It was 20 months ago that congress “speed rushed” the $787 billion stimulus package through congress with a goal of creating jobs. In fact, several in Washington told us that unemployment would not exceed 8% if this was passed. Well, how effectively was the money spent?
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If you base the result simply on unemployment, not very well. As everyone knows, the U-3 unemployment is currently at 9.6% (and the less publicized U-6 underemployment is at 17.1%) and many jobs were lost in the months after the bill was passed. But let’s suppose we give them the benefit of the doubt that the recession was worse than they knew (I know, but just go with me on this). How well did the stimulus money work at “creating” jobs?
First, how do we count jobs created? One of the more difficult tasks is trying to determine how many jobs are the direct result of the stimulus money and also trying to determine what is actually a job (full-time, part-time, job saved…). As you dig into this you quickly determine that everyone has their own interpretation and spin. It reminds me of something my father always said - “figures lie and liars figure.” But that is the challenge in trying to actually get to the bottom of how effective the stimulus was--nearly impossible.
None the less, I recently stumbled upon one the most thorough examinations of this complex process and thought I should share it.
The Los Angeles controller recently completed a study of the $594 million in stimulus funds it received. The results are much worse than anyone could believe. The audits actually scrutinizeda sample of $111 million in stimulus funds and found that money went to projects that created or retained just 54 jobs. That works out to roughly $2 million per job, which is simply disgusting! If you desire to read the details, the audit reports are available here and here (pdf).
If you actually study the reports, it will help you understand just how inefficient government is at creating jobs. I am sure some of my blog readers will be able to provide me a few examples of stimulus money success. But the challenge again is to prove the actual jobs created and from what I can tell, no one has spent the time and energy to study the funds as much as Los Angeles has done.
I could make a long list of business leaders that I know who could take $2 million and create more than one job (and also turn a profit that could be taxed to actually pay for the stimulus), but no one in Washington called me to ask for my assistance :)