No statistics should ever be accepted at face value. All statistics are the result of assumptions, procedures, and ranges of estimation or error. Obama and his staff and advisors estimate that the $750 billion stimulus over two years will "create" 3.5 million jobs. The jobs are estimated for different employment sectors (e.g., manufacturing, construction, education). Government (apparently referring to all government) is expected to take only 244,000 jobs, which would be an increase of 1.1%.
The report by Obama advisors (Christina Romer, chair nominee, Council of Economic Advisors, Jared Bernstein, Office of the president elect, "The Job Impact of the American Recovery and Reinvestment Plan", January 9, 2009) is here. The analysis is based on a simple multiplier model, in which certain dollars spent and/or provided by tax cuts creates specific numbers of jobs in the private and governmental sectors.
Frankly, I don't believe the numbers. They lack basic credibility. They look politically polished--and that should raise suspicions.
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Where do these numbers come from?
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What and when is the historical basis of the multiplier model?
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Every step of their generation must be open to inspection.
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What does it mean to say the stimulus "will create" these jobs?
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Are the jobs simply old jobs whose holders were laid off (who will be recalled as a result of the stimulus) or do the jobs represent additions to the payrolls as compared to, say, several years ago?
What level of efficiency does the analysis build in?
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Does the analysis assume that employers will add employees without generating efficiency (for instance, employing one person to do a job one person used to do, rather than employing one to do a job that two employees did before the recession layoffs?)
Are all the jobs evaluated equally?
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Are some jobs new line positions, representing permanent jobs to which an employer has a longterm future commitment, or are some jobs part-time, or temporary, or make-work?
What assumptions does the analysis make regarding new created government jobs?
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Governmental supervision of infrastructure supervision and regulation will require enormous numbers of new employees, who will have to be trained. Regulation and supervision of highways, bridges, railroads, railroad stations, hospitals, schools, and toxic waste incinerators, for instance, require a lot of government supervisors and inspectors. It beggers the imagination to assume that government will be able to do this supervisory chore with only 1.1% more employees.
Because the numbers are politically polished, we should expect the actual numbers, as obtained by historical analysis after the mini-depression (as Lawrence Summers calls it), to be very different. Actual new private sector jobs (distinguished from temporary jobs created to take stimulus money) will be much smaller and governmental jobs (which will be permanent) will be much higher. Such an outcome would move the nation a long way toward the centralized command economy of the old soviet states and a long-way from the flexible, free market, manufacturing economy the nation needs.
Revised. January 11, 2009.
