Whenever government throws billions of dollars at the economy, one would certainly expect to find some jobs at the end of those dollars. President Obama has worked hard to convince the nation that the mega fiscal stimulus he signed into law produced some 650,000 jobs. This PR blitz is amazing in the face of an economy that has shed 3.4 million jobs since Obama was sworn in, the unemployment rate is pressing toward 10 percent, and the Obama jobs gap – the gap between where he promised we would be and actual employment — rises monthly.
Political chutzpah aside, the numbers Obama is tossing around are grossly misleading. The problem is not the calculation itself. This is a political guesstimate and no doubt the duly tasked bean counters are doing their level best to count every last bean job. For that matter, the problem is not government inefficiency and waste. That was assumed from the outset, so it should not surprise anyone that according to the government’s own data some $173 billion has been spent thus far and all they can point to is a relative handful of jobs. The problem is the Obama figure only tells half the story.
The Obama jobs figure is a guesstimate of the number of jobs created from the spending. It is analogous to the gross income a company earns on sales. But what matters, of course, is net income, on in this case, net jobs, and that requires an estimate of the net cost.
The net cost in this case derives from the simple fact that the federal government is borrowing money to spend money. Government borrowing subtracts purchasing power from the economy just as government spending adds it back in. Absent the government borrowing and spending, consumers and businesses would have borrowed the funds and spent the funds. The same mechanisms that supposedly created the jobs from the government spending would have created jobs from private spending.
At best, the jobs created and destroyed are a wash. Of course, the jobs that are destroyed are scattered across the economy and across the country and cannot be identified specifically, though wouldn’t that be interesting. Imagine the pictures and story of the worker who lost a job because government borrowed money. However, the destruction of those jobs by borrowing is every bit as certain as the creation of jobs by deficit spending.
It is possible to calculate with fair precision the net jobs created by Obama’s attempt at fiscal alchemy. Adding jobs gained to jobs lost produces a big fat squadoosh, nada, zippo, zero. It’s also possible to show the increase in the national debt that produced this outstanding government policy result – by last count it was $173 billion.
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“One can search economic textbooks forever without finding a concept called ‘jobs saved’,” said Allan Meltzer, a professor at Carnegie Mellon University, in a memo to House of Representatives Republican leader John Boehner today. “How can anyone know that his or her job has been saved?”
