(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.
This is one of the most damning studies of the stimulus I’ve seen yet. It’s also timely, considering the national debt debate going on.
[…] that’s the most damning study of the stimulus, aka Porkulus, that I’ve seen to date. As Steve Egg at No Runny Eggs pointed out, even the two economists seemed to be taken aback by their findings. The report, titled […]
“…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.”
Imagine that. The goods-producing sector decreasing payrolls during the worst collapse in AD in almost a century. And no one refutes that ARRA helped to shore up state and local government budget shortfalls. Nothing in this paper is really fresh except for the rather odd, “crowding out” argument they put forward.
“This actually surprised the economists.”
Somehow I don’t think these conclusions surprised economists who openly refute Keynesian multiplier theory.
It’s been a while since you showed up. I see you missed the part of the paper that said that the government jobs “saved/created” and the private-sector jobs “destroyed/forestalled” was against what would have happened had Porkulus never came into being, not against the economic collapse.
As for the state/local government shortfalls, all that happened was, at the cost of 600,000 jobs (or more properly, closer to 1,000,000 jobs), Obama and company rolled into the federal debt 2 years of state/local deficit spending. To put it another way, instead of states and local governments cutting an aggregate $247 billion of spending, we put that, and a lot more not covered by the report, on the federal charge card.
The reason why the actual number of net jobs destroyed/forestalled by Porkulus is closer to 1,000,000 than 600,000 is because in many states, including Wisconsin, the bulk of the money was not used to replace other revenue streams, but supplement them.
I didn’t miss anything Steve. It just doesn’t make any sense. This is the run-of-the-mill “crowding out” argument that defies basic econ. One could make the argument (a weak one at that) that ARRA did little or nothing to sustain aggregate employment over the last two years. But the idea that ARRA stimulus money worked to crowd out private sector employment at a time when 8 million plus workers are out of a job and a quarter of the nation’s capacity sitting idle defies logic (and math). As I said before, this crowding out argument has been around since the beginning of the crisis and doesn’t have a shred of evidence to support it.
“The reason why the actual number of net jobs destroyed/forestalled by Porkulus is closer to 1,000,000 than 600,000 is because in many states, including Wisconsin, the bulk of the money was not used to replace other revenue streams, but supplement them.”
This makes no sense either. What you’re saying is that ARRA funds were used by “some” states to supplement other revenue streams which REDUCED growth and, therefor, aggregate employment. Your making the same argument Dupor and Conely that 1+1= -2.
It’s pretty clear that Dupor and Conely’s paper was written with a pre-determined conclusion in mind. Maybe you see it, maybe you don’t.