Stimulus Math: $533,000 Per Job Saved or Created?

(IStockPhoto)

With the release of some hard data, the effects of the first wave of President Obama's stimulus program are now observable. Businesses receiving federal contracts participating in the program reported creating or saving more than 30,383 jobs in the first months of the program, based on less than $16 billion in federal contracts.

ProPublica has done some basic mathon the program so far, and calculated scenarios that shed light on the value proposition as outlined by the Obama administration. Following is the ProPublica analysis by Christopher Flavelle:

On Thursday, the government released a flood of data about the stimulus, showing how 9,000 federal contractors spent their stimulus dollars — including the value of the contract, each project's status, and how much each of the contractor's five highest-paid officers were paid.

But when it came to presenting that data, Recovery.gov, the government's official site for stimulus information, highlighted one number in particular, posting it on the site's main page in large font: "JOBS CREATED/SAVED AS REPORTED BY FEDERAL CONTRACT RECIPIENTS: 30,383." To make extra certain of getting viewers' attention, the number itself appears in bright green.

As the economy continues to shed jobs , it's easy to see why the administration is keen to highlight the number of jobs created by the stimulus. When the numbers were released, Jared Bernstein, the administration's chief economist, said the job count "exceeds our projections," adding that it supported the conclusion "that the Recovery Act did indeed create or save about 1 million jobs in its first seven months."

But do the 30,000 jobs represent a good return? And since the federal contracts for which data was reported this week represent just a sliver of the overall stimulus package, what do they really say about the impact of the stimulus as a whole?

Let's start with the 30,000 jobs themselves. The federal contracts in question represented $16 billion in stimulus spending. Assuming the number of created or saved jobs reported by each contract recipient was accurate—which, as we've reported before, is still an open question—that breaks down to $533,000 for each job. That's more than five times the projection of the president's own Council of Economic Advisers , which estimated in May that every $92,136 in government spending would create one job for one year.

Five hundred thousand dollars per job might sound like a lot of money, but wait: The data released this week covers only the jobs directly created by federal stimulus money so far. It doesn't cover indirect jobs — the people who make the materials that contractors need to complete their project, or make the sandwich when a construction worker buys lunch from the proverbial roadside diner.

So, if the $16 billion in federal stimulus contracts generated 30,383 direct jobs, how many indirect jobs were created or saved? We asked the White House, which told us they believe that for each direct job created or saved, there is one indirect job. Assuming that's right, that $16 billion created or saved some 60,000 jobs — which still clocks in at $267,000 per person.

What about the second question — the relationship between the 30,000 direct jobs reportedly created or saved by that $16 billion, and the job impact of the stimulus as a whole? We asked the White House for the logic behind Bernstein's statement that this week's numbers "point to the conclusion that the Recovery Act did indeed create or save about 1 million jobs in its first seven months."

Their response: Because the $16 billion in federal contracts represents about 5 percent of the $339 billion spent so far, they multiplied the 30,000 jobs by 20. The result is 600,000 direct jobs; and, relying again on the assumption that each direct job produces one indirect job, the White House doubled that number to 1.2 million.

Of course, that assumes that for every part of the stimulus will have roughly the same job-creating impact as federal contracts. That's contradicted by the Council of Economic Advisers' own report , which said that while every $92,136 in government spending creates one job for one year, it takes $145,351 in tax cuts to achieve the same result. As much as 28 percent of the stimulus is going to tax cuts; if the Council's estimates are right, then the White House's assertion — that every part of the stimulus will produce the same job impact as federal contracts — starts to look a little less certain.

The bottom line, it seems, is that knowing for certain how many jobs the stimulus is producing remains, for now, as tricky as ever.

[MrPragmatic]

Any sensible person should have known that the Porkulus Bill was just that-basically pork. Since taking control of Congress in 2006, the Democrats are actually spending at a shocking six times faster pace than the spendthrift Republicans under Bush. The drunken Bush sailors now appear sober by comparison...The Obama Administration agenda is truly all about social change with a staggering pricetag. Otherwise, a truly focused President would be focused on one thing only right now and that would be jobs. Jobs creation should have been first and foremost and nothing else. Putting America back to work, reducing transfer payments for unemployement, and broadening and growing the tax revenue base should have been this Administration's obvious clarion call! Instead? Healthcare? Cap and Tax? Worldwide Apology Tour? Only a President who has never actually held a job in the private sector could be so misguided in his focus. And every Obama solution? Is a heavy hand of government solution, adding legions of new public employees to the taxpayer burden along with increasing debt of truly tragic proportions. Financial calamity is around the corner-the interest burden of staggering debt cannot be avoided nor ignored much longer. The standard of living of each and every American is going to be profoundly reduced. And the economic future of your children and grandchildren is becoming increasingly dim. Did you know that within ten years the national debt will more than double? And the interest cost to pay for $20 trillion of debt will be how much? At 5% interest, it will cost American Taxpayers exactly $1 trillion dollars each year simply to cash flow national existing debt!!! And this assumes no new spending and no entitlement payments to any Americans, imagine that... Hope you've enjoyed your voyage on the USS Titanic folks. It's all coming to an end. We've all been suckered into the biggest Ponzi scheme of all time... and we have no one to blame but ourselves...Peace.

[mjvwsr]

by salmoc44 October 16, 2009 11:51 PM EDT
GI bill? Wow, that was a huge handout by the liberals that started back in 1944. It's a good thing that you were helped out by this socialist program. I'm glad it helped you.
______________________
in addition to paying a share of the GI bill we had to sign a contract to protect the rights of the idiots - that would be you

[donbl1]

What a mess.

And, it is going to get worse.

Time to pull the plug on this team and send in the next one.

[rhs648]

But it gives us something to talk about.

[jxknowles]

Also subtract the cost of the unemployemnt benefits, add the income tax paid, and the jobs saved by the producers of the manufactured and raw materials used in construction (steel, concrete, lumber, electrical, plumbing, gasoline, machine repairs, etc...). It's hard to figure out the exact cost/benefit/job of each dime of the stimulus money. Basically we are trying to put America back to work. We can't become a country of just day traders, McDonalds, reality TV stars, pro-athletes and tanning beds.

[sjc_1]

Let's say after all the other costs, $100,000 per job makes its way down and %50,000 makes its way to an employee which the company writes off as an expense. The other $50,000 goes to exec salaries, bonuses and dividends for rich share holder that did nothing to build the bridge...the same old story.

[rayhyson]

When are we "TRUE" United States of America Citizens going to stop this nonsense. Our country the UNITED STATES of AMERICA is quickly heading into the wrong direction and it scares the living hell out of me. Stop throwing our hard earned tax money at problems before thoroughly analzing the possible affects of your lazy actions. We have to stand up and protect our rights as "TRUE" Amercian Citizens, born and raised in the UNITED STATES of AMERICA. Why do we continue to look the other way or turn over and play dead when our everyday rights and hard earned taxes are being violated? Eventually, the money will run and then what? There is a simple thing called Return on Investment (ROI) and at $533,000 per job your ROI is nowhere in sight. We need common sense politicians in office to make common sense decisions. At this rate we will be speaking Chinese in 15 to 20 years.

[jschmidt27]

If the $787 billion had gone to infrastructure that at least would have resulted in some rebuilding. Instead on;y 9% went to infrastructure, and the rest to Democrat pet projects in their districts such as high speed rail in Reid, Murtha's district, and Obama former state, Illinios that will not result in any payback for years. Though 2007 we had a growing economy with jobs. In 2006, the Dems took over Congress and watched and did nothing while the subprime crisis peaked. Now the same people are charged with fixing the problems while they sat for 2 years and watched it happen. Barney and Dodd were the biggest cheerleaders for no regulation of Fannie even as late as July 2008 while Bush on at least 2 occassion proposed more regulation. So we ended up with the Barney/Dodd recession. Is it a coincidence that the subprime crisis hit in Oct 2008 just before the election of Obama or did the Dems sit on their hands to blame it on Bush. I hope not. I hope it was just that they were to dumb to do anything. So think about Murtha, Frank, Waters, Rangel all creating the legislation that is suppossed to get us back on track. Of course Dodd was exonerated by the ethicc committee of any Countrywide collusion after reading 18000 the pages of evidence. This is the same Congress that can't read a 1000 page bill before voting. If these guys are in charge, it shouldn't allow anyone to sleep well at night.

[Orlandojon]

So Obama spent $533,000 on each of the 30,000 jobs saved. Our government at it's finest

[voxpopulus]

Learn to read. Especially the last paragraph

[rhs648]

correction

titletrack - We may never know that answer. Some things are difficult to quantify. Even if we could figure that out, it is often easy to manipulate statistics. For example, the government tells us that our cost of living went down. Many people looking at their bills may not agree. Different formulas give different results. Further, if you drive a lot and the cost of fuel goes down a lot, you may spend less in the overall scheme of things. On the other hand, if you drive very little, your overall expenses might be higher. That is like a person who doesn't have a job versus a person who earns $100,000 per year. The unemployed person is suffering while the person earning $100,000 may not understand all of the fuss about unemployment. Our perceptions are often influenced by our own situations.

[titletrack]

Which is why this saved jobs talk is nonsense. One thing for sure is we are heading towards 10 % unemployment.

[rhs648]

titletrack - Agreed. What if unemployment were 20% or 30% without the stimulus package. We'll probably never know what might or might not have happened without it.

[rhs648]

Although I do not support either the bailouts or stimulus package, it is unfair not to take into consideration all of indirect jobs that are either created or saved. As others have pointed out, the money makes it way throughout the economy. People with jobs support many different industries as they spend on many different things. I am in business. Not only do I have employees who help support other people, but my company supports the paper industry, the printing industry, the postal service, the banking industry, and many other industries. All of the people involved in these industries spend money for homes, food, televisions, vacations, automobiles, etc. Regardless of where the money originates, it makes its way throughout the economy. At least take these things into consideration.

[titletrack]

How many jobs were saved?

[rhs648]

titletrack - We may never know that answer. Some things are difficult to quantify. Even if we could figure that out, it is too easy to manipulate statistics. For example, the government tells us that our cost of living went down. Many people looking at their bills may not agree. Different formulas give different results. Further, if you drive a lot and the cost of fuel goes down a lot, you may spend less in the overall scheme of things. On the other hand, if you drive very little, your overall expenses might be higher. That is like a person who doesn't have a job versus a person who earns $100,000 per year. The unemployed person is suffering while the person earning $100,000 may not understand all of the fuss is about unemployment. Our perceptions are often influenced by our own situations.