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The Status of the Stimulus Plan

I was supposed to be a guest on the Today Show earlier this week to speak about job-hunting, specifically the effects on jobs of the stimulus package—the American Recovery and Reinvestment Act of 2009. But I had to bow out because I came down with a wretched cold. My family followed me as I went through all the Kübler-Ross stages of denial, anger, and so forth, until I had to accept the fact that I was not well enough to appear.

So I’m using today’s blog to take stock of the current state of the stimulus package. (How’s that for a lot of luscious alliteration?) When I wrote a book about the plans for the stimulus, Great Jobs in the President’s Stimulus Plan, I did not have access to many details about the legislation. And now, even though the law has been in effect for several months, economists have few tools for gauging its effects.

This lack of useful data has given rise to a lot of sniping from politicians and pundits who oppose the stimulus. Here is a fairly mild example, from an Associated Press story that ran in mid-May: "Models that predict the number of U.S. jobs with and without the stimulus still conclude that the bill will create or save 3.5 million by the end of 2010, the report says. Economists who study job creation say the administration will need some creative math to reach that goal. That's because Obama has lumped 'jobs saved' with 'jobs created.' Even economists for organizations that stand to benefit from the stimulus concede it probably is impossible to estimate saved jobs because that would require calculating a hypothetical: how many people would have lost their jobs without the stimulus."

The writer seems to resent the lumping-together of jobs saved with jobs created, but it would be very difficult to untangle these two phenomena. If stimulus money is available to pay for road resurfacing and a contracting company gets the work, the employer may either take on new workers or avoid planned layoffs. The former is easy enough to measure, but the latter, being the absence of an event, is harder to detect. The saving of jobs may have an effect on unemployment figures, but keep in mind that these figures are based on the number of people seeking work, so they are notoriously subject to upward or downward swings based on the optimism or despair of out-of-work people.

What’s really odd is that the most partisan commentators talk as if the lack of a good metric somehow proves the futility of the stimulus plan. I have to wonder what course of action they would prefer as an alternative. The most logical way to fashion a stimulus that consists entirely of new jobs would be to create a lot of government jobs, such as the Civilian Conservation Corps did in the 1930s, but that would be anathema to conservatives. Ironically, the saving of jobs comes about because the Obama stimulus plan injects funds primarily into the private sector.

I also should point out that the saving of a job is, in some ways, better than the creation of a new job. A saved job avoids severance payments and unemployment benefits, which drain corporate budgets and state coffers. The money from these payments to laid-off workers is also less likely to circulate rapidly through the economy; from my own experience of a downsizing, I can assure you that people spend this money much more cautiously than money from a paycheck. Preservation of a job also avoids psychological costs, which are profound even if they are harder to measure than monetary costs.

Perhaps the main drawback of preserving a job rather than creating a new one is that a new job is more likely to involve up-to-date technologies and skills that will move our economy toward greater competitiveness. However, in this regard it’s worth remembering that many initiatives funded by the stimulus package, from alternative energy to smart grids to biomedical research, are aimed precisely at these new technologies and skills.

In conclusion, it’s difficult to measure the impact of the stimulus plan, but that’s true for some other government expenditures. Consider our huge expenditures on national defense and homeland security. Although we can point to some events that indicate the efficacy of these expenditures, such as a successful military campaign or the thwarting of a known terrorist plot, most of the accomplishments of these two cabinet-level departments consist of nonevents—attacks that never happened and that we will never know were a possibility. I wonder when conservative pundits will start demanding metrics for these expenditures.