Thoughts, essays, and writings on Liberty. Written by the heirs of Patrick Henry.

June 16, 2009

$3 Bazillion Spent & 3 Jobs Created. That’s A Bazillion Per Job! OMG!!

by Brad Warbiany

First, let me state categorically that I don’t believe government statistics. When they talk about $X Billions of dollars spent and Y00,000 numbers of jobs created, it’s clearly BS. The government rarely knows (or cares) how much of allocated money is actually spent until they’ve run out, and I think we all know that the job count is inflated in any statistically possible way to make themselves look better.

But I just can’t get over the analysis (and sorry Jason, such as this post) that simply divide the number of billions of dollars of stimulus money spent by the number of jobs to come up with a “per job” cost. In this case it was $746K “per job”.

There’s an implicit charge there, suggesting that if you spend $746K “per job”, it’s a complete and total waste of money. The charge, of course, is that the labor cost is the “per job” amount — or should be if it weren’t “squandered”.

And let’s also be clear. I’m not suggesting this money was spent well or efficiently. But that’s not the point.

Let’s say, for example, that a multinational company wants to build a skyscraper. And building that bridge required hiring a general contractor who farms work out to a bunch of subcontractors who employ in total 1,000 workers on the building. The construction cost of the building was $1 Billion. You could easily suggest that the cost of the project was $1 Million per job. But would that matter in any way, shape, or form? Not only does it not really account for the capital costs of all the equipment — cranes, trucks, tools, etc that those workers must use, it doesn’t account for the capital costs of the building materials themselves!

If I want to build a skyscraper, the vast majority of the cost is for the steel, drywall, wiring, piping, elevators, etc — materials. The cost of the workers is a slight fraction of the total. Likewise, if the government wants to build a bridge, or construct 15 miles of freeway, or engage in pretty much any other infrastructure spending, far more money will be spent on materials than on actual workers.

Now, don’t get me wrong. I am not trying to defend the stimulus. I’m not trying to defend the government’s numbers on job creation (because, of course, borrowing the money they needed to pay for the project may have crowded out actual productive enterprises that could offset those “created” jobs). But simply dividing spending by # of jobs to come up with some arbitrary (and absurdly high) “per job” cost is a cheap rhetorical device. It might sound great on Rush Limbaugh’s show or whip up outrage amongst people who don’t know better, but it certainly isn’t a serious analysis of the policy.

Freedom is sexy, so share!Share on Facebook0Tweet about this on Twitter0Share on Google+0Share on Reddit0Digg thisShare on StumbleUpon0Share on LinkedIn0Pin on Pinterest0Email this to someone
TrackBack URI: http://www.thelibertypapers.org/2009/06/16/3-bazillion-spent-3-jobs-created-thats-a-bazillion-per-job-omg/trackback/
Read more posts from
• • •
  • Pingback: Posts about Rush Limbaugh as of June 17, 2009 » The Daily Parr()

  • http://www.jasonpye.com Jason

    First, before trashing what I wrote, it would have been nice to get a head’s up. I certainly would have given you that courtesy.

    Secondly, the point of saying that this cost x amount per job is to point out the ridiculous pimping of the stimulus and the number of jobs supposedly created, when in fact we’re losing jobs to the tune of several hundred thousand per month.

  • SWilliams

    I’m not defending the stimulus either but I don’t think many of us would enjoy the reality of a world in which the Fed and DC has not been pumping money into the economy at an unsustainable rate, the latest Flow of Funds report pretty much shows they are the only ones propping the whole thing up right now, consumers and business aren’t.

    http://images.moneyandmarkets.com/1388/fed_%20flow_of_funds_%20q12009.pdf

    My problem isn’t as much with what has been done to date but rather that the intervention didn’t come with an exit strategy, so instead we are simply strengthening the institutions that created the mess hoping they can pull us out.

  • http://thelibertypapers.org/ Brad Warbiany

    Jason,

    Your post did a good job of pointing out that we have lost 2.8M jobs since the beginning of 2009, and that the stimulus has only [supposedly] “created” 150K. That’s a factor of 20 lost to “created”. And that it cost the government only $112B to do it! I think we both agree that we can point out that the stimulus is a failure, even with the cooked books job creation numbers the administration throws out.

    But the “cost per job” metric doesn’t get that across. The “cost per job” becomes a focus point, and one I’ve seen all over the conservative/libertarian ‘sphere. It’s a very similar thing to Congress focusing on executive compensation at big banks when there are severe structural deficiencies that they don’t want to or can’t address. It’s a number, it’s not an argument.

  • Akston

    “…I don’t think many of us would enjoy the reality of a world in which the Fed and DC has not been pumping money into the economy at an unsustainable rate…”

    I agree.

    And I bet a junkie would not enjoy the reality of a world in which heroin had not been pumped into his system. The unsustainability of the solution is one of its larger flaws. The longer that junkie postpones going through unpleasant withdrawal, the more of he wastes away toward destruction.

    If he postpones the withdrawal until after his internal systems have been irrevocably trashed by the abuse, then even withdrawal won’t save him.

    If we destroy the dollar in order to postpone an unpleasant market correction, we’ve also destroyed our chances of a healthy recovery in the long term.

    Junkies do not usually have exit strategies until they face mortality. Getting hooked on the junk was not the right move in the first place. Exiting NOW is too late, but better than a moment later.

  • SWilliams

    While I like the heroin addict metaphor when it comes to the intellectual dishonesty of partisan politics and demagoguery, to me the economy is a little different and maybe analogous to a car driving down the interstate. You and I are only passengers we don’t have much if any control but when that car throws a rod what do you want the driver to do? Turn on the hazards and coast to a stop on the shoulder so you can get out and continue the journey or would you rather he simply drive into the first tree, brick wall or over the first bridge he see? The tree/wall/bridge will bring you to a stop much quicker and I guess if you are lucky and healthy enough after the impact you may be able to get on your way again a little before you would be in the coasting to a stop example.

    I think the blowing up of the dollar fear is taking hold a little too soon. Until we begin to see rising employment and/or wages, aspects of CPI will be headed in opposite directions and essentially balance each other out. Energy and food will rise while consumer goods and real assets will decline. Loss of the consumer will send more businesses into bankruptcy and along with the decline in real assets, personal bankruptcy will rise, these along with other deleveraging will eat up dollars at a fast enough pace to offset massive dollar creation for a few years.

    I agree that ultimately the goal in DC is to devalue the dollar and inflate their way out of debt, it is the easiest choice and they are politicians first, and the consequences of that, with personal, commercial and government debt levels as high as they are, will be the end of a very long run for the dollar. So for me the concern is how we bring this car to a stop and continue on our journey in a different form of transportation. I for one, with the destruction of the dollar all but certain, would rather see my future customers brought to a stop safely so that they can all be paying for my services in the future.

    Ultimately, in an extreme example, we shouldn’t’ play this game of only absolving the debt of bankers, insurers and select manufactures, which is all that is really happening but rather blow the dollar apart by absolving the debt of everyone. After all, to tie into another thread, we have paid for the Navy we have to encourage and protect dollar hegemony, now that that is ending, and while we are still strong relative to the rest of the world, let us control how this economy comes to a stop and insure the health of as many occupants as possible and screw those greater fools who devalued their currencies for years in an attempt to exploit the labor, i.e. wealth, of Americans and now find themselves on the losing side of the dollar trade.

Powered by: WordPress • Template by: Eric • Banner #1, #3, #4 by Stephen Macklin • Banner #2 by Mark RaynerXML
Social Media Auto Publish Powered By : XYZScripts.com