Stimulus jobs nothing more than “featherbedding”?

posted at 10:50 am on November 2, 2009 by Ed Morrissey

The Washington Examiner takes apart the administration’s stimulus job-producing numbers, calling them the worst kind of featherbedding seen, and not surprisingly from the most union-friendly White House in decades.  Even if one accepts the numbers of “saved or created” jobs from the Obama administration, the Examiner argues, the cost-benefit calculation makes this an absurd program to herald as some sort of success:

Featherbedding occurs when paychecks are issued for nonexistent employees and the money goes directly into union coffers. Thousands of the jobs Obama officials say were saved or created by the stimulus program are no more real than those invisible positions invented by unions to bulk up their treasuries. We know this to be the case because as Obama’s chief economist, Christina Romer, admitted several weeks ago, “It’s very hard to say exactly because you don’t know what the baseline is, right, because you don’t know what the economy would have done without [the economic stimulus program].”

Even if we take at face value the White House claim that it created or saved all these jobs with approximately $150 billion of the economic stimulus money, a little simple math shows the taxpayers aren’t getting any bargains here: $150 billion divided by 650,000 jobs equals $230,000 per job saved or created. Instead of taking all that time required to write the 1,588-page stimulus bill, Congress could have passed a one-pager saying the first 650,000 jobless persons to report for work at the White House will receive a voucher worth $230,000 redeemable at the university, community college or trade school of their choice. That would have been enough for a degree plus a hefty down payment on a mortgage.

Actually, taxpayers would be better off with such a deal, too, compared with the reality of the Obama stimulus program. Among the top 10 stimulus contracts awarded, there is the one for nearly $339 million that allegedly created or saved 41.19 jobs, or about $8.3 million per position. It was even worse with the $258 million contract to Brookhaven Science Associates in New York, where 25 jobs were saved or created, at a cost of $10.3 million per position. Rep. Kevin Brady, R-Texas, the ranking House minority member of the Joint Economic Committee, said it best: “What we know for certain is that 2.7 million payroll jobs have been lost since the Obama stimulus was signed into law, hundreds of thousands of more jobs are being lost each month, and America is so deep in debt, China and France are lecturing us to get our financial house in order.”

Jake Tapper made a similar argument when the White House released the figures.   Tapper gave them credit for their unsubstantiated claim of saving a million jobs based on the 640,000 that they had counted, so he calculated that the White House had spent $160,000 per job.  For his efforts at cost-benefit analysis, the administration accused him of “calculator abuse”:

So let’s see. Assuming their number is right — 160 billion divided by 1 million. Does that mean the stimulus costs taxpayers $160,000 per job?

Jared Bernstein, chief economist and senior economic advisor to the vice president, called that “calculator abuse.”

He said the cost per job was actually $92,000 — but acknowledged that estimate is for the whole stimulus package as of the end of 2010.

Jake may still be working with a calculator, but I’ll use the same spreadsheet program that I used in the corporate world to do my own cost-benefit analysis.  No one at the White House apparently worked in the private sector to understand the concept, but the idea of spending money to make money requires that kind of analysis in order to determine the efficiency and the efficacy of the project at hand.  That isn’t “calculator abuse,” it’s a standard operating procedure.  In fact, in the business world, someone proposing a big expenditure without a cost-benefit analysis would get laughed out of the boardroom.

Let’s start with the administration’s base number.  They claim to have directly saved or created 640,329 jobs with $159 billion of expenditures this year.  That actually comes to $248,310 per job, a little higher even than the Examiner’s calculation.  Using the median household income in America of about $51,000 to calculate this, how long would it take the tax revenue from each job to pay back the stimulus spending that “saved or created” it (and just the principal, not the interest accruing on the debt)?  At an effective tax rate of 15%, it would take thirty-two years and five months — almost the entire career of the person holding it.  At an effective tax rate of 20%, it would take less … just twenty-four years, four months.

Or let’s consider the administration’s wildest claim, that of a million jobs saved or created at $159,000 per job.  At the 15% effective tax rate, it would still take almost twenty-one years to pay back the principal; at the 20% rate, fifteen years, seven months.  And bear in mind that this calclation applies all of the federal taxes paid to paying back the cost of the stimulus that created the job.

It also assumes that the jobs are permanently “saved or created” by this federal intervention.  That’s simply not the case.  Most of the jobs in their calculus are bureaucratic jobs at the state level that won’t get funded next year by Washington.  States will still have to make tough decisions on employment levels that should have been made decades ago.  All Porkulus did was delay that needed decision by throwing money at the states, who used it not to improve efficiency but to paper over budget gaps that will recur next year as well.

Anyone who proposed spending any amount of money in the private sector that would take thirty-two years to see even the principal return would find themselves working in the government tout suite.  That’s how we got Porkulus in the first place.


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