Yesterday, as part of the Recovery Summer Tour, Obama’s CEA Chief Christina Romer cheerfully pitched that the Stimulus worked ever better then they (her and Biden-economist Jared Bernstein) said it would … that 3 million jobs have already been saved or created and another 600,000 will materialize before the end of 2010.
It’s easy to quibble since actual employment has fallen by 2.5 million since the Stimulus was enacted … and it’s well-traveled that the same same Ms. Romer said the unemployment rate would rise to 9% without the Stimulus, but would get capped at 8% if the gov’t threw a cool trillion dollars at the problem. Oops.
The Job Impact of the American Recovery and Reinvestment Plan, Romer & Bernstein, January 2009
http://www.economy.com/mark-zandi/documents/The_Job_Impact_of_the_American_Recovery_and_Reinvestment_Plan.pdf
But, HomaFiles aren’t in to cheap shots, so we’ll assume that Ms. Romer has gotten smarter and has crafted a more refined econometric model.
And, we’ll assume that she’s an honest person and isn’t just ginning up numbers for political purposes.
Let’s do some simple arithmetic.
Assuming Romer’s right, then – in the best case — each job saved or created cost almost $250,000 !
I don’t know about you, but that strikes me as a pretty big number.
And, keep in mind that the Stimulus just funds jobs temporarily …. when the Stimulus is expended, somebody else has to pick up the tab or the saved and create jobs vanish again.
The Homa Files 
July 15, 2010 at 9:01 am |
Your analysis needs a slight adjustment – only ~half the ARRA money has been spent. So the cost to the tacx payer for each job is probably more like $120-125K.
Assuming the median unloaded cost of an employee (salary + benefits) is in the range of $50-75K per year, the observed Keynesian multiplier would seem to be between 0.4 and 0.6 – about where Robert Barro and Charles J. Redlick estimate it.
See here, second to last paragraph: http://online.wsj.com/article/SB10001424052748703394204575367421573463984.html?mod=WSJ_Opinion_AboveLEFTTop