No Runny Eggs

The repository of one hard-boiled egg from the south suburbs of Milwaukee, Wisconsin (and the occassional guest-blogger). The ramblings within may or may not offend, shock and awe you, but they are what I (or my guest-bloggers) think.

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Porkulus destroyed/forestalled a net 599,000 jobs

by @ 12:10 on May 16, 2011. Filed under Economy Held Hostage.

(H/T – Greg Mankiw via PowerLine and Speaker John Boehner)

Ohio State released a report on the effects of Porkulus by a pair of economists, Timothy Conley and Bill Dupor, on job creation and destruction. They estimated that, through September 2010, while roughly 450,000 state and local government jobs were “saved/created” by Porkulus, roughly 1,000,000 private-sector jobs were “destroyed/forestalled” by it:

Our benchmark results suggest that the ARRA created/saved approximately 450 thousand state and local government jobs and destroyed/forestalled roughly one million private sector jobs. State and local government jobs were saved because ARRA funds were largely used to offset state revenue shortfalls and Medicaid increases rather than boost private sector employment. The majority of destroyed/forestalled jobs were in growth industries including health, education, professional and business services. This suggests the possibility that, in absence of the ARRA, many government workers (on average relatively well-educated) would have found private-sector employment had their jobs not been saved.

They divided the jobs market into 4 broad categories: state/local government, “HELP” services (private health and education, leisure and hospitality and business and professional service), goods-producing employment and “non-HELP” services (the last includes federal employees). They also found that the majority of Porkulus aid given to states and local governments was “fungible”, defined as replacing other state/local revenues.

Under the “fungibility-imposed” scenario, state and local governments increased their payrolls by 443,000 relative to what would have been expected without Porkulus, and those entities in the “non-HELP” services raised their payrolls by 92,000 (unfortunately, there is no split between the federal government employment versus private-sector employment in this category), while the entities in the goods-producing sector decreased their payrolls by 362,000 and those in the “HELP” services sector decreased their payrolls by 772,000.

If “fungibility” is not imposed, those numbers get worse. Under that scenario, only state and local governments increased their payrolls, by 473,000. Meanwhile, “Non-HELP” services payrolls dropped by 443,000, goods-producing payrolls dropped by 832,000, and “HELP” services payrolls dropped by 882,000.

This actually surprised the economists. Quoting from the conclusions portion:

Much work on the effects of the ARRA remains to be done. We found, surprisingly, either negligible or negative effects of the Act on total employment; thus, it is important to explore whether alternative empirical specifcations, besides the historical ‘Keynesian multiplier’ approach of Section 5 used by other researchers, are capable of finding a signicant positive jobs effect.

My money is against that.

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