Wash. Examiner forwards misleading cost-per-job stimulus math

››› ››› ERIC SCHROECK

Echoing GOP claims, The Washington Examiner stated: "Even if we take at face value the White House claim that it created or saved [650,000] jobs with approximately $150 billion of the economic stimulus money, a little simple math shows the taxpayers aren't getting any bargains here: $150 billion divided by 650,000 jobs equals $230,000 per job saved or created." However, as the Associated Press noted, this "math is satisfyingly simple but highly misleading," because it does not capture the full impact of the stimulus.

Examiner does "a little simple math" to claim each stimulus job costs $230,000

Examiner: "$150 billion divided by 650,000 jobs equals $230,000 per job saved or created." In a November 2 editorial, The Washington Examiner stated:

Even if we take at face value the White House claim that it created or saved all these jobs with approximately $150 billion of the economic stimulus money, a little simple math shows the taxpayers aren't getting any bargains here: $150 billion divided by 650,000 jobs equals $230,000 per job saved or created. Instead of taking all that time required to write the 1,588-page stimulus bill, Congress could have passed a one-pager saying the first 650,000 jobless persons to report for work at the White House will receive a voucher worth $230,000 redeemable at the university, community college or trade school of their choice. That would have been enough for a degree plus a hefty down payment on a mortgage.

"Highly misleading" calculation does not capture the full impact of the stimulus

AP: "[M]ath is satisfyingly simple but highly misleading." In a November 2 "fact check" article, the AP reported that "divid[ing] the stimulus money spent so far by the estimated number of jobs saved or created" is "highly misleading" because that calculation "ignores the value of the work produced," only includes jobs produced "to date" from funds "that will fuel work for months or years," and excludes "indirect employment" resulting from the stimulus:

Beware the math. Some Republican lawmakers critical of President Barack Obama's stimulus package are using grade-school arithmetic to size up costs and consequences of all that spending. The math is satisfyingly simple but highly misleading.

It goes like this: Divide the stimulus money spent so far by the estimated number of jobs saved or created. That produces a rather frightening figure on how much money taxpayers are spending for each job.

On Friday, the White House released estimates that $160 billion in stimulus spending created or preserved 650,000 direct jobs.

By the critics' calculations, that's over $246,000 a job -- and a terrible deal for taxpayers. Why spend nearly $250,000 to employ a highway worker or a teacher making a small fraction of that?

The reality is more complex.

First, the naysayers' calculations ignore the value of the work produced.

Any cost-per-job figure pays not just for the worker, but for material, supplies and that worker's output -- a portion of a road paved, patients treated in a health clinic, goods shipped from a factory floor, railroad tracks laid.

Second, critics are counting the total cost of contracts that will fuel work for months or years and dividing that by the number of jobs produced only to date.

A construction project, for one, may only require a few engineers to get going, with the work force to swell as ground is broken and building accelerates.

Hundreds of such projects have been on the books, in which the full value of the contracts is already counted in the spending totals, but few or no jobs have been reported yet because the work is only getting started.

To flip the equation politically, it's as if the 10-year cost of George W. Bush's big tax cuts were compared with the benefits to the economy that only accrued during the first year.

Third, the package approved by Congress is aimed at more than direct job creation, although employment was certainly central to its promotion and purpose.

Its features include money for research, training, plant equipment, extended unemployment benefits, credit assistance for businesses and more -- spending meant to pay off over time but impossible to judge in a short-term job formula.

Nor do the estimates made Friday include indirect employment already created by the package -- difficult if not impossible to measure.

White House: Data does not reflect jobs created or saved indirectly by spending. A September 10 report by the White House Council of Economic Advisers said that recipients of stimulus contracts "are only required to report on direct jobs created or retained by the entities receiving recovery funds" and that the October recipient reports "will not provide an easy way of finding the overall effects of the Act":

Importantly, recipient reports will not encompass all ARRA spending. Specifically, the reports due to begin in October will provide employment impacts only for those projects and activities funded by state fiscal relief grants and government investment spending. The job impacts associated with the remaining recovery funds, such as funds going to individual tax cuts, business tax incentives, and aid to directly impacted individuals, will not be captured. Furthermore, recipients are only required to report on direct jobs created or retained by the entities receiving recovery funds (for example, the general contractor for a road project) and not additional job impacts that may be occurring beyond that (for example, at sub-contractors or suppliers to the general contractor). And of course, they will not capture jobs created by the additional spending resulting from the higher incomes of the workers hired. Thus, the recipient reports will not provide an easy way of finding the overall effects of the Act.

NY Times: "$37 billion" of $159 billion awarded in grants, loans and contracts "has been paid out so far." Although The Washington Examiner divided "$150 billion" by the number of jobs reported, The New York Times reported that only $37 billion of those awards have been "paid out so far" or are listed as "received" on Recovery.gov. The Times further noted that the job reports do not reflect the impact of the stimulus tax cuts, unemployment benefits and aid to states for Medicaid:

The jobs announced Friday were created by about $159 billion in grants, loans and contracts made available to the states. About $37 billion of that amount has been paid out so far.

The Obama administration said the jobs were evidence that the stimulus was on track to save or create 3.5 million jobs by the end of next year.

Officials did not count jobs that were indirectly created by the $84 billion pumped into the economy through tax cuts so far, or from the billions of dollars' worth of unemployment benefits and aid to states for Medicaid. If those were included, the administration estimated, the tally of jobs saved or created would rise to more than 1 million.

Krugman: "Indirect effect" of saved jobs "hasn't been fully felt yet." Economist Paul Krugman wrote on his New York Times blog that the stimulus "has probably saved as many schoolteachers' jobs as it's going to -- but the indirect effect of those jobs saved on, say, employment at the stores where the teachers buy their groceries hasn't been fully felt yet."

Examiner's calculation echoes GOP math

AP: McConnell spokesman "encouraged reporters to 'get out your calculators' and divide the spending by the jobs." The AP reported on November 2 that Don Stewart, a spokesman for Senate Minority Leader Mitch McConnell, "encouraged reporters to 'get out your calculators' and divide the spending by the jobs." The AP added that Stewart "came up with $230,769 per job."

Boehner claimed in January that stimulus plan would cost taxpayers $275,000 per job. The AP also noted on November 2 that in January, House Minority Leader John Boehner said, "All told, the plan would spend a whopping $275,000 in taxpayer dollars for every new job it aims to create."

Posted In
Economy, Jobs, Wages, & Unemployment
Network/Outlet
Washington Examiner
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