Tuesday, November 25, 2008

280000 Per Job? Only If You Add, Not Subtract

This professor might be good at economics; he's not very good at math.

He claims the Obama stimulus plan comes out to $280,000 per job, by dividing the amount of stimulus by the number of jobs Obama claims he will add (2.5 million).

What he forgets to do is subtract the number of jobs that would be lost in the downturn if we did nothing. If it's already a million, there'll probably be another million lost after Obama takes office early in 2009. And you need to figure out how many jobs would be lost WITHOUT the stimulus. Three million? Five? Obama needs to make up for the jobs potentially lost before he can create the additional 2.5 million. So that money is closer to $100,000 a job, if that. And that only gets us back to today's 6.5% unemployment rate. If we want to go back to 5% unemployment (before this crisis hit) we'll need another 250,000 jobs.

$100,000 a job is still a lot, though.


Stew Magoo said...

But I clearly heard Obama talk about "preserving or creating" those jobs.

And it's really discouraging to hear that people are buying into the government creating jobs routine.

Businesses create jobs, not government.

If Obama and company REALLY wanted to help create jobs, they would get out of the way of business.

Especially small businesses.

But I did enjoy the contrary viewpoint.

Martin Schecter said...

Okay, I went to look up the text of Obama's announcement here.

What obama actually says is "Creating and saving 2.5 million jobs."

Okay, I admit, I have no idea how Obama expects one to interpret the meaning of "creating and saving." Is he saving or creating? Or saving and creating.

However, I think that the interpretation of the press - and what the press will hold him accountable for - is whether there are 2.5 million MORE jobs after he takes office or not. So whether he meant to say it or not, I think the measurment is the 2.5 million created PLUS the X (2.5? 5? 10?) million saved.

According to your way of looking at it, there could be 10 million fewer jobs at the end of 2009, and all Obama would have to do was say, "yeah, but without the stimulus, there would have been 12.5 million lost, so I saved 2.5 million of those."

I don't think that will fly in anyone's book, so I think my interpretation of the math is correct.

Stew Magoo said...

Yeah, I hear what you're saying and I completely understand the math. What I don't understand is how you (or anyone for that matter) reconciles job creation through Government.

Government doesn't create jobs!

Doesn't this strike you as artificial?

When businesses lay off employees there's a reason for it. It's not just "the man" being mean. Job loss is a natural and normal part of business.

Why is Obama's statement being accepted so blithely as fact?

Can you explain this?

Martin Schecter said...

Well, government creates jobs when it actually goes out and hires people (i.e., to build roads, etc.) which is what a lot of the stimulus is going to do. So that's definitely creating jobs, even though they're jobs for the government.

As for the rest of it, I think it all depends upon what its used for. If it's just used for tax breaks for the wealthy and rebate checks, I agree, there's no evidence this would actually end up creating any jobs, as people would just save the money. That was the problem with the stimulus earlier this year.

If people who invested in or started new businesses were able to get a break on their capital gains - or if businesses got a tax break if they hired American workers rather used outsourced resources overseas - there's evidence that would encourage people to hire more Americans...though it's indirect, it's a tool that could support new business. Government artificially supports businesses (and thus workers) all the time (look at the farm industry). Of course this may distort the markets, but if it's for "R&D" that has a lot of upside potential, that's not necessarily a bad thing. We'll have to see exactly what "investing in clean energy business" by the government means.