Answer: Zero
Here is the question: In estimating the number of net jobs created by the stimulus package, how many jobs did the Administration assume were lost when hundreds of billions of dollars were pulled out of private hands and distributed by public authorities?
And the answer to that question is just one reason the analysis is absurd. I have seen a lot of good critiques about accounting in the jobs numbers. But the biggest single problem is that it is assumed that the trillion dollars Obama has pulled out of private capital markets (via deficit spending) wasn't really doing anything productive, so that redirecting it into pork-barrel programs chosen by Congress based on their campaign donor lists and run by government bureaucrats would use the money much better.
Anyone believe this? So why have I not seen a single reporter ask the question, "But how many jobs were lost from where these funds were taken?" Just because they are invisible or hard to count does not mean they don't exist.
David Zetland:
Oh, that's easy -- those jobs will be lost in the future, since we are BORROWING the money for the stimulus. And who cares about the future, anyway? ...except those pesky kids /sarc
November 2, 2009, 8:25 amYoshidad:
Warren's comments demonstrate how firmly his head is wedged in his nether regions. Kind of a limited view, and certainly no place from which to understand Keynsian economics.
For those interested in a completely opposing view, I recommend today's Paul Krugman editorial (here).
Krugman is a nobel-laureate economist, but what does he know?
Warren's point requires belief that the economy is a zero sum game. That's why our standard of living hasn't changed since medieval times, right?
But if economic activity actually creates wealth, making silk purses out of sow's ears, so to speak, then an interruption in wealth creation to wait for bankers to feel safe enough about lending might actually destroy -- or at least prevent creation of -- wealth! Yow! Could that be possible?
That the Keynesian theory has been born out by experience is already part of history. The much larger deficit spending that was part of World War II brought the U.S. out of the Great Depression, for just one example.
Read Krugman's "Peddling Prosperity" for the full debunk of Warren's abysmal economics ignorance, and for the full story of how Keynesian economics has been vindicated.
November 2, 2009, 9:18 amWalt:
Taking the White House numbers (15 percent of the $787B and 650,000 jobs) at their face value (just for discussion sake), yields an average cost of the jobs created/preserved of $181,615 year-to-date, i.e., not an annualized wage rate. Assuming 50 percent of that went to materials, the labor portion is still $90K. As a data point, the median household income was $50,300 in 2008. So how many highway construction workers do you think are pulling down that kind of dough?
November 2, 2009, 9:55 amTim:
@yoshidad: Regardless of your point, which I don't know if I agree or disagree with, a proper analysis of the number of jobs created would require an accounting of the number of jobs destroyed, so they can be balanced against those created. If you don't agree with Warren's question/answer premise then that would be pertinent information to your comment.
November 2, 2009, 10:02 amLink:
Yoshidad ... you're more than wrong.
"Stimulus" could have been half as big, spent twice as fast and been 4x as effective. Too much of Stimulus is just a two-year bailout of state budgets, and spending on Nancy's pet projects. Nancy specifically steered Stimulus spending away from "burly man jobs" -- the kind of spending that yields a tangible asset with a measurable payback period ... the kind with a high multiplier.
So Krugman now says that Stimulus needs to be bigger. Another idiot savant -- Larry Summers -- is surprised that unemployment is higher than what Okun's law would predict. They're missing that the private sector is seizing up -- owners don't want to hire or expand. Banks are reining in lending too.
You're also missing "opportunity cost." Not all spending is "investment." At some point, these deficits will bite us.
Our federal government has been getting about 19% of GDP in taxes every year for the last 50 years -- it's like a law of nature. Remarkably, it didn't matter what tax regime we had in place in any given year. Our federal government typically spent about 20% in most years, and so we've often run a deficit. I'd argue that we've actually been spending more than this as the federal government has been using off-balance sheet guarantees for many purposes -- which is shadow spending. The federal government is now boosting spending into the high 20s, with no way to pay for it. It's unsustainable.
Keynes is often misapplied. He'd say that paying some one to dig a ditch and then fill it up again was useful -- but only when an economy had reached extreme conditions. Even then, you could argue Keynes was wrong.
November 2, 2009, 10:12 amRaven:
If a market scare causes capital to be dumped into safer assets like t-bills and bonds then government spending will create more jobs in the short term by using the capital instead of just letting it sit. In the long term there can be no net jobs but the trade off may be justified in some circumstances.
November 2, 2009, 11:40 amQuincy:
Yoshidad... In a word, "no".
Government confiscating money and using it for the purpose of economic stimulus is not a zero-sum game, it is a negative-sum game. The political incentives involved in the process make it impossible for government to make decisions as efficient as those of even irrational actors on a level playing field in a free market. The Keynesian hypothesis ignores this problem of information and incentives. When those are taken into account, the Keynesian hypothesis of economic stimulus is roundly proven false. The current employment situation is just another example of this playing out, as private employers wait for the economic situation to stabilize before bringing on new employees.
November 2, 2009, 11:44 amRoy:
Yoshidad (scarily) reminds me of a few folks who, for my wife's sake (skip story) I've done consulting. These folks insisted they had a sure-fire machine. Which in reality was a perpetual motion machine. Which they denied, no matter the depth of research and (labor intensive) care of refutation I presented. They simply believed the 2nd law did not apply to their invention.
Krugman (and Keynes) provide nothing more than extra examples of the same sort of thinking. But more dangerous. Because they involve guns. They involve worship, too, since they insist gov't can create by fiat. Faith in that failed god does not die despite evidence of disaster. (Note how Yoshidad 'believes' gov't fiat econ activity creates wealth = creates more wealth than it (consumes + displaces)). Krugman, rather than recognizing how FDR's econ policies extended the depression, insists that WWII deficit spending cost nothing but gained everything. That's faith contrary to fact.
November 2, 2009, 3:08 pmArtD0dger:
My nomination for most unintentionally humorous phrase in Yoshidad's Krugman link:
[Solid growth will continue only if private spending takes up the baton as the effect of the stimulus fades. And so far there’s no sign that this is happening.]
Because, just as with CO2 in the climate, government spending will trigger positive feedback and snowball private economic activity along with it real soon now.
November 2, 2009, 4:03 pmDr. T:
"“But how many jobs were lost from where these funds were taken?â€"
The answer is none, because no funds were borrowed from US banks. Instead, the funds were created out of thin air and eventually will result in either inflation or increased borrowing from foreign nations (predominantly China).
However, there were indirect job losses due to business concerns about our national debt and expected future tax increases. It's impossible to calculate these losses.
And, Yoshidad, Krugman sold his soul to Democratic interests years ago. The fact that previous work won him a Nobel prize means nothing when his recent writings are almost all crap.
November 2, 2009, 5:03 pmSean A:
Just to pile on a bit here,
[Solid growth will continue only if private spending takes up the baton as the effect of the stimulus fades. And so far there’s no sign that this is happening.]
Isn't the point of stimulus to "stimulate" the private spending he is admonishing to "take up the baton"? If the "effect" of the stimulus is fading, then it didn't have much "effect", did it? He admits as much in that last quoted sentence. I don't read Krugman anymore, but let me guess for all our amusement, his prescription for fixing this little problem is yet more stimulus. Do I win the prize?
November 2, 2009, 5:24 pmMesa Econoguy:
And just to pile on more, here’s our friend yoshalist again. Hey, welcome back, unobservant fool.
Here’s an article by an actual economist (Ed Lazear, smarter than Krugman, but then, who isn’t?) asking this very question in today’s Wall Street Journal:
Stimulus and the Jobless Recovery
November 2, 2009, 6:03 pmJobs 'created or saved' is meaningless. What matters is net job gain or loss, and that means the unemployment rate.
Link:
To the private sector, sayeth Obama, Pelosi and Krugman:
"The beatings will continue, until morale improves."
November 2, 2009, 6:18 pmElliot:
Herr Dr. T, I must take strong issue with your statement that Krugman's recent writing is all cr*p. I think his writings are much more than that, In fact, all cr*p. The Nobel club gave away the same prize years ago for theories proving the very opposite of herr mr. Krugman blatherings.
Is no one suprized that the administration's finest minds are not accountants but creative writers?
E
November 4, 2009, 12:17 pmDurk Pearson:
Because very few reporters have any knowledge of economics other than socialist myths. I doubt that one reporter in a thousand understands the broken window fallacy. Coyotes are much more intelligent than the average reporter; I'll bet you a rabbit dinner that you will never find even one coyote who believes that damaging his den was good for the pack.
November 4, 2009, 9:57 pm