How The Stimulus Money Saved my Job, and many others

In Current Events, Economics on September 4, 2010 at 00:19

There are two broad camps in the debate over the stimulus and jobs. There is the Obama camp that makes statements like “In these last few months, the American Recovery and Reinvestment Act has saved or created nearly 150,000 jobs” and the Republican camp represented by Senator Scott Brown of Massachusetts who said, “The last stimulus bill didn’t create one new job.” Both the Obama camp and the Republicans are guilty of exaggeration or outright lying about the stimulus and job creation. In these two examples President Obama got a barely true rating and Senator Brown got a pants on fire rating from Politifact.org.

Since the Stimulus package of $862 billion passed in February of 2009, the jobless rate has gone from 8.1 percent to the current 9.5 percent (now 9.6). Does that mean the stimulus hasn’t worked? It depends on your definition of a working stimulus package.

Clearly, it hasn’t stopped the unemployment rate from rising, and if you define success as a drop in unemployment, the stimulus package has failed. However, the Congressional Budget Office (CBO) says that may have added up to 3.3 million jobs. Then why is unemployment rising?

Unemployment is rising because the number of stimulus created (or saved) jobs has been outpaced by private and public sector layoffs. Now that may be elementary to most of my readers, but some in Congress don’t understand that the stimulus package may have helped slow the rate of the recession and unemployment while it hasn’t ended either.

And by the way, many of those 3.3 million jobs that were “created” aren’t all new jobs. The White House saying they were all “created” is in fact a lie. Many are public jobs such as teachers, police, firefighters, etc, that were saved with the influx of stimulus money to the states. One of those teaching jobs saved due to stimulus money was mine.

The fact that the stimulus saved and created jobs but not enough to reduce unemployment can lead one to conclude that the stimulus package wasn’t large enough. However, it’s not that simple. There are other factors to consider. First, there is the money that the private sector received that hasn’t been reinvested in the economy. Perhaps if that money had been reinvested, the unemployment rate would have dropped. Then there is the question about how the money was spent.

A lot of the money from the first stimulus package was invested in the building of roads. However, a recent study has shown that investment in road construction won’t reduce long-term unemployment. That is probably because road construction and repair can be highly equipment heavy as opposed to labor intensives, and once a project is done, the jobs are gone.

” Even within the construction industry, which stood to benefit most from transportation money, the AP’s analysis found there was nearly no connection between stimulus money and the number of construction workers hired or fired since Congress passed the recovery program. The effect was so small, one economist compared it to trying to move the Empire State Building by pushing against it.”  (Link)

It’s hard to say how many jobs were created with the stimulus money. What is clear is that the money saved hundreds of thousands of teachers jobs as well as jobs of firemen and police officers and other public figures. However, the private sector has yet to reinvest their recent windfall, and until that happens, unemployment may continue to hover around 10%.

Should the stimulus have been bigger? Yes, it should have been bigger, better, and smarter. The best return on investment for stimulus money is in education. After next best investments include mass transit and construction projects weatherizing homes and improving other housing infrastructure. (see the PDF report here) So the spent on teachers and mass transit was well spent. But road construction has a low multiplier affect.

Tax cuts were not only slightly more effective than investing in the military, and that was for all tax cuts. So while tax cuts can have a stimulative effect, it would be better to let some tax cuts passed under Bush expire and invest that money in energy efficiency for houses, mass transit for cities and populated urban corridors around the nation, and education. Curiously enough, it does not help to invest in new roads.

The upshot is that the White House exaggerates the effectiveness of the stimulus, which as many economists have said was too small, and Republicans exaggerate and even lie about it’s effectiveness. I suggest you read Forbes Magazine, the Wall Street Journal, economists’ papers (anything by Joseph Stiglitz), and the alternative press to get the best picture of how the stimulus works or not.

Follow the path of Joseph Stiglitz and ask Obama to push for more and smarter job creation. Half measures won’t do in this economy.

President Obama
CO/ The White House
1600 Pennsylvania Avenue Northwest
Washington, DC 20500-0004
or phone: (202) 456-1414

Or send note online: http://www.whitehouse.gov/contact

Tex Shelters

  1. The Stimulus should have been used for Something Big…I would have liked to have seen a Public Transportation solution implemented.

    • Yes, that would have been a good investment. Something like rapid rail from NYC to Florida for the commuters might work especially with the costs of jet fuel and plane rides going up.

      Thanks Roscoe.

      Tex Shelters

  2. Tex in my eyes the stimulus didn’t work. There is but one way for government to stimulate the economy and that’s not to take the money from the people in the first place. We can bicker about where the biggest bang for the buck comes from but it is the private sector rich and poor that drives the economy not government. We need to treat Social Security for what it is and that’s another welfare program. I’m not saying we should get rid of it but let’s call it what it is and get rid of all regressive payroll taxes. The poor and middle class drive the economy thru consumption, you allow people at the lower rungs to keep more of their money they will always pour it back into the economy thru necessity or the want of new big screen plasma for the NASCAR Race or the White Sox Game. I am also of the belief that taxing Corporations and Businesses is also a regressive Tax. The Little Guy ends up paying for corporate taxes when he consumes. When the Government sued that Evil Big Tobacco it wasn’t Big Tobacco that paid off it was the poor who consume tobacco that did. 8 ½ Billion cutting the cost of doing business (taxes) or getting rid of payroll taxes would have had the same effect, the economy would be spinning like a top right now, tax cuts for business, corporations, and cuts in payroll taxes all have the same effect and that is getting the most money into the people who are most likely to spend it the poor and middle class. The so-called middle class tax cut didn’t do shit people didn’t even notice it and for those who smoke it got eaten up and then some by the tobacco tax. Trickledown economics is actually the same as trickle up economics, there is no difference between the two and Government can only get in the way of both. It’s the masses who spend that drive the economy not government nor the rich. If not for J Q Public’s appatite for goods and services there would be no “Evil Rich” to demonize.

    • 860 bil not 8.5 bil. my bad, just woke up getting ready for work,havn’t had my coffee yet.

    • “We can bicker about where the biggest bang for the buck comes from but it is the private sector rich and poor that drives the economy not government.”

      Yes, you can bicker Jake, but apparently you didn’t read the well researched article on what type of stimulus is the best for the economy. Read it, and you will see that tax cuts ranks down there with investing in the military.

      Corporations get so many benefits in infrastructure, trade assistant, R and D, defense, and so forth that making them pay for what they get is a great idea. http://moneycentral.msn.com/content/Taxes/P80242.asp As it is, many companies that make billions are use our resources pay little or no taxes. Why do you insist on defending the wealthy even if you aren’t wealthy and they already reep the benefits of our society. Read the except from “Take the Rich Off Welfare and you will get the idea of how much we spend to help rich individuals and coporations. When I get back to my computer, I will post more links.

      Social Security is self sustaining. People pay into it and use the benefits when needed. It is working. Even some Teaparty members want their social security protected and Republicans in general know it’s a now starter. http://progressivenation.us/2010/08/16/the-gop-wishes-tea-party-candidates-would-just-stfu/

      Of course consumption is the main generator of GDP in this nation. If you read the original link, you will find that that is why you fund teachers; they are more likely to spend their income and thus stimulate the economy.

      Asking the wealthy you life off the people to pay their share is NOT “demonization”.

      Tex Shelters

  3. Well said, Tex.

    Though, for some time now, (even though I disagree with him on some things), I’ve been inclined to think this fella’s statistics on unemployment are often far more accurate than the government’s… He shows a real unemployment rate of approximately 22 percent:


  4. LS,

    Economist do a better job much of the time than the Whtie House that has an agenda.

    Thanks Little Sun.

    Tex Shelters

    • Here’s an interesting little article. But for those with short attention spans, perhaps a long gaze at the deficit chart will do 😉 To be fair, one needs to mentally add President Obama’s name next to the Shrub’s to the chart’s captions (unless Obama suddenly stops behaving like an 80’s-Republican and surprises us all).

      Critics Still Wrong on What’s Driving Deficits…

  5. I am not over there but everything I read really paints the stimulus as being bad. If It really did fail, it’s not because it was a bad idea, it was just poorly executed and planned.

    I have another crazy theory and that is possibly, a lot of the big employers r ruled by conservatives and they do have a need to fill job vacancies and they r just choosing not to because they want to sabotage the idea of “liberalism” and “socialism” and every “ism” they disagree with once and for all so they are the ones hurting the economy. They need workers and they r just saying the ones we alredy have can just work longer and harder until we get rid of this President we don’t like.

Comments are closed.

%d bloggers like this: