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Each Job “Saved or Created” Cost $246,436

The economics of government stimulus investments can be very muddy.  It can be argued that one dollar spent by the government today will have a lasting ripple in the economy as it flows through different outlets.  On the other hand, immediate and direct benefits of stimulus money can often be measured rather easily as was the case with new homes purchased due to the home owner’s tax credit or the new cars purchased due to the cash for clunkers program.  In the case of Cash for Clunkers, the cost to the taxpayer for every incremental car sold was $24,000.   In the case for the home-owner’s tax credit, the cost to the taxpayer for every incremental house sold was $43,000.

Not to be outdone, the latest statistics came out regarding the federal stimulus money that was released to “Save or Create” jobs in the United States.  According to the Obama administration, the stimulus program has “saved or created” 640,329 jobs since its enactment in FebruaryBased upon the $157.8 billion that was released for the program, that equates to a taxpayer bill of $246,436 per job.  On the other hand, had they just hired a bunch of people to sit around and collect $60,000 they could have *created* $2.6M jobs!

I know, I know…the effects of having people employed and productive in our society cannot be underestimated.  I just want to bring to light the immediate economics of these situations.  Stimulus spending is expensive, plain and simple.

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2 Responses

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  1. Travis Robinson says

    If it were completely true that the Fed had to continue monetization/quantitive easing, would there have to be high deficit spending to trigger the treasury bond auctions/issuances to sell for those dollars “printed”, or would it be all the same for the Fed and the economy if the Fed just stepped into the open market and bought bonds. I’m under the impression that buying bonds in the secondary market is more inflationary than buying the bonds at auction, am i correct on that?

    What I’m really asking: Is it possible that government spending is completely secondary to the central bank’s policy? If the central bank has to buy bonds, does there need to be government spending programs to provide the reason for the issuance of those bonds?

  2. SurlyTrader says

    The government spending is rationalized because it is “targeted”. If the government spends money to increase the purchase of automobiles then the easy analysis suggests that the money helps 1) consumers who buy the cars, 2) the auto manufacturers, 3) the workers of auto manufacturers/dealers/suppliers. When the fed performs its “quantitative easing” they are really trying to keep a lower interest rate environment while providing cash for the struggling banks AKA propping up the house of cards.

    I’m not a big proponent of wealth distribution in general, but I think I would have much rather had the cash for clunkers and housing tax rebate money go directly to the families in “poverty”. These government “stimulus” programs just breed outright fraud, corruption and waste IMO.

    SurlyTrader



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