Wednesday, September 14, 2011

At What Price Jobs?

Don’t know much about history
Don’t know much biology
Don’t know much about a science book
Don’t know much about the French I took
But I do know that I love you
And I know that if you love me, too
What a wonderful world this would be.
—Sam Cooke, Wonderful World

Obama’s Rainbow Tour rolls on. 

We’ve now got the gist of Obama’s new “jobs plan,” and as I predicted it’s being offered as a take-it-or-leave-it package.  $447 billion in additional “stimulus” spending consisting of the following basic elements: 

·         Extending the payroll tax reductions enacted in December of last year,

·         Extending unemployment benefits,

·         Giving federal subsidies to state programs for training unemployed workers,

·         Giving federal subsidies to local governments to keep from laying off teachers,

·         Giving federal subsidies to renovate schools and roads. 

But what bang are we really getting for our buck? 

First, it’s worth considering the absurdity of the government “stimulus” spending concept.  The idea is that the government will jump start things, thus “creating” jobs, by injecting capital—money—into the economy.  But where does that money come from?  There is no stash of Obama-money.  The only money the government has to inject into the economy is money it takes from we, the citizenry, who are the economy.  So what “stimulus” spending is really doing is putting back into the economy money that the government took out of the economy in the first place.  The only thing that has changed is in which citizen’s hands the money is (and, one suspects, there lies the key for Obama). 

Imagine taking $10 from your daughter’s piggy bank to give to her as her allowance.  You’d get the same “What kind of an a-hole are you?” stare you see from the cheated kids in the Ally Bank pony ads 

Second, it’s clear that Obama has no idea what a job is or where it comes from.  Most of Obama’s proposal doesn’t even have anything to do with jobs at all.  Cutting taxes is almost always a good thing, but the payroll tax reduction—I think it amounts to about $1000 per household—is likely not enough to make much difference in the economy.  Unemployment benefits and training don’t create jobs that aren’t there.  Subsidies to prevent teacher layoffs may prop up a few jobs, but how many can that really be?  And renovating schools and roads—if done right—only takes so long, at which point the job is over.  And for all his sudden bluster about the need to get this done “right now”—where was this urgency when he was spending all of last month on the golf course, or for that matter, during the last year and a half or so?—even if his plan were to pass Congress tomorrow it is virtually certain that the school and infrastructure projects he envisions would not even begin until the middle of next year, and the vast majority wouldn’t begin for years. 

He can talk all he wants, but this plan isn’t going to create a bunch of jobs, and the few it might aren’t coming any time soon.   

Past experience with Stimulus I suggests that Obama is overestimating his plan’s potential impact, probably by a substantial amount.  If the CBO is to be believed, the $862 billion Stimulus I “created or saved” between 1.1 million and 3.3 million jobs, yet still leaves 14.3 million unemployed today.  Query how they measure this sort of thing; the 200% +/- spread alone should call the estimate into question.  But taking the CBO’s estimate at face value, Stimulus I ran between $261,000 and $783,000 per job, for an average estimate of about $522,000 per.  Obama is estimating his new $447 billion Stimulus II will create 2 million jobs (who knows where he’s actually getting his numbers, but I’ll bet it’s no coincidence that just happens to be exactly the number that would bring unemployment under the magic 8% he predicted back in Stimulus I).  That works out to $223,000 per job, or about 15% better than even the best numbers that can be derived from the CBO’s estimates on Stimulus I’s job results, and nearly 60% better than the median.   

Even if we assume Obama is right that his plan will create jobs, that it is all net job creation and not jobs “saved,” and that it will create them all right now—none of which is true, but let’s indulge him for the moment—extrapolating from the CBO’s estimate of Stimulus I’s performance indicates the plan would result in approximately 856,000 jobs, reducing unemployment a whopping 5.9%, or from its current 9.1% to about 8.6%. 

Hoo-rah.  Tell it to the 13.5 million who would still be unemployed. 

And what about the cost of this thing?  Using Obama’s own best-case estimate, he wants to spend $223,000 apiece to create 2 million jobs.  This means that combined, Stimulus I and II will have spent $1.3 trillion to create (“or save”) between 3.1 and 5.3 million jobs, and there will still be 12.3 million unemployed.  Even if we accept the dubious proposition that this shows that stimulus “works,” at some point don’t we have to say we’re spending too much for too little return?  For $715 billion—or a little over half the total if Obama gets his way—we could have just given each of the 14.3 million unemployed $50,000, roughly one year at the average household income level, which for most of them would represent a raise over their last job. 

Meanwhile, to pay for this nonsense, Obama plans to raise income taxes on those making over $200,000 a year, a group that includes most small business owners—but, conveniently, still excludes reluctant tax-evader Warren Buffett (remember, he only makes $100,000 in salary subject to income tax; most of his earnings are in the form of capital gains, which so far Obama has not proposed to tap).  So what we have is a proposal that:

·         Has little to do with jobs
·         Won’t make a significant dent in unemployment even under Obama’s own estimates, and
·         Imposes additional financial burdens on the very people who actually create most of the jobs in this country. 

Accepting that this isn’t just a political ploy to set up his re-election spin and he actually intended this to be something Congress would pass—I know, just go with me here—this isn’t a jobs plan.  It’s a plan to take money from the productive and give it to the unproductive and to his political cronies in the AFL-CIO and NEA.  Nothing more. 

Somewhere, John Galt is warming up his plane.  I just hope he takes me with him.

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