Monday, November 2, 2009

"Saved... or Created"??!

Here’s a story to illustrate the White House stimulus spin on the unemployment numbers:

A 300 pound man walks into his doctors office for his yearly checkup. After a thorough goings-over, the doctor says to the man, “Sir, you need to lose weight if you wish to remain healthy.” Of course, the man agrees and promises the doctor he will immediately start a diet.

Exactly one year passes and the man finds himself back in the doctors office again. When he gets on the scale he tips it at 320lbs. The doctor says. “Sir, you’ve gained 20 pounds, I thought you were going to go on a diet.” To which the man responds, “I did lose weight doctor, if I hadn’t gone on that diet, I would have weighed 340 pounds.”

There are many problems with the White House claims. Let’s start with just the top ones:

  • The economy continues to shed jobs. The Administration’s economists claimed that passage of the package would keep the unemployment rate at about 8 percent. Since the passage of the “stimulus,” however, more than 2.7 million jobs have been lost, as early October data showed. Any job numbers touted by the Administration will have to be seen against this background.
  • “Indirectly” saving/creating jobs. The White House’s “indirect” job creation number is taking their bogus metric of counting “jobs saved/created” to a whole new level. One can indirectly claim credit for anything. Buy a lot of hamburgers? You personally “indirectly saved or created” five jobs at McDonalds.
  • “Saved/created” metric will overstate impact. Leaving “indirect” job creation aside, the “saved/created” metric is so utterly flawed (as even President Obama’s chief economist Christina Romer admitted saying: “It’s very hard to say exactly because you don’t know what the baseline is, right, because you don’t know what the economy would have done without it.” ) So even if they scrubbed the data for three weeks to prevent the massive errors found in the first batch of data, the numbers will be highly inflated because the underlying premise is flawed.

  • Saving/creating government jobs. The data will show that the bulk of the jobs “saved/created” are government jobs - mostly jobs in the unproductive sector of the economy, furthering no economic growth, and preventing necessary streamlining of an already bloated bureaucracy. Ultimately, the package is propping up government at the expense of taxpayers.
  • Strings attached only aggravate the problem. State and local governments are beginning to feel the strings attached to the federal “stimulus” dollars. Several provisions in the “stimulus” package prevent lawmakers from making certain budget cuts or adjustments that would alleviate fiscal strain. In the case of Washington state, the "maintenance of effort" provisions in the Recovery Act prevent the state from adopting eligibility standards for Medicaid that are more restrictive than those in effect on July 1, 2008, and education budget reduction restrictions also apply. Most states failed to quantify the restrictions. The likely result as states work to fix their budget problems: tax increases which will further depress economic growth and kill jobs.
  • Taxpayers pay steep price. Even if you were to grant the Administration the 650,000 jobs created – using the roughly $150 billion figure of “stimulus” funds spent, the cost per job “created/saved” would come out to more than $230,000. Not exactly a bargain.

Thanks to Ryan Ellis at Americans for Tax Reform (and Rizzuto)

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