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$221,000 per job

Submitted by Ironman on Sat, 01/10/2009 - 11:57
in

The "new math" or "fuzzy math" wasn't taught in parochial school in Brooklyn in the 1960's, so if the numbers in the Obama deficit spending scheme are owrking for me I apologize for my limited educational skills compared to the Ivy League wizards drawing this one up.  

But I did the math, and assumed this amoprphous proposal works exactly as planned.

Obama advisers say plan would create 3.5m new jobs- AP

Facing growing criticism of his economic recovery plan, President-elect Barack Obama made public Saturday a detailed analysis by his economic advisers that estimates the $775 billion plan of tax cuts and new spending would create 3.5 million jobs over the next two years

$775,000,000,000 divided into 3,500,000= $221,428 per job "saved" or "created"

I've seen lots of local economic development proposals that got turned down with a better cost per job projection for being wasteful pork barrel programs.

Mind you I'm making two very big assumptions here in Obama's favor:

a) the plan works perfectly

b) the plan's cost comes in @ $775B. 

First, Senator Charles Schumer, Super Genius, has made clear Congress is going to add a massive amount of pork and fillers to the original Obama plan. But not to worry, it will come in under a trillion dollars.  

And the overall trillion dollar deficit scheme is going to be "paperless" Hard to tell if it works if it isn;t defined.

What's worse is what if the deficit spending scheme fails? And one economist points out that we've been trying to do "stimulus" for over a year in loose fiscal and monetary policy without result, suggesting a trillion dollar Obama program is akin to the Battle of the Somme   where Allied generals concluded that using more ammunition would achieve victory applying the same unsuccessful tactics.

What if we get a trillion dollars deeper in debt (adding a new $50B+/- interest cost in perpeuati )but the Obama scheme fails to revive the economy? (such as the Somme cost the UK most of it's trained soldiers to gain a few km) Will we be treated to the weak justification "well, things would've been worse"?  while they demand yet another trip to the stimulus bar?

Note: the annual interest cost on the added debt will run about $11,000 per new job created. If the new jobs don't net an annual increment of about $56,000 in GNP/job the new net tax revenue per job will be insufficent  to cover the added debt load to pay for the . (assumption is 5% interest rate average going forward and a 22% tax/GNP ratio--at the $775B cost/3.5M job gain).

Based on running these numbers, there's a high probablity the existing workers and taxpayers will have to go out of pocket ad infiteum to pay for these "new jobs"; which of course, will mean fewer "old jobs".

This is why the Republican Party has no business endorsing Obamanomics.  It may well decide to let the Democrats pass it on their own, but Warner Tood Huston explains eloquently how a loyal opposition gives the incumbent party a "chance" without being co-opted in the process.

Getting back to the original point--if Republicans proposed an economic scheme based on deficit spending that cost $221,400 per job created , think it would fly through unscatched?

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what the MSM used to say about this mentality

Submitted by Ironman on Sat, 01/10/2009 - 15:06.

from Time magazine , June 24, 2001 "Corporate Welfare"

In 1989 Illinois gave $240 million in economic incentives to Sears, Roebuck & Co. to keep its corporate headquarters and 5,400 workers in the state by moving from Chicago to suburban Hoffman Estates. That amounted to a subsidy of $44,000 for each job.

In 1991 Indiana gave $451 million in economic incentives to United Airlines to build an aircraft-maintenance facility that would employ as many as 6,300 people. Subsidy: $72,000 for each job.

In 1993 Alabama gave $253 million in economic incentives to Mercedes-Benz to build an automobile-assembly plant near Tuscaloosa and employ 1,500 workers. Subsidy: $169,000 for each job.

And in 1997 Pennsylvania gave $307 million in economic incentives to Kvaerner ASA, a Norwegian global engineering and construction company, to open a shipyard at the former Philadelphia Naval Shipyard and employ 950 people. Subsidy: $323,000 for each job.

This kind of arithmetic seldom adds up. Let's say the Philadelphia job pays $50,000. And each new worker pays $6,700 in local and state taxes. That means it will take nearly a half-century of tax collections from each individual to earn back the money granted to create his or her job. And that assumes all 950 workers will be recruited from outside Philadelphia and will relocate in the city, rather than move from existing jobs within the city, where they are already paying taxes.

http://www.time.com/time/magazine/article/0,9171,140395,00.html?iid=chix-sphere

The national cost per new or "saved" job from Obamamomics will be about 35% more than the subsidy cost to Alabama to lure a Mercedes-Benz assembly plant to Tuscaloosa. (which, or course, acted as an anchor for lots of local businesses across the region).

The point herein about spending a lot of money to shift economic activity instead of creating it is also quite relevant.

I doubt we are going to see anything as tangible as a M-class SUV as a result of Barack's Bailout Bonanza.

http://www.thecourier.com/Iss

Submitted by In between on Sat, 01/10/2009 - 16:02.

http://www.thecourier.com/Issues/2008/Dec/18/ar_news_121808_story3.asp?d...

You have come up with a good point. Just what are we doing in America? Just what are we producing in America and at what cost.

And it comes right back to globalization.

We have had 8 years of tax cuts and we are back into a recession.

We have had a stimulus package a year ago and will have another one soon.

We have bailouts from Wall Street to Detroit.

We have deficits and debt.

We send our jobs overseas. And nothing to replace them.

We send our money to Iraq.

We see the middle class jobs leave and if not that then you have pressure on wages, healthcare, and pensions.

We have a healthcare system in shambles as they pad our insurances to pay for those that have no healthcare.

We have cities and states going broke.

A lot of pension funds in trouble.

High consumer debt.

We are more dependent on OPEC

We rely more than ever for borrowing of money from other countries.

We are behind in our infrastructural spending.

50 trillion dollars of unfunded social programs.

The stores are full of Chinese goods. Do we give up manufacturing completely?

During this time it is China that has high growth and creating wealth. They build whole cities. They have the largest airport and has invested in hi speed rail. (they do have their problems and I am not making light of the situation, every country has problems). But the fact remains, that China has seen real growth.

We subsidize industry to stay here, but at some time the industry will leave because of  market forces.

If you rely on private industry to create jobs, what is there to say those jobs can't go overseas.

Is free trade good, when factories close?

So these are the questions to be asking. What is for our future. How do you invest in a future. And do we use ideology in which most or all fail, or do we become pragmatic and work on the problems. This is what I have seen missing for the last 8 years, and maybe before that but it wasn't as well defined. Now we have seen some sort of laissez-faire approach in letting things go, and when the time comes, cities, states, and the federal government hand out tax breaks, tax cuts, or bailouts. Is this the way to run things? It seems wacky to me.

got that on speed dial

Submitted by Ironman on Sat, 01/10/2009 - 16:09.

Same litany of complaints every post.

Re; China; Interesting that they are promoting private industry at the same time you dismiss it as unreliable.

You never responded to my point it was cheaper for Alabama to subsidize it's economic crown jewel than Obama's economy-wide programs. Economies of scale, not.

No private sector. No tax money for the public sector. See. It takes me less bandwidth to explain stuff.  

You are saying the same

Submitted by In between on Sat, 01/10/2009 - 16:58.

You are saying the same things as Bush has for 8 years. It failed.

You still have to deal with globalization. All those problems I listed comes down to a vicious circle. Alabama may have subsidized, but it only takes away from industry in the North. You can say they make a better product. It still comes down to globalization and a fragmentation of society. It solves nothing. Except that you will have a better product at a cheaper price. But it does not answer to all the problems that it creates.

China is promoting private industry as we give them the jobs. It is cheap labor, we cannot compete with cheap labor. The companies pay a dollar an hour, no healthcare, no pensions, no social security, and no OSHA standards.

If I dismiss the private industry as unreliable, it is because of globalization. Even if they create a product, it can be made in China, India, or someplace else cheaper. Again, you live on false hope. 800 billion dollars of borrowed money for tax cuts over 8 years and we are back into a recession, with our jobs going overseas, and our money going to Iraq. So far the republicans are clueless.

What Obama is doing, what Paulson is doing, what the federal reserve is doing is trying to find a way of heading off a depression. And that comes with a price.

So far the private sector is not doing anything to get the economy going. The infrastructure still has to be maintained. That is the governments responsibility. And since the republicans don't have an answer and don't want to pay for anything, they don't have room to criticize. 

Alabama may have given tax breaks to industry, but in the end, the industry is building the buildings and paying for the workforce. Obama has to do it all. Can it be done better? Maybe. But the government is the last resort to stop a depression.

Now maybe you can make private industry make the products. First, how many products can be made and how many employees do you want to hire in a recession? And where are you going to make these products. Oh, China. And who is going to buy these products?

So good luck in creating a million jobs.

 

 

 

Yeah, he really does...

Submitted by Liberally Conse... on Sat, 01/10/2009 - 17:07.

Anyway, a question, if I may.

It seems like you're comparing apples to oranges. You're comparing the cost of incentivizing a company to move to a state instead of the next one over, as compared to making a project from scratch.

Let's say a part of Obama's plan is to build a wind power turbine, just as DaimlerChrysler's plan consists of building a new plant in America. In the case of the auto plant, states compete for the placement of the plant, but DC has decided to build a plant in a given region (say, the Eastern US), and the incentive is minute compared to the actual cost of building a factory and employing the people.

By contrast, Obama's plan creates a wind turbine, and the money goes to buying the parts, paying for the construction, the upkeep, and for the labor that will work the turbine.

So, incentive on one hand, and the sum of the costs of production on the other. And if Obama hadn't built this wind turbine, it would likely have never gotten created, not because it wouldn't be profitable, but because it may have taken much too long to recoup the initial costs of investment.

Well, I don't understand the

Submitted by In between on Sat, 01/10/2009 - 17:57.

Well, I don't understand the question. I think the various comparisons are getting out of hand.

I just see tax incentives, tax cuts, and bailouts as an answer to globalization. Which to me solves no problems. Globalization or cheap labor is going to win every time. I view the whole westernized world as vulnerable to losing jobs. And besides all the problems I listed, just how much junk can be produced in the world. I see so much competition, especially in the U.S. Put an extra chocolate chip in a cookie and the other guy goes broke. 

Simplistic analysis

Submitted by NextRightNando on Sat, 01/10/2009 - 17:02.

There is going to be a lot more spending than just on wages. If you are going to build a bridge you need contruction workers, yes, but you also need steel, concrete and equipment, all to be purchased from companies which otherwise don't have enough demand for their products. So you can't just take the $ figure and divide by the numer of jobs claimed.

If we got Bloomberg to run this

Submitted by Ironman on Sun, 01/11/2009 - 08:56.

and hire just NYC employees, he could deliver 3.5 million jobs at half the cost

http://www.nytimes.com/2009/01/09/nyregion/09salaries.html?partner=permalink&exprod=permalink

Really, that's an awful lot of steel your  talking about if NYC government's average hire is running @ $107,000 

re: Getting back to the original point

Submitted by opendna on Sat, 01/10/2009 - 19:21.

[I]f Republicans proposed an economic scheme based on deficit spending that cost $221,400 per job created, think it would fly through unscatched?

Yes.

But I can't really remember an American economic scheme that didn't rely on deficit spending. There were some that were supposed to be self-funding, but they didn't quite work out that way.

 

Marginally related (heh): the following is chart of the economic activity created by each dollar spent on one policy or another.

(source:  A rescue plan for Main Street by Irons & Pollack at The Economic Policy Institute, December 17 2008)

"Photobucket"

In principle, we ought to be able to compare the proposed rescue package against known multipliers (similar to those in the chart) and predict how much GDP will grow as a result of the final spending package. Deficits can make sense, even if they usually don't.

now how did this stuff work to date?

Submitted by Ironman on Sat, 01/10/2009 - 19:45.

We tried a tax rebate in 2008 and it had the economic effect of a bug into a windshield. Why? Because they weren't spent. (there is some anecdotal evidence that the Asian flat screen TV business benefited, but that was not an intended result, now was it)

Notice this is "first year impact" in the Zandi chart. I wonder if the "bang for the buck" dissipates quickly. I mean, why haven;t states been engaged in a frezied bidding war to increase unemployment benefits and food stamps to boost their economies? Why would they be trying to lure manufacturing and research jobs?

Besides, I think economic reports from the EPI are as to taken with the same grain of salt as climate research paid for by ExxonMobil.

One other point. If I hired a million people to burn down buildings their wages would increase GNP in year one. The loss of productivity from the destroyed assets would not appear until year two. Will throwing cash at the present problem damage long term U.S. productivity? ( compare Rubinomics  with Carternomics) Can the Obama team answer that question?  Somebody should.

This whole exercise is the economic version of the Battle of the Somme; if last's year's economic stimulus didn;t work just use the same tactics this year with more firepower and expect a better result. Right.

I don't entirely disagree...

Submitted by opendna on Mon, 01/12/2009 - 04:01.

We tried a tax rebate in 2008 and it had the economic effect of a bug into a windshield. Why? Because they weren't spent. (there is some anecdotal evidence that the Asian flat screen TV business benefited, but that was not an intended result, now was it)

I think that would be classified as a "Non-refundable lump-sum tax rebate" which the chart lists as having a $1.02/$1.00 impact in the first year. An econonomist would say that last year's tax rebate had a lousy multiplier and - if the goal was stimulating the economy - the money could have been better spent. If the same money had been spent on fixing potholes, levies or building other "Infrastructure" we should have seen $1.59/$1.00 in activity. Maybe that extra $0.47 would have made a difference.

A quick google says the 2008 tax rebate cost $168 billion. Economic impact should have been $171 billion. The same money spent on infrastructure should have returned $267 billion. Would we have noticed another $96 billion in economic activity? I dunno.

That's hugely speculative, I think

Submitted by Ironman on Mon, 01/12/2009 - 06:11.

On the topic of Tim O' Neill's adage "all politiics is local"  I link to a blog run by a local CT politician, questioning how one could possibly assess the merits of so many uses of money so quickly

  http://timwhitelistens.blogspot.com/2009/01/cheshires-shovel-ready-wish-list.html

This also reminds me of one of the fundamental problems with Big Government - who decides the merits of the project? How can Obama (or his people) know the value of repaving Abrams Road versus Winding Trail Lane? ........

There is absolutely no way for Washington to have any real sense of which projects are worthy and which are not. The whole premise is based on projects being "shovel-ready." But who is going to define that?

This whole "stimulus package" sounds to me like another bailout... and where did that money go? 

 

Let me ask you. Do we need to

Submitted by In between on Mon, 01/12/2009 - 07:32.

Let me ask you.

Do we need to be energy independent and get away from OPEC?

Do we need to keep up with our infrastructure?

Do we need more science?

Do we need more research and development?

Do we have cities and states going broke?

Do we have factories closing?

Do we need a more educated people to compete in the world?

Do we have globalization and what do we do about it? Just more free trade as factories close?

You may be right in some delegations, but we can't let everything fall apart either. 

The problem with laissez-faire is that you are not dealing with problems. CEO's manage, managers manage, coaches manage, everyone manages. But the most important job in our country, the president, does not have to manage. He just watches the flowers grow.

 

And you say "where did the money go?"

Well, where did the tax cuts go as we sit in a recession? We were supposed to have prosperity and economic growth. The tax cuts were supposed to solve all problems and lift people out of poverty. 8 years of tax cuts and are we better off?

How about this for an idea

Submitted by Ironman on Mon, 01/12/2009 - 07:57.

a) we figure out how we need to accomplish

b) we discuss this in a deliberate fashion

c) we ascertain the most cost-effective means of reaching this goal. or determine some goals are simply not economically achievable  (see Kyoto targets)

d) we prioritize within feasible resources i.e. maybe green buildings get funded now; green cars later

or: we can simply throw a trillion or so dollars at every cool idea we have and see which one works, since we can;t wait to make a rational decision.   And continue to diss the private sector as having all already moved offshore when it is going to be the only means of paying for all this stuff.

 

 I have no problem with

Submitted by In between on Mon, 01/12/2009 - 08:23.

 I have no problem with this.

I have for example, on energy independence you need an energy council and an energy plan. And that goes for everything. Now the Bush idea is to throw a flawed social security program to congress and let it fail. It failed because it would cost 2 trillion dollars for the transition and other problems. You want to have a good program with little flaws and you need insiders in the congress and senate to push something.

Another example. The Iraq war. Bush only listened to his neocons. Bush never talked to James Baker, Bob Gates, Brent Scrowcroft, or his father. So you need all the angles. And you don't let ideology rule.

Obama has surrounded himself with some of the best people. He wants input from all angles. He wants someone to tell him no. Many presidents want this to keep himself in check. Bush never did that.

Jack Welch, former GE CEO, is on MSNBC. He seems to be pleased with the situation. You need to throw money and everything thing at this. This recession is not the usual cycle, it is about a financial crisis. And China is stimulating their economy with 1 trillion dollars and Germany is doing the same, as he says. The worst of all worlds is ending up in a depression.

Also, Jack Welch was quite pleased with Obama.

Bush has held little curiosity in anything.

energy independence

Submitted by chemjeff on Mon, 01/12/2009 - 08:27.

I have for example, on energy independence you need an energy council and an energy plan.

No you don't.

uhh?

Submitted by In between on Mon, 01/12/2009 - 08:33.

uhh?

I'm serious.

Submitted by chemjeff on Mon, 01/12/2009 - 09:43.

I'm serious.  You don't need an "energy council" or an "energy plan" to obtain energy independence.  Once you fully understand the zen of this statement, then you will be well on your way to understanding conservatism.

Big hint: Read the book.

Have read what I could on the

Submitted by In between on Mon, 01/12/2009 - 17:43.

Have read what I could on the internet. Talks about socialism and planning. It is not close to what I am saying. If I am saying anything then we (our country) should be competitive with the rest of the world. And that is a far cry from your laissez-faire. We are losing our competitiveness.  

Don't read the Cliff's Notes.

Submitted by chemjeff on Mon, 01/12/2009 - 18:02.

Don't read the Cliff's Notes version of the book.  Read the book itself.

And if you don't think subjects like 'socialism' and 'central planning' aren't relevant to the discussion on economic stimulus and globalization, then you have even less of a clue than I thought.

 Well, I have seen enough.

Submitted by In between on Mon, 01/12/2009 - 18:31.

 Well, I have seen enough. There is no excuse for the president not doing his job. In any industry he would have been fired for incompetence. Laissez-faire is close to incompetence. Absolutely nothing done to solve the problems before him and our country. I think Bush is a total disgrace in how he managed our country. While the book you suggest cuts down socialism, Bush brought an ideology that has damaged our country. It will take at least 20 years to undo the damage.

Now can we have some management, instead of watching the flowers grow.

Globalization is real. We see

Submitted by In between on Mon, 01/12/2009 - 08:31.

Globalization is real. We see cities and states going broke. We are spending money in Iraq and we are not paying any attention on how to deal with globalization. This is the biggest economic problem we face long term. If I see this problem, then I have to look at it that we can lose most of our jobs. China has 1 billion people and India 1 billion people. They want our jobs.

McDonalds has been testing a drive-thru in which you talk to someone in India to order your hamburger. So I view most jobs being vulnerable. And you have to be ahead of the game. We have seen what Japan has done for 30 years and we cannot sit back and watch the flowers grow. China is teaching english to its kids. I was in Hungary and you don't go to college there unless you know english. They know what is at stake. We have not yet learned what is at stake. 

China is teaching english to its kids.

Submitted by Ironman on Mon, 01/12/2009 - 19:36.

Because they realize they need to speak to us; not the other way around.

Well, they know what

Submitted by In between on Mon, 01/12/2009 - 20:12.

Well, they know what globalization is all about. We are just watching the flowers grow here. China has 5%+ growth and will be for many years. We have 0% growth. So we already know who will pull ahead. We cannot match the growth of China. 

BTW, are you on antidepressants?

Submitted by Ironman on Mon, 01/12/2009 - 20:48.

because if you are not, i would strongly suggest you look into it.

For Wicca's sake, you are the most defeatist wet blanket ever to waste bandwidth here.

Just giving you the facts and

Submitted by In between on Mon, 01/12/2009 - 20:56.

Just giving you the facts and reality. 

Congratulations

Submitted by Ironman on Mon, 01/12/2009 - 21:01.

a post which was shorter than the Sunday NY Times.

On that point, I still think we tell Bloomberg to add the 3.5 Million jobs to the NYC payroll, which would cost half as much as Obamanomics. 

In between better get a new crystal ball

Submitted by Ironman on Mon, 01/12/2009 - 21:08.

Hot off the presses from the noted right wing rag, Time magazine. I know this is against the KnownFacts tm about the economy , but when does the MSM ever get it wrong 

The Last Pillar of the Chinese Economy Falls

What was unimaginable a year ago has now happened. China has entered a recession and it may end up being deeper than the one in the U.S. It is not clear that the government can mount and manage a plan to create about 10 million new jobs. This will be an even more difficult task if exports continue to fall sharply. China does not have a service industry which is anywhere close to being as large a part of the GDP as it is in the U.S.

http://www.time.com/time/business/article/0,8599,1871014,00.html?imw=Y

Hmmm, maybe we don't want to emulate the Chinese????

 Interesting. But they still

Submitted by In between on Mon, 01/12/2009 - 21:45.

 Interesting. But they still have 3% growth and the cash. I always would like to know who my economic enemy is, so it gives us an idea what we have to do. 

We are behind the 8 ball in so many areas and maybe we can catch up. Maybe we can create a battery that will charge at 100 miles +, and maybe we can do it in 5 years. We should strive for the positive. This situation in China gives us a better playing field. 

We of course can't match China's growth--

Submitted by Crow on Mon, 01/12/2009 - 21:10.

we're a mature economy--but we need to get back to positive 

Ironman, the cost of the stimulis includes the 1st year's salary PLUS the net capital investment so the job cost is less.