Sunday, May 15, 2011

Stimulus: Saving & Creating Government Jobs Since 2009

Yes, that’s the result of a recent analysis of the stimulus package. You should download the PDF and read it, but here’s the money quote (emphasis mine):

Our benchmark results suggest that the ARRA created/saved approximately 450 thousand state and local government jobs and destroyed/forestalled roughly one million private sector jobs. State and local government jobs were saved because ARRA funds were largely used to o set state revenue shortfalls and Medicaid increases rather than boost private sector employment. The majority of destroyed/forestalled jobs were in growth industries including health, education, professional and business services. This suggests the possibility that, in absence of the ARRA, many government workers (on average relatively well-educated) would have found private-sector employment had their jobs not been saved. Searching across alternative model specifications, the best-case scenario for an effectual ARRA has the Act creating/saving a net 659 thousand jobs, mainly in government.

So, their analysis has a net loss of about half a million jobs, and their best case analysis is a net gain of a half a million jobs. The researchers note that the different conclusions are usually based on the “Keynesian multiplier”, an item that is taken on faith by Keynesians with absolutely no empirical evidence in support of it.

So, depending on worst case or best case, we spent about $1.5 million for every lost job or saved job, respectively. Government spending at its finest. I’m telling you, the government could have gotten me fired for free, or saved my job for a lot less than $1.5 million. However, if the government wants to spend $1.5 million on me for two years of work, I will happily accept the money.

No matter how you slice it, whether you agree with the pessimistic numbers (I do), or the optimistic, Keynesian ones, the stimulus package has been a dismal failure.

When I was growing up, there was this joke/riddle that was popular:

Q: What do you call 50 dead lawyers at the bottom of the ocean?

A: A good start.

Today, I think you should replace lawyers with “Keynesian economists”. A lost decade is a best case scenario if these policies are allowed to continue.

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