Saving A Million Jobs at $787,000 Per Job

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The White House Council of Economic Advisers said Thursday the $787 billion stimulus plan kept one million people working who would otherwise not have had jobs.

You wouldn't let me stand up and make the simplistic claim that these million jobs were saved at a cost of $787,000 per job without challenging the details of my accounting, would you? Surely, reality is more complex.

But when the White House Council of Economic Advisers calculated the number of jobs saved by our government's massive stimulus spending, how is it that they entirely neglected to account for the impact on employment of removing $787 billion dollars from the balance sheet of the private economy?

What kind of single-entry bookkeeping is this? Who are these experts so willing to make glib claims with a straight face? How is it that the press, politicians, and pundits credulously report these claims as facts? And why are those who question whether the emperor is wearing any clothes treated like obstructionist members of some lunatic fringe?

There are those who passionately promote the theory that the government can, on net, create jobs by taking money from one set of citizens and handing it to another. Does this make sense to you? Are these promoters easily fooled, willfully blind, or cunningly smart? Let's take a look under the covers and examine the source of this week's claim.

The White House Council of Economic Advisers is lead by three presidential appointees. Currently, these are Christina Romer, Austan Goolsbee, and Cecilia Rouse.

According to their biographies on the Council web site, these people have never held jobs outside of academia. Their positions at Princeton, Berkeley, and the University of Chicago were protected by lifetime tenure. Unemployment, to them, is a theory that cannot become a personal reality. What in their backgrounds makes them experts on the subject of job creation?

They never had to meet a payroll. They never had to raise money to fund their businesses from skeptical investors. They never bet their life savings on their own business judgment. They never had to scramble to pay off a banker who called in a loan. They never had to decide whether to take a calculated risk to expand their workforce hoping to take market share from a fierce competitor. They never had to make a judgment call on whether or not to launch an unproven new product. They never had to manage a reduction in force, explaining to employees that their jobs have been eliminated because the tax and regulatory burdens imposed by some new law forced them to cut costs. They never lost business to a government-subsidized competitor whose cost of capital was vastly lower than theirs. They never had to grease the palms of politicians offering constituent services to resolve a bureaucratic hangup caused by the labyrinthine government approvals these selfsame politicians inflict on many businesses. They never had to deal with a missed sales forecast caused by an economy so roiled by capricious and uncertain fiscal policy that frightened customers were holding back orders. They never had to deal with a key supplier that unexpectedly went bankrupt because their source of credit dried up as dollars got sucked out of the commercial economy into government debt. They never had to negotiate with angry landlords after being forced to shut down a business destroyed by spurious mass-manufactured class action lawsuits. They never had to stand up in front of disappointed investors to explain why they lost money that had been entrusted to them. And you can be sure that none of them ever fell on their face and had to pick themselves up, dust themselves off, and decide whether it was worth going through all of the joys described above to take another shot at building a business from scratch.

Go read their biographies. Do Christina, Austan, and Cecilia appear to you to be contributing members of the productive economy? Do you see any evidence that they've spent even a fraction of their careers creating jobs? What do you think qualifies these people to work as high level apparatchiks of a governing class determined to manage the businesses of others?

All three have Ph.D.'s from fancy universities. They are prize winning experts in macroeconomics. To have come this far you can bet that they are ambitious, articulate, well connected, and brilliant. Yet when the Council of Economic Advisers did its calculations to determine the number of jobs saved by the stimulus, they shamelessly counted assets and totally ignored liabilities.

People this smart cannot be easily fooled. People so visibly in the public eye cannot remain willfully blind.

No, these people and those that appointed them are cunningly smart. It's we who are the fools for listening to them. Long after these experts return to their sinecures in academia to train another generation of economists on the wisdom of central planning and Keynesian pump priming, it's we and our children and our grandchildren who will be paying the price.

Bill Frezza is a fellow at the Competitive Enterprise Institute, and a Boston-based venture capitalist. You can find all of his columns, TV, and radio interviews here.  If you would like to have his weekly columns delivered to you by e-mail, click here or follow him on Twitter @BillFrezza.

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