Tuesday, November 3, 2009

Is Government Stimulus Spending For Jobs Wasteful?

There has been some concern over whether the government spending for jobs is justified by the results. To date the government has spent $150 billion dollars, while reporting 650,000 jobs that were created or saved, which roughly equates to a cost of about $230,000 per job. Glen Hill from The Street discusses this in the following post.

Jobs are being created, or at least saved, thanks to President Obama's stimulus spending, and the administration seems pleased to take credit for 650,000 state and local positions after burning through $150 billion.

That's it? That's the best we can get for $150 billion? I'm starting to understand the stimulus naysayers because when you do the math, it's costing an average of more than $230,000 to save a job with this program.

I seriously doubt we're creating six-figure income jobs. Granted, the investment is intended to create long-term employment opportunities, so the cost per job should diminish over time if the companies keep all the stimulus-related positions.

There should also be a compounding impact as companies in the supply chain boost employment to keep up with potential growth by the recipients of government grants.

At least that's the hope. For now, all we know is that the government is spending more than four times the median household income of $52,029 to create or save jobs.

The Obama camp is quick to point out that this initial job assessment covers only a small part of the $787 billion in planned spending. The White House puts the stimulus-job tally at 1 million when other spending is factored in and says it expects to see 3.5 million jobs credited to the stimulus package when all is said and done, according to a report on CNN.

Looking at the data available so far, the number of positions created or saved directly by federal contracts is only about 30,000 to date, according to the official government stimulus Web site, Recovery.gov.

So the rest of the stimulus jobs must be coming from the trickle down impact of spending at the state and local level.

More details on stimulus jobs are expected to be released this afternoon.

So far, it's a pretty lame PR effort by the Obama camp. If they are going to defend this spending program against increasing attacks by Republicans who think the money is being wasted, then they'll need to find some better examples of success.

Sifting through the reams of individual reports on the stimulus tracking Web site, you'll find some big amounts going to individual companies in various states that didn't help with employment at all.

According to the fancy map on the Recovery.gov Web site, $165.9 million went to Lockheed Martin(LMT Quote) in Colorado that didn't save or create any jobs, $57.6 million went to Northrop Grumman (NOC Quote)in California that didn't create or save any jobs and $373.6 million went to Sanofi-Aventis (SNY Quote)in Pennsylvania that didn't save or create any jobs.

That said, there are many smaller awards such as $70,808 that went to the Housing Authority in the city of Robert Lee, Texas and is credited with 5 jobs.

I'm hoping that the data on the government Web site is simply incomplete because my unscientific review produced very disappointing results.

Maybe the White House needs to create a few jobs itself to get a better tracking system.

This post has been republished from The Street, an investment news and analysis site.
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