRA. The CBO made the following claim:
CBO estimates that in the second quarter of calendar year 2010, ARRA’s policies:
Increased the number of full-time-equivalent (FTE) jobs by 2.0 million to 4.8 million
My first thought on this was that you could drive a truck through those estimates. But if you use a mid estimate of 3mm you would have to conclude that ARRA was a pretty big success. But then you read on:
CBO’s estimates differ substantially from the reports filed by recipients of ARRA funding. Those recipients reported that ARRA funded nearly 750,000 FTE jobs during the second quarter of 2010
Wait a minute. How many jobs were saved? Is it 750k or is it 4.8mm?
I happen to know a lady who runs a health center. Big one. On behalf of the clinic she applied for ARRA money and got it. They bought needed equipment and hired people to use it. The reporting requirements for the money were rigorous. She had to document the number of jobs created before during and after. Failure to do so meant money did not come.
Based on this I conclude that the reports from the ARRA recipients is very accurate. These are the numbers the White House collected. But Doug does not like the results. He just blows them off:
The law’s overall effects on employment requires a more comprehensive analysis than the recipients’ reports provide.
So there are hard numbers and there are soft numbers. To be fair, ARRA was much more than a jobs program. It funded unemployment benefits and some tax breaks. I can’t imagine how 4-5 million jobs get created from that.
If you are an “In” you can say that you were part of a Congress that passed legislation that saved nearly 5 million jobs. You can wave a CBO report to prove it.
If you are a “Wanna Be In” you can say that the “Ins” failed miserably. They spent $820 billion to create a lousy 750k jobs. That comes to $1,100,000 per job! And you can wave the Recipients of the ARRA Funding reports to prove it.
Ain’t America great….
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According to wikipedia, ARRA featured $300B in tax cuts, $150B in healthcare grants, $100B in education grants, $80B in welfare transfer payments, and $100B in misc. infrastructure stuff.
ReplyDeleteWhile only about half the programmed money has been spent so far, I wonder why you think that amount of money *wouldn't* create/retain 5M jobs.
5m x $75K per position is $225B, right in line with the amount of program money for 2010.
Money spent by the government doesn't disappear immediately into the Caymans. AFAIK, of course!
One thing I don't really understand is the velocity of money, and how a dollar of USG checkbook money travels after it gets spent into the private economy.
I wonder how they measure that.
For example, government spending ex. pensions is around $5.5T this year. Naively, at $100K per job that would be 55M jobs directly funded by gov't, and by the velocity of money another 55M jobs or so indirectly dependent on government employee spending.
There are not much more than 110M households in the US, so by these numbers every household in the US is directly or indirectly dependent on gov spending.
It makes my head hurt.
^ oops 5M x 75K is $375B.
ReplyDeleteWait what? You could drive a truck through your logic.
ReplyDelete1) Elmendorf and the CBO report appear to be talking about Q2 2010. Obviously, ARRA was disbursed over a number of calendar quarters. So to claim the whole $800 billion created the # of jobs reported by ARRA recipients is really misleading hyperbole.
2) About 2/5 of ARRA went to tax cuts. Even if you assume those tax cuts have a very poor bang-for-the-buck (off the top of my head, it was a mix between lower/middle income and high income/investment tax cuts, obviously the latter don't tend to get spent and would have a worse multiplier effect). A good portion of ARRA also went to state governments as general block grants, I believe, and so these wouldn't be counted by "ARRA recipients" for purposes of saving jobs. Without knowing the specifics, I'd guess that MOST of ARRA (perhaps a vast majority) DID NOT GO TO SPECIFIC "ARRA RECIPIENTS". Which kinda blows your point about the discrepancy with ARRA recipient surveys out of the water.
3) Even taking the huge huge impacts of 2) aside, you're obviously ignoring any multiplier effects. If 750,000 jobs were saved, presumably the people who kept their jobs are spending money on things (cable TV, maybe a couple of meals out a week, etc. etc. etc.) they wouldn't be doing if they were unemployed. While the exact multiplier impact is obviously a matter of huge debate (Mark Zandi's precision aside), I've not heard a single reputable economist claim there's no such thing as a multiplier effect, which is effectively what you're arguing here.
This post is either grossly intellectually dishonest or really lazy.