The PJ Tatler

Stim Bill May Have Cost as Much as $4.1 Million Per Job

Best case scenario: Stim bill only spent $540,000 per job. But this CBO report — courtesy of Jim Pethokoukis at Enterprise Blog — draws some even more startling conclusions about how ineffective and wasteful the stimulus bill really was.

By CBO’s estimate, close to half of that impact occurred in fiscal year 2010, and more than 90 percent of ARRA’s budgetary impact was realized by the end of March 2012. CBO has estimated the law’s impact on employment and economic output using evidence about the effects of previous similar policies and drawing on various mathematical models that represent the workings of the economy. …

On that basis CBO estimates that ARRA’s policies had the following effects in the first quarter of calendar year 2012 compared with what would have occurred otherwise:

– They raised real (inflation-adjusted) gross domestic product (GDP) by between 0.1 percent and 1.0 percent,

– They lowered the unemployment rate by between 0.1 percentage points and 0.8 percentage points,

– They increased the number of people employed by between 0.2 million and 1.5 million,

– They increased the number of full-time-equivalent jobs by 0.3 million to 1.9 million. (Increases in FTE jobs include shifts from part-time to full-time work or overtime and are thus generally larger than increases in the number of employed workers.)

Pethokoukis figures it this way:

OK, so without the stimulus, there would be anywhere from 200,000 to 1.5 million fewer people employed right now? That means the current cost-per-job created is somewhere between $4.1 million and $540,000.

As for the long term impact, CBO offers this:

In contrast to its positive near-term macroeconomic effects, ARRA will reduce output slightly in the long run, CBO estimates—by between zero and 0.2 percent after 2016. But CBO expects that the legislation will have no long-term effects on employment because the U.S. economy will have a high rate of use of its labor resources in the long run. ARRA’s long-run impact on the economy will stem primarily from the resulting increase in government debt.

To the extent that people hold their wealth in government securities rather than in a form that can be used to finance private investment, the increased debt tends to reduce the stock of productive private capital. In the long run, each dollar of additional debt crowds out about a third of a dollar’s worth of private domestic capital, CBO estimates.

To sum up:

1. Increase in GDP over two years of, at most, 1% but could be as little as 0.1%.

2. Lowered unemployment rate up to 0.8%

3. Increased the number of people employed by 1.5 million at $540,000 per job, but could be as much as $4.1 million per job.

4. After 2016, will negatively impact GDP by at as much as 0.2%.

5. Will increase the national debt and “reduce the stock of productive private capital.”

All for the bargain basement price of $831 billion.

Every time the president says that he saved the economy, or that he prevented a depression, these figures should be thrown back in his face. The tiny impact his stim bill had on jobs and GDP shows that Obama is talking through his hat about “saving” the country from anything.