White House economic adviser Jared Bernstein was on the defensive Monday about the Obama administration’s claims to have “created or saved” 150,000 jobs so far with the $787 billion stimulus bill.
President Obama also said Monday that the stimulus spending will save or create 600,000 jobs over the next 100 days. Reporters peppered Bernstein and White House press secretary Robert Gibbs today about how they can say this with any certainty. Here’s what Bernstein said:
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“I want to be very clear about this — this is a absolute tried and true economic methodology. In fact, there’s simply no other way to make this kind of estimate. You have to have an estimate of what would have occurred in the absence of your stimulus plan in order to come up with the jobs that you’ve created or saved. Every macro model, whether it’s Federal Reserve or private forecasters, engages in these kinds of exercises.”
So what is this “tried and true” methodology? The White House explained it in some detail in May, in a report released by the Council of Economic Advisers. Here’s the report.
Basically, the report states that the stimulus is supporting three types of spending: government spending, tax cuts and state fiscal relief.
Each of these categories produces different quantities of what is called a “job-year,” or “one job for one year.”
Government spending requires $92,136 to produce one job-year, tax cuts require $145,351 for one job-year, and state fiscal relief needs $116,603 for one job-year, the report says.
Then there’s the type of job created. Direct benefits come from government spending on a project to or hire or retain workers, indirect benefits come from those who support those projects, and then there’s induced benefits, which happens when a tax cut puts more cash in a consumer’s pocket and when they and others spend that cash it gives business owners the money they need to hire or retain workers.
But the bottom line is that these are all projections, and former Bush administration official Tony Fratto took the White House to task Monday for using these projections as virtual promises of what is going to happen, or what has happened.
“The Obama Administration is continuing to fabricate job creation projections related to the stimulus,” Fratto said in an e-mail sent to reporters. “The Bureau of Labor Statistics — the only government agency counting jobs — cannot tell you how many Americans are working today. They cannot tell you how many Americans were working a month ago. And they cannot even tell you how many Americans — within 50,000 — who were at work when the stimulus was passed by Congress.”
“Without that information there is no credible estimate for jobs ‘created or saved’ — either today or looking forward — worthy of newsprint, broadcast, or electronic posting. Period,” said Fratto, a former deputy press secretary with years of experience at the Treasury Department prior to the White House.
One thing that’s important to note is that the White House will be able to get real, after the fact, hard results only on about one third of the stimulus spending. About $271 billion of the $787 billion in the stimulus is direct government spending. The rest is a mix of “tax cuts, state fiscal relief, and transfer payments to people directly hurt by the recession.”
The jobs created by direct spending will be reported back to the government by employers.
But “there is no mechanism available for collecting data on actual job creation” from the other two thirds of the bill.
— Jon Ward, White House reporter, The Washington Times
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