Friday, May 01, 2009

If $14 billion "creates or saves" 150,000 jobs... 

...what would it cost to return to full employment?

During our conversation yesterday about the President's claim that he has "saved or created" 150,000 jobs, we highlighted a quote from yesterday's testimony from CEA chair Christina Romer:
I have been told by the Office of Management and Budget that approximately $75 billion in spending under the ARRA has been obligated and almost $14 billion in outlays have already occurred. During the first 100 days in office, which the Administration marked yesterday, we estimate that the ARRA has already saved or created 150,000 jobs.
Many have pointed out in comments to that post that this comes out to $14,000,000,000/150,000 = $93,333.33 per job. And assuming as we did yesterday that they are connecting government spending to jobs via a multiplier and some imputation of GDP growth to job creation, it got me to wonder, what would it take to create full employment?

The full employment rate of unemployment (technically, NAIRU or the Nonaccelerating Inflation Rate of Unemployment) is 5.2%. (Their calculations are in spreadsheets found here.) The last data on the size of the labor force is for 154,048,000 workers, so 5.2% of that is 8,010,496. Current estimate of unemployment from that same source is 13,161,000, so we have about 5.1 million people who we would call "excess unemployment".

If spending $14 billion of some future taxpayers' money "creates or saves" 150,000 jobs, then is the path to full employment just spending enough to "create or save" 5,100,000 jobs? If the CEA chair really believed her calculations, why would she not ask for the immediate expenditure of $480.7 billion? The president could then hold a press conference and say "we have restored full employment", and she can do the math for JEC the next morning. Seems simple enough to me; she is welcome to the above script if she would like the help, gratis. What's wrong with that calculation?

(Of course, they spent much more than that. This is because they think that without stimulus more job losses are in the offing. They need to "create or save" those too. They're from the Obama Administration, of course, so they're here to help save or create a job you didn't even know you were losing yet. It's in the math donchaknow.)

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