Media promote false calculation of job-creation costs in stimulus

››› ››› JEREMY HOLDEN

Numerous media figures have asserted that the proposed stimulus package supported by President Barack Obama would amount to spending at least $223,000 for every job created, echoing a press release issued by the Republicans on the House Appropriations Committee. But by calculating the per-job cost by dividing the estimated total cost of the stimulus package by the estimated number of jobs created -- and thus suggesting that the sole purpose of that package is to create jobs -- these media figures ignored other tangible benefits stemming from the package, such as infrastructure improvements and education, health, and public safety investments.

Numerous media figures, including David Brooks, Larry Kudlow, Brit Hume, and George Stephanopoulos, have asserted that the proposed fiscal stimulus package supported by President Barack Obama would amount to spending at least $223,000 for every job created, echoing a January 15 "Stimulus Quick Facts" press release, issued by the Republicans on the House Appropriations Committee, that "President-elect Obama has said that his proposed stimulus legislation will create or save 3 million jobs. This means that this legislation will spend about $275,000 per job. The average household income in the U.S. is $42,000 a year." But by calculating the per-job cost by dividing the estimated total cost of the stimulus package by the estimated number of jobs created -- and thus suggesting that the sole purpose of that package is to create jobs -- these media figures ignored other tangible benefits stemming from the package, such as infrastructure improvements and education, health, and public safety investments. Indeed, in a January 18 appearance on ABC's This Week, White House senior adviser David Axelrod said of the plan: "We're not just spending money to create jobs; we're investing money to strengthen this economy. We're investing in areas like energy independence. We're investing in creating the classrooms of the 21st century for our kids to give us the kind of education system we need. We're investing in computerizing the health-care records of this country so that we can reduce costs and improve care. These things will pay long-term dividends to this country."

Media figures promoting this false calculation include:

  • In his January 23 New York Times column, David Brooks claimed, "The [House Appropriations Committee] staff took the kernel of President Obama's vision -- infrastructure programs to create jobs -- and surrounded it with an undisciplined sprawl of health, education, entitlement and other spending. There's money for nurse training, Medicare, Head Start, boatyard support, home weatherization and so on. Eleven of the programs in the bill account for the vast majority of the actual job creation. The rest may be worthy or not, but they have little to do with stimulus. The total package is so diffuse, it costs $223,000 to create a single job."
  • In a January 22 National Review Online blog post, Larry Kudlow claimed, "Oh, by the way, even if the entire stimulus package were put into play, various people have calculated that the estimated 3.5 million new jobs would cost $225,000 per job [emphasis in original]."
  • During the January 21 edition of Fox News' Special Report, senior political analyst Brit Hume claimed that "one Republican congressman did the math and found that even if you accept the sponsor's estimates of the jobs created by this current plan, you end up with each one costing about $223,000. That's about four times the normal cost of a private-sector job."
  • During the January 18 edition of This Week, Stephanopoulos claimed, "The other substantive point that [House Minority Leader John] Boehner [R-OH] makes -- he circulated a facts sheet -- he says, if you look at an $825 billion piece of legislation, 3 million jobs, that's $275,000 a job." Axelrod said: "George, he's missing the fundamental point. We're not just spending money to create jobs; we're investing money to strengthen this economy. We're investing in areas like energy independence. We're investing in creating the classrooms of the 21st century for our kids to give us the kind of education system we need. We're investing in computerizing the health-care records of this country so that we can reduce costs and improve care. These things will pay long-term dividends to this country, and we've been very careful about that." Nonetheless, following Axelrod's comments, Stephanopoulos asked: "But you would concede $275,000 a job is a high price to pay, isn't it?"

In fact, according to a House of Representatives discussion draft of the legislation, the American Recovery and Reinvestment Act of 2009 would include $54 billion to increase renewable energy production and to help public buildings become more energy efficient, $90 billion for infrastructure investment, $41 billion to modernize schools, and $275 billion in tax cuts.

Addressing the falsehood -- and specifically the estimate by economist Greg Mankiw that a stimulus proposal would cost $280,000 per job -- American Prospect associate editor Ezra Klein wrote in November 2008:

[T]he stimulus package cannot be understood as spending divided by jobs. If California's Medicaid program faces a $10 billion shortfall, you're not likely to see a lot of doctors or nurses out on the street. But you are likely to see a lot of families that can't access health care. If Missouri's government falls into debt, the main injury will not be to the state's workforce, but to its schools and its roads and its projects. If $30 billion is spent to erect a bridge, that creates some jobs, but it also pays for machines and stones and steel and scaffolding. The envisioned stimulus is much bigger than simple job creation. It's infrastructure construction and aid to states and the preservation of the safety net.

From Brooks' January 23 New York Times column:

The bill has three essential failings. First, it lacks any strategic vision. This $825 billion bill has to be passed within weeks. There's no time for fundamental rethinking or new approaches. Instead, there's a sloppy profusion of 152 different appropriations -- off-the-shelf ideas that mostly create costlier versions of the status quo.

The committee staff took the kernel of President Obama's vision -- infrastructure programs to create jobs -- and surrounded it with an undisciplined sprawl of health, education, entitlement and other spending. There's money for nurse training, Medicare, Head Start, boatyard support, home weatherization and so on. Eleven of the programs in the bill account for the vast majority of the actual job creation. The rest may be worthy or not, but they have little to do with stimulus. The total package is so diffuse, it costs $223,000 to create a single job.

From Kudlow's January 22 National Review Online blog post:

Meanwhile, a new CBO report has pulled the rug out from under the Obama stimulus package. Of $355 billion in infrastructure and other cash outlays, only $136 billion would be spent by October 2010. And out of the roughly $100 billion in infrastructure spending, only $26 billion would be spent in fiscal 2009. So much for a quick and immediate jolt to the economy. Oh, by the way, even if the entire stimulus package were put into play, various people have calculated that the estimated 3.5 million new jobs would cost $225,000 per job.

In today's Wall Street Journal, distinguished Harvard economist Robert Barro estimated that the so-called government-spending multiplier for GDP associated with peacetime government purchases would be "insignificantly different from zero." While left-wing economist Paul Krugman rants on about opponents to Keynesian stimulus -- calling them quacks -- a growing list of prominent academic economists oppose the Keynesian approach. In yesterday's Journal, economists Alberto Alesina of Harvard and Luigi Zingales of the University of Chicago rejected the Keynesian spending approach while suggesting that a capital-gains tax holiday would bring private investors back into the market.

From the January 21 edition of Fox News' Special Report with Bret Baier:

BRET BAIER (host): Senior political analyst Brit Hume has some thoughts now about the economic stimulus package -- Brit.

HUME: Bret, thank you. The idea of stimulating a stalled economy by government spending has been tried many times, but it is unclear that it has ever worked. One reason is that government spending takes a while to get into the bloodstream, and much of it ends up being spent well after the economy is already growing again.

That has been underscored by that Congressional Budget Office report we've been talking about that found that only about a third of the money proposed would be spent in the next two years. And one Republican congressman did the math and found that even if you accept the sponsor's estimates of the jobs created by this current plan, you end up with each one costing about $223,000. That's about four times the normal cost of a private-sector job.

From the January 18 edition of ABC News' This Week with George Stephanopoulos:

STEPHANOPOULOS: The other substantive point that Boehner makes -- he circulated a facts sheet -- he says, if you look at an $825 billion piece of legislation, 3 million jobs, that's $275,000 a job. Is that the most efficient way to create jobs?

AXELROD: George, he's missing the fundamental point. We're not just spending money to create jobs; we're investing money to strengthen this economy. We're investing in areas like energy independence. We're investing in creating the classrooms of the 21st century for our kids to give us the kind of education system we need.

We're investing in computerizing the health-care records of this country so that we can reduce costs and improve care. These things will pay long-term dividends to this country, and we've been very careful about that.

We're not being frivolous. We're being thoughtful about how we make these investments.

STEPHANOPOULOS: But you would concede $275,000 a job is a high price to pay, isn't it?

AXELROD: Well, I'm not signing on to that particular figure. I think preventing this country from sliding into as deep an economic emergency as we've seen since the Great Depression, preventing double-digit unemployment, and laying the foundwork -- the groundwork for the future in these areas that I mentioned and others, I think, is a worthy thing to do.

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