White House Inflates Stimulus Job Creation With Accounting Gimmicks
The Obama administration is changing the way it counts jobs created or saved by stimulus spending in a way that will make the programs look far more successful.
Under the old rules, only jobs that were actually newly created or not lost because of stimulus money were counted. Now the administration plans to count all jobs for projects funded by stimulus money—even if that job already existed and the person was never in danger of losing the job.
…California, for instance, claimed that stimulus spending had saved 18,000 corrections department jobs—when only 5,000 were scheduled to be cut. Under the new system, all of those jobs could be counted as products of the stimulus.
Similarly, pay raises can count as stimulus jobs. Chrysler reported last year that a $53 million government contract to build 3,000 vehicles created no jobs because it used existing workers to fill the order. Under the new accounting, those jobs would count as being created by the stimulus plan.
…Some economists think the entire process of trying to count jobs saved or created by stimulus spending is ridiculous since we lack the proper methodological controls.
“I just think it’s a silly exercise” counting jobs, Harvard labor economist Lawrence Katz tells ProPublica. The numbers are inherently inaccurate, he said, because we’ll never know how many jobs would have been created or lost without the stimulus. To do so, we’d need a control group, say giving stimulus money to North Carolina but withholding it from South Carolina.
“Obviously, that’s not something we can do,” Katz said. “We’ve only got one draw of history.”
The new methodology, however, will do more than just make the stimulus program look like it is creating more jobs than it actually is. It will also conceal an important cost of the stimulus—the economic distortion that comes from diverting labor away from projects favored by the market toward projects favored by the government. In the past, the government didn’t get credit for drawing jobs away from market based projects—limiting its incentives to do so. Now that it gets credit for those jobs, the distortive effects are likely to become greater.
The Business Insider, January 11, 2010