Virgil
02-15-2009, 10:54 AM
http://www.sfgate.com/cgi-bin/article.cgi?f=/c/a/2009/02/15/BUKO15TMRH.DTL
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Sunday, February 15, 2009
The White House says the nearly $800 billion stimulus bill will save or create about 3 million to 4 million jobs. But if you look through the bill itself, it's hard to see where they are coming from.
In the 1,073-page document, the word "job" or "jobs" shows up only 59 times, if you exclude its appearance in titles or chapter headings. That's about once every 18 pages.
In most cases, the word is used in sentences that define goals - such as "the purpose of this bill is to create jobs" - or in provisions requiring recipients of stimulus aid to estimate and publish how many jobs they have created or saved.
An unemployed person would be hard pressed to read the bill and figure out where to look for work, at least in the near future.
"The trouble is, the things that create the most jobs are the things that kick in the most slowly," says Nigel Gault, chief U.S. economist with HIS Global Insight.
"The biggest bang for the buck" will come from new infrastructure spending on things like roads, bridges and alternative-energy projects, Gault says. But few of these jobs will be created before 2010 or 2011. (After the 1989 earthquake, construction on the Bay Bridge retrofit didn't start for 12 years, and it's still not done.)
The part of the stimulus bill that will kick in soonest is the cut in payroll taxes. Most workers will start seeing a bit more in their paychecks in June or July. How many jobs this creates depends on how much of the tax cut is spent.
The bill also includes business tax cuts that could result in fewer layoffs by improving cash flow at companies that can't get credit, says Mike Englund, chief economist with Action Economics.
In between the tax cuts and infrastructure spending is money the federal government will transfer to states for things like Medicaid and education.
While these transfers might not create a lot of jobs, they will preserve a large number of jobs that states would have to cut without the federal funding. The impact will come sooner than infrastructure spending, especially in states such as California that have already furloughed workers. And they will probably have a bigger impact than tax cuts.
"Transfers to states have a very high bang for the buck," says David Levine, an economics professor at the UC Berkeley Haas School of Business.
Private-sector economists say the bill will create or save fewer jobs than the White House has estimated.
Mark Zandi of Economy.com estimates it will create 2 to 2.5 million jobs by the end of 2010.
Gault's estimate is also "in the 2 million to 2.5 million region," he says. "I would put the majority of those jobs in the saved rather than created category."
Given the bill's lack of specifics on jobs, where do these estimates come from?
To put it very simply, economists estimate how many jobs will be created by government spending or tax cuts (the direct impact) and how many additional jobs will be created when workers in these new jobs spend their paychecks (the indirect impact).
In a paper published in January, White House economists Christina Romer and Jared Bernstein outlined a hypothetical program similar in size and scope to the final bill. They assumed that a dollar in federal spending would create roughly $1.50 in economic activity and that a dollar in tax cuts would create about 95 cents worth of activity.
Compared with doing nothing, they estimated the stimulus package would increase gross domestic product by about 3.7 percent and create 3.7 million jobs by the end of 2010.
Margins of error
They admitted that their estimates "are subject to significant margins of error" and that the historical rules of thumb they used to derive them may not be relevant given the extreme and unusual nature of today's downturn.
The White House did not return numerous calls seeking comment.
The success of the stimulus program depends largely on whether people think it will work.
If Americans think it will revive the economy without too many ill effects, consumers and businesses will be more willing to spend and hire.
But if "people panic and perceive that government spending is out of control, they might anticipate higher interest rates, higher inflation and higher taxes down the road," Englund says. In that case, they may spend less, defeating the plan's purpose.
Unfortunately, the bill is such a potpourri, it's hard to understand how it will work.
"The list of projects is so long, it's almost throwing money at everything the government does. It was not targeted (at jobs) as much as people anticipated. That's probably why the stock market hasn't gained on the package," Englund says.
'Room for a lot'
Levine agrees that "the stimulus bill seems enormous. But the U.S. economy is going to shrink several trillion dollars from what it could be. There is room for a lot of stimulus," he says.
"Starbucks will shrink more slowly because of this," he adds. "More people will be buying coffee because they got a tax cut or they got a job from biotech or road spending. This is good news if you are a Starbucks worker."
===========
Sunday, February 15, 2009
The White House says the nearly $800 billion stimulus bill will save or create about 3 million to 4 million jobs. But if you look through the bill itself, it's hard to see where they are coming from.
In the 1,073-page document, the word "job" or "jobs" shows up only 59 times, if you exclude its appearance in titles or chapter headings. That's about once every 18 pages.
In most cases, the word is used in sentences that define goals - such as "the purpose of this bill is to create jobs" - or in provisions requiring recipients of stimulus aid to estimate and publish how many jobs they have created or saved.
An unemployed person would be hard pressed to read the bill and figure out where to look for work, at least in the near future.
"The trouble is, the things that create the most jobs are the things that kick in the most slowly," says Nigel Gault, chief U.S. economist with HIS Global Insight.
"The biggest bang for the buck" will come from new infrastructure spending on things like roads, bridges and alternative-energy projects, Gault says. But few of these jobs will be created before 2010 or 2011. (After the 1989 earthquake, construction on the Bay Bridge retrofit didn't start for 12 years, and it's still not done.)
The part of the stimulus bill that will kick in soonest is the cut in payroll taxes. Most workers will start seeing a bit more in their paychecks in June or July. How many jobs this creates depends on how much of the tax cut is spent.
The bill also includes business tax cuts that could result in fewer layoffs by improving cash flow at companies that can't get credit, says Mike Englund, chief economist with Action Economics.
In between the tax cuts and infrastructure spending is money the federal government will transfer to states for things like Medicaid and education.
While these transfers might not create a lot of jobs, they will preserve a large number of jobs that states would have to cut without the federal funding. The impact will come sooner than infrastructure spending, especially in states such as California that have already furloughed workers. And they will probably have a bigger impact than tax cuts.
"Transfers to states have a very high bang for the buck," says David Levine, an economics professor at the UC Berkeley Haas School of Business.
Private-sector economists say the bill will create or save fewer jobs than the White House has estimated.
Mark Zandi of Economy.com estimates it will create 2 to 2.5 million jobs by the end of 2010.
Gault's estimate is also "in the 2 million to 2.5 million region," he says. "I would put the majority of those jobs in the saved rather than created category."
Given the bill's lack of specifics on jobs, where do these estimates come from?
To put it very simply, economists estimate how many jobs will be created by government spending or tax cuts (the direct impact) and how many additional jobs will be created when workers in these new jobs spend their paychecks (the indirect impact).
In a paper published in January, White House economists Christina Romer and Jared Bernstein outlined a hypothetical program similar in size and scope to the final bill. They assumed that a dollar in federal spending would create roughly $1.50 in economic activity and that a dollar in tax cuts would create about 95 cents worth of activity.
Compared with doing nothing, they estimated the stimulus package would increase gross domestic product by about 3.7 percent and create 3.7 million jobs by the end of 2010.
Margins of error
They admitted that their estimates "are subject to significant margins of error" and that the historical rules of thumb they used to derive them may not be relevant given the extreme and unusual nature of today's downturn.
The White House did not return numerous calls seeking comment.
The success of the stimulus program depends largely on whether people think it will work.
If Americans think it will revive the economy without too many ill effects, consumers and businesses will be more willing to spend and hire.
But if "people panic and perceive that government spending is out of control, they might anticipate higher interest rates, higher inflation and higher taxes down the road," Englund says. In that case, they may spend less, defeating the plan's purpose.
Unfortunately, the bill is such a potpourri, it's hard to understand how it will work.
"The list of projects is so long, it's almost throwing money at everything the government does. It was not targeted (at jobs) as much as people anticipated. That's probably why the stock market hasn't gained on the package," Englund says.
'Room for a lot'
Levine agrees that "the stimulus bill seems enormous. But the U.S. economy is going to shrink several trillion dollars from what it could be. There is room for a lot of stimulus," he says.
"Starbucks will shrink more slowly because of this," he adds. "More people will be buying coffee because they got a tax cut or they got a job from biotech or road spending. This is good news if you are a Starbucks worker."