The Cost of Obama’s Jobs Plan
A lot of new outlets carried Mark Zandi’s prediction:
“The president’s plan would provide a meaningful boost to the economy and job market in 2012,” Zandi concluded. “I expect the plan to add 2 percentage points to real GDP growth and 1.9 million payroll jobs, and reduce unemployment by a percentage point.”
I entered these numbers into a spreadsheet along with the cost of each program (based on WSJ) of $175b, $70b, and $140b respectively. You can then calculate how much it costs (in lost revenue or greater expenditures) to create a job. The numbers are sobering: $233k per job for the payroll tax cuts and $350k per job for the infrastructure spending. And these jobs would only be around for the duration of the new stimulus package!
HT: Arnold Kling
At some point, don’t we have to admit that John Maynard Keynes was wrong? In addition to this example, don’t we have decades of data to show that Keynesian economics doesn’t work?
As an economist I doubt the jobs program will create jobs in any meaningful way. If anything, the jobs it will create may not be the type of jobs that are good for long term economic growth. Spending money on temporary employment or government jobs just takes from the economy rather than growing the economy.
I am afraid that it is a political reality that we must have jobs programs (the median voter votes them) so we must find a cheaper way for Gov to encourage job creation. I say we try to get the whores, I mean the politicians, to replace minimum wage with a wage subsidy and see of that works. We are already paying many of the unemployed.