From Media Matters for America -- May 31, 2012:
New Stimulus Report, Same Bogus Cost-Per-Job Analysis From Right-Wing Media
Right-wing media are using a new report from the Congressional Budget Office to claim that the stimulus "may have cost as much as $4.1 million per job." However, simply dividing the amount of money spent by the number of jobs created is, according to an Associated Press fact check, "highly misleading," and economist Paul Krugman has called this math "bogus." Conservative media regularly use similar calculations to attack jobs initiatives.
CBO "Now Estimates That The Total Impact [Of ARRA] Over The 2009-2019 Period Will Amount To About $831 Billion." From a May report from the Congressional Budget Office:
When ARRA was being considered, the Congressional Budget Office (CBO) and the staff of the Joint Committee on Taxation estimated that it would increase budget deficits by $787 billion between fiscal years 2009 and 2019. CBO now estimates that the total impact over the 2009-2019 period will amount to about $831 billion. By CBO's estimate, close to half of that impact occurred in fiscal year 2010, and more than 90 percent of ARRA's budgetary impact was realized by the end of March 2012.
Conservative Pundits Respond With Bogus Cost-Per-Jobs Analysis
AEI's Pethokoukis: "Obama Stimulus May Have Cost As Much As $4.1 Million A Job." In a post on the American Enterprise Institute's "The Enterprise Blog", James Pethokoukis excerpted part of the CBO report and wrote:
OK, so without the stimulus, there would be anywhere from 200,000 to 1.5 million fewer people employed right now? That means the current cost-per-job created is somewhere between $4.1 million and $540,000. [The Enterprise Blog, 5/30/12]
Fox Nation: "CBO: Obama Stimulus May Have Cost As Much As $4.1 Million A Job." A May 30 post on Fox Nation linked to Pethokoukis' post under the headline:
Limbaugh: "The Amount Of Money That They Calculate The Stimulus Will Cost And Add To The Deficit Equals $4.1 Million Per Job Created." On the May 31 broadcast of his radio show, Rush Limbaugh said:
LIMBAUGH: When the American Recovery and Reinvestment Act was considered -- this is the stimulus bill. By the way, this is a new CBO report. Congressional Budget Office.
The CBO and the staff of the Joint Committee on Taxation estimated that the stimulus would increase budget deficits by $787 billion. The CBO now estimates that the total impact from 2009 to 2019 of Obama's stimulus will be $831 billion. So, by the CBO's estimate, close to half of that impact occurred in fiscal year 2010.
The bottom line is this. The amount of money that they calculate the stimulus will cost and add to the deficit equals $4.1 million per job created. That's the efficiency we got from the regime -- $4.1 million per job. And the reason it's $4.1 million per job is because there weren't that many jobs created. [Premiere Radio Networks, The Rush Limbaugh Show, 5/31/12]
Experts Have Called Such Math "Highly Misleading"
AP Calls Cost-Per-Job Analysis "Math" That Is "Satisfyingly Simple But Highly Misleading." In 2009, the Associated Press published a "fact check" reviewing similar claims being made at the time:
Beware the math. Some Republican lawmakers critical of President Barack Obama's stimulus package are using grade-school arithmetic to size up costs and consequences of all that spending. The math is satisfyingly simple but highly misleading.
It goes like this: Divide the stimulus money spent so far by the estimated number of jobs saved or created. That produces a rather frightening figure on how much money taxpayers are spending for each job.
The reality is more complex.
First, the naysayers' calculations ignore the value of the work produced.
Any cost-per-job figure pays not just for the worker, but for material, supplies and that worker's output -- a portion of a road paved, patients treated in a health clinic, goods shipped from a factory floor, railroad tracks laid.
Second, critics are counting the total cost of contracts that will fuel work for months or years and dividing that by the number of jobs produced only to date.
A construction project, for one, may only require a few engineers to get going, with the work force to swell as ground is broken and building accelerates.
Hundreds of such projects have been on the books, in which the full value of the contracts is already counted in the spending totals, but few or no jobs have been reported yet because the work is only getting started.
To flip the equation politically, it's as if the 10-year cost of George W. Bush's big tax cuts were compared with the benefits to the economy that only accrued during the first year.
Third, the package approved by Congress is aimed at more than direct job creation, although employment was certainly central to its promotion and purpose.
Its features include money for research, training, plant equipment, extended unemployment benefits, credit assistance for businesses and more -- spending meant to pay off over time but impossible to judge in a short-term job formula.
Nor do the estimates made Friday include indirect employment already created by the package -- difficult if not impossible to measure. [AP, 11/2/09, via Nexis]
Krugman Called Claim That Stimulus Would Cost $275,000 Per Job "Bogus." Paul Krugman, a Nobel Prize-winning economist, responded to similar claims in his New York Times column in 2009:
First, there's the bogus talking point that the Obama plan will cost $275,000 per job created. Why is it bogus? Because it involves taking the cost of a plan that will extend over several years, creating millions of jobs each year, and dividing it by the jobs created in just one of those years.
It's as if an opponent of the school lunch program were to take an estimate of the cost of that program over the next five years, then divide it by the number of lunches provided in just one of those years, and assert that the program was hugely wasteful, because it cost $13 per lunch. (The actual cost of a free school lunch, by the way, is $2.57.)
The true cost per job of the Obama plan will probably be closer to $100,000 than $275,000 -- and the net cost will be as little as $60,000 once you take into account the fact that a stronger economy means higher tax receipts.