Sizing Up The Stimulus: Where Are The Jobs?

In a report titled "Recovery Act Transparency, Learning From States' Experience," in a study for Harvard University's Kennedy School of Government, Francisca Rojas pointed to the lack of "consensus around job creation numbers."

"Even though capturing the number, duration and quality of jobs was a critical objective of the Recovery Act, the transparency effort did not incorporate measures of job creation that allowed a consensus evaluation of projects on the job creation question," wrote Rojas in the 64-page report. "In retrospect a better way to track ongoing employment impacts of the Recovery Act would have been to locate job creation estimates within an institution that could be judged a fair arbiter of making ongoing estimates (e.g. the Congressional Budget Office or the Federal Reserve Board) based on more sophisticated macroeconomic models.

"Although Recovery Act projects generated jobs, the underlying process was much more complicated, and expenditures worked through indirect as well as direct employment effects. Even though employment outcomes were critical to gauging the ongoing impacts of the Recovery Act, doing so through the disclosure system was almost doomed to fail because of the complexity of measuring these effects. Concerns that the administration had incentives to game such numbers led to a methodology that provided an extremely conservative measure of impact, and one with little public salience since it precluded aggregating cumulative effects over time."

In a Frequently Asked Questions posting titled "Why can't I find the total number of jobs funded under the Recovery Act?" the answer was: "ecipients only report job numbers by quarter. To total the quarters would be misleading and inaccurate because some of the jobs span quarters, so they would be counted more than once. And, some recipients only report the job in the first quarter but mistakenly believe that they don't have to report the same job in subsequent quarters."

None of the top five companies named in the CRN investigation would talk about how many jobs were created from the funds they received as a result of ARRA. The CRN investigation also found that administration supporters pressing for an aggressive clean energy agenda including high-profile venture capitalists such as John Doerr, a partner at Kleiner Perkins Caufield & Byers, and Steve Westly, managing partner of The Westly Group venture capital firm, benefited from the legislation.

"If you are asking the question, 'Do you want to do stimulus?,' then why are you doing clean energy funds to begin with?" asked Holtz-Eakin, now president of the American Action Forum, a Washington, D.C., policy institute. "Or why do we have rural broadband programs which have nothing to do with stimulus? This was all about the domestic policy agenda and constituents they [the Obama administration] care about. Let's face it. That's how it works. It was a bad bill. It was a bad bill at the time it was passed. We knew it and as it has played out over time, we have, I think, been increasingly given evidence of that."

Added Holtz-Eakin: "If you have to pick between a dollar you are going to put out in a clean energy fund or a dollar of tax cuts to the American household, we know that the latter allows American households to determine where their money is spent and for what priorities. We know that the former puts the politics in charge. And I will always pick the American household over politics."

Since politicians are "not spending their own money, we know we are less likely to get reasonable or good sensible decisions about how to spend the money," agreed de Rugy, pointing to the Obama administration's green energy investments. "You pick the industry you are biased toward," she said. "In this case the government tends to believe that green energy is the way to go. So they invest a massive amount of money behind green energy regardless of whether it is a good idea or not."

Perhaps the most important lesson learned from ARRA is that "politicians make promises about what [government] spending is going to achieve and these promises are rarely fulfilled," said de Rugy. "When you use stimulus to jump-start the economy it is exactly the same as if you were trying to fix your broken arm with morphine. It may feel good when you get the morphine injection, but it doesn't fix your arm. I am sure the people who received the stimulus money, whether they deserved it or not, liked it. But it doesn't mean that it fixed the economy."