Hannity repeats false calculation of job creation cost

During the January 26 edition of Fox News' Hannity, referring to the American Recovery and Reinvestment Act of 2009, host Sean Hannity asserted, "If, on the high side, we reached their job-creation number of 4 million, that's going to cost $217,000 to get that job," echoing a false calculation from a press release issued by the Republicans on the House Appropriations Committee and repeated by numerous media figures. In fact, by calculating the per-job cost by dividing the estimated total cost of the stimulus package by the estimated number of jobs created -- and thus suggesting that the sole purpose of that package is to create jobs -- these media figures ignore other tangible benefits stemming from the package, such as infrastructure improvements and education, health, and public safety investments.

As White House senior adviser David Axelrod noted in a January 18 appearance on ABC's This Week: "We're not just spending money to create jobs; we're investing money to strengthen this economy. We're investing in areas like energy independence. We're investing in creating the classrooms of the 21st century for our kids to give us the kind of education system we need. We're investing in computerizing the health-care records of this country so that we can reduce costs and improve care. These things will pay long-term dividends to this country."

Moreover, economists, including Center for Economic and Policy Research co-director Dean Baker and Nobel laureate Paul Krugman, have presented another criticism of the claim. In a January 24 post on The American Prospect's Beat the Press blog, Baker wrote: "The Republicans have become fond of saying that President Obama's stimulus package will cost $275,000 for every job created. The media have been typically derelict in simply reporting this number without making any assessment to evaluate it -- as though readers in their spare time are supposed to determine whether it is accurate or not." Baker continued:

Okay, let's do the reporters' work for them. First, where do the Republicans get this number? They divide the the $825 billion cost of the stimulus by 3 million jobs that President Obama had originally pledged.

Their arithmetic is right but both numbers are wrong. First, the projections from the Obama team is that their package will create 4 million jobs, not 3 million. Furthermore, it is important to note that this over 2 years, not one year.

The cost is also wrong, or at least misleading. If we assume that the stimulus will work as planned, then it will boost GDP by approximately 1.5 times the amount of spending or $620 billion a year. If GDP rises by this amount, then it will translate into roughly $155 billion a year in higher taxes/lower spending than if we didn't do the stimulus. This is money that should be subtracted from the cost to the taxpayers.

So, if net out the increased revenue from the growth generated by the stimulus we end up with a 2-year cost of $515 billion which will generate roughly 8 million job-years. That comes to about $65k per job year, less than one-fourth of the Republicans' number.

Similarly, in his January 25 New York Times column, Krugman wrote, "As the debate over President Obama's economic stimulus plan gets under way, one thing is certain: many of the plan's opponents aren't arguing in good faith," and that "[t]he true cost per job of the Obama plan will probably be closer to $100,000 than $275,000 -- and the net cost will be as little as $60,000 once you take into account the fact that a stronger economy means higher tax receipts."

From the January 26 edition of Fox News' Hannity:

HANNITY: Well, the problem is, the Heritage Foundation -- and we've been dealing with this now for the last, you know, two weeks on the program. It is the $6,700 of debt per family in America --

DICK MORRIS (Fox News contributor): Right.

HANNITY: -- right off the top.

MORRIS: Right.

HANNITY: They're going to spend more in a week than they spend usually in a year, Dick.

MORRIS: That's right.

HANNITY: And they're going --

MORRIS: It's incredible.

HANNITY: If, on the high side, we reached their job-creation number of 4 million, that's going to cost $217,000 to get that job.

MORRIS: Yeah. And we're not going to do that.