The Stimulus Worked?, Ctd
A reader writes:
"Worked" is an interesting word. Simply citing employment and GDP data as evidence that a public policy "worked" implies that there is no cost-benefit analysis -- that infinite spending and debt can be considered to have "worked" if some threshold levels of employment and GDP are achieved. But a look at what those jobs and what that additional increment of GDP cost us -- or more precisely, cost future generations -- reveals a different story.
According to Recovery.gov, $234.2 billion of the stimulus money has been spent. Assuming CBO's jobs estimates are correct, that means that each job cost somewhere between $146,000 and $390,000. Does spending almost $400,000 to save a job sound like a policy that "worked"? Not to me. And on the GDP numbers, 1.2% to 3.2% translates into a range of $170 billion to $453 billion of additional GDP. Given $234.2 billion in costs, that suggests a multiplier of between 0.73 and 1.94. So it's not even clear that we've achieved a break-even multiplier of 1.
Based on that report, the CBO does not like tax cuts or bribing seniors as stimulus.
Check out the table on page 12 and 13 of the PDF. The CBO itemizes the low and high estimates of output multipliers--cumulative impact on real gross domestic product over several quarters for each dollar of spending or reduction in tax revenues--for various ARRA "activities". The CBO liked when the ARRA called for the federal government to buy stuff or provide services (low: 1.0, high: 2.5). They also liked when the federal government provided cash for infrastructure (1.0, 2.5).
Tax cuts? Notsomuch. The one year tax cut for higher-income people (.1, .5) and provisions for corporate cash flow ledger trickery were the worst (0, .4). The first-time homeowner credit? Nope (.1, .5).
And bribing seniors? Sorry (.2, 1.2).
The CBO report is the ARRA's estimated impact as of September 2009 so there's some time to go for some of those underperformers. The corporate cash flow ledger tricks may actually payoff later. The rest of the tax cuts and senior bribes are likely to fizzle as their effects were temporary or will end in a year or so.
Still, not good for cheerleaders of the homeowner tax credit or anyone who may call for more tax cuts in a possible second stimulus or jobs program.