The billions have been spent. The data has been released. How efficiently did President Obama’s controversial stimulus package create or retain jobs in New Mexico?
Based on the government’s own data, the Obama stimulus required $335,310 on average for each of the jobs it claims to have created or retained in New Mexico. This figure has been calculated directly from the records President Obama pledged would provide unprecedented transparency in accounting for how “every dime” of the stimulus would be spent.
The Obama Administration’s Stimulus Data
The Recovery Accountability and Transparency Board was created and funded with tens of millions of dollars to track spending of the President’s stimulus package. The Board reports on those expenditures in considerable detail at its website, recovery.gov. The White House, and President Obama himself, has touted the accuracy and comprehensive quality of its data in tracking the stimulus spending.
According to the government’s data for New Mexico, exactly $2,685,767,766 billion in stimulus funds have been awarded in New Mexico. This amount represents all the stimulus contract, grant, and loan funding awarded to recipients in the state. It does not include other sums called “Recovery Entitlements or Tax Benefits.” Only $89 million of the award amount was in loans. The Board does report whether the loans have been repaid.
The Board reports the number of jobs credited to the stimulus spending in New Mexico on a quarterly basis. The reporting began in February of 2009. According to the Board: “Prime recipients of Recovery awards are required to estimate and report the number of jobs funded by the Recovery Act. Recipients calculate jobs as follows: If three employees work on a Recovery-funded project for a total of 1,300 hours in a given quarter, and the recipient defines a full-time job as 520 hours (40 hours per week, for 13 weeks), the recipient would report 2.5 jobs (1,300/520 = 2.5).” This figure includes jobs created as well as jobs retained by stimulus funding, along with jobs that merely are subsidized with the stimulus funds.
How many jobs in New Mexico have been credited to the $2.686 billion in stimulus fund awards?
Here’s the tally by quarter of jobs created, retained and supported by stimulus funds. Since the first reporting period ran from February to September 2009, we count it as a combined two quarters:
Q1 & Q2: 5,205.2
So How Much Did It Cost Taxpayers To Fund These Stimulus Jobs?
Let’s go about it this way. We’ll calculate the average number of jobs per quarter credited to the stimulus. Then we’ll divide the total amount of New Mexico’s stimulus award by 12 (the number of quarters the stimulus has been running) to determine the average amount of stimulus award expenditures per quarter. Then we simply divide that sum by the average jobs per quarter to give us the average cost of each stimulus job per quarter. Multiply that by four and we have the average cost per stimulus job per year.
The average number of jobs per quarter in New Mexico credited to the stimulus is 3,791.3.
The average amount of stimulus award dollars for New Mexico per quarter was $223,831,980, not including interest.
The average cost per stimulus job per quarter comes to $59,033.57, not including interest.
The average cost per stimulus job per year comes to $236,143, not including interest.
Yes, that number is below the figure in the headline. Please keep reading.
Other Efforts to Calculate the Cost of the Jobs Credited to the Obama Stimulus
In a February 2010, article, a reporter for CNSNews.com took figures released by the Congressional Budget Office showing that the total cost of the Obama stimulus had increased from $787 billion to $821 billion. According to the CBO, at its peak effectiveness, the stimulus was accounting for 3.6 million jobs nationwide created or retained. The reporter then calculated that the average cost per job attributable to the stimulus was $228,055 each.
In July 2011, The Weekly Standard updated its efforts to calculate the cost per stimulus job using data released by President Obama’s Council of Economic Advisers in its Seventh Assessment of ARRA expenditures and impacts. It found that the stimulus had cost taxpayers an average of $278,000 per job.
The White House complained that The Weekly Standard report used only the lowest jobs figure in the range estimated by the Council of Economic Advisers. Jim Geraghty of National Review Online then took the White House’s preferred higher estimated jobs figure and found that the cost per job dropped to $185,000 each.
The estimated cost of the stimulus jobs has continued to climb with continued stimulus spending and each subsequent release of the assessment of ARRA by the White House Council of Economic Advisers. Further, the number of jobs being created has dropped as the stimulus spending winds down; but the running total of stimulus spending has continued to climb. In its December 2011 assessment of the stimulus, the White House Council of Economic Advisers reported that 2.2 million jobs had been created or saved by the stimulus. The Weekly Standardused the new figures to calculate that the cost of each job credited to the stimulus had now risen to $317,000 each.
The White House claims these sorts of calculations ignore the temporary aspect of the stimulus and the fact that the sums expended included the purchase of materials as well as the payment of salaries. The total employment numbers calculated by the White Council of Economic Advisers and the Congressional Budget Office, however, attempted to reflect the total employment impact of the stimulus, including sums expended for the purchase of materials. Other critics point out that the stimulus also included entitlement benefits, and argue those should not be included into the sums used to calculate the cost of the jobs created or retained by the stimulus.
New York Times columnist and economist Paul Krugman has also alleged that these sorts of calculations mislead. He claims that they take the total amount of spending over a number of years and divide it by the number of jobs reported in a single quarter or other period of time. He has argued that “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.”
Dr. Krguman made those arguments in 2009. He did not at that time, early in the life of the stimulus spending, attempt to calculate the cost per job from the Obama stimulus. Nor has he attempted since then to use the considerable data made available by the Recovery and Accountability Transparency Board to test his predictions. Krugman’s optimism that the benefits of the stimulus would produce such growth that tax receipts would substantially offset its cost has not been rewarded. Instead, the number of people who have given up looking for work has reached historically dismal levels, and the most favorable measure of unemployment has yet to drop below 8%, the level above which unemployment would not climb if the stimulus package were enacted, according to Dr. Christine Romer, who was Obama’s chief economic adviser in 2009. Including the people who have stopped looking for work, the unemployment rate since Obama took office has been 11.1%.
Others have made the case that the Obama stimulus actually destroyed jobs because it advanced the growth of government jobs at the cost of private sector jobs.
Though the Recovery and Accountability Transparency Board provides the raw data for such a calculation, it does not itself calculate the average cost per job created or saved by the stimulus. The Obama White House has never released any cost per job calculations of its own, as far as can be determined from the research conducted for this report.
The Not So Little Matter of Interest Owed on the Obama Stimulus
The calculations conducted in this report to determine the cost per stimulus job in New Mexico address Dr. Krugman’s concerns. The methodology avoids comparing total expenditures against moment-in-time employment figures by averaging out all the quarterly job reports and applying them against an average quarterly expenditure of stimulus funds. The starting point for the calculation in this story also does not include amounts paid out for entitlements. The $2.686 billion figure used as the starting point is solely for grants, contracts and a small amount for loans.
As careful readers will note, the average cost per job reported above, $236,134, falls below the figure in the headline of $335,310 per job. Why? The lower figure does not include the matter of interest owed on the funds spent to create each job, a calculation we will now perform.
Even though President Obama advertised his stimulus bill as costing (only) $787 million, according to the Congressional Budget Office, it has actually cost a principal amount of $825 billion. And the total cost of the stimulus over ten years is actually $1.2 trillion. That is because the federal government had to borrow the money for the stimulus and owes a staggering $347 billion in interest payments over the next decade. Looked at another way, the total cost of the stimulus is actually 42% higher than the base amount, and much higher than the $787 billion originally advertised by President Obama.
Critics of the cost per job calculations, such as Dr. Krugman, routinely fail to factor in the interest costs that must be paid on the funding for each job. That omission understates the true cost of each job attributed to the Obama stimulus by a very substantial 42%.
To calculate the complete cost per stimulus job in New Mexico, we must factor in the interest that is owed on the amount expended in New Mexico Applying the same ratio of interest to principal as the CBO found at the national level (42%) allows us to make that calculation. The result? The actual cost to taxpayers of each job in New Mexico credited to the Obama stimulus comes to $335,310.