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Cost of a Job

What is the cost of a job?  Priceless… if you’re without one.

The American Recovery and Reinvestment Act of 2009 (a.k.a., the Recovery Act or the Stimulus), was enacted in February 2009 to create jobs and stimulate business investment in the recession which became severely pronounced at the end of 2008.  The original cost estimate was $787 billion. The most recent estimate is a $862 billion price tag.

President Obama and the supporters of the Stimulus argued that unemployment would exceed 9% without the Stimulus, but it would never be higher than 8% if the Stimulus was enacted.  Sadly, the unemployment rate reached 8.2% in February 2009, the month the Stimulus was passed, and exceeded 9% in May 2009. The rate has remained above 9% for over two years, except during February and March of 2011.

The Stimulus proponents have maintained that it was beneficial, and things would have been much worse without the Recovery Act.  This may be true, but it’s a difficult argument to make.

On July 1, 2011, the President’s Council of Economic Advisors released the most recent report on the progress and effect of the Recovery Act.  The report touted the Recovery Act’s success in creating or saving 3.6 million jobs.  Even if you accept the inclusion of a “saved job”, which is a controversial claim itself, the average cost per job is currently estimated to be $278,000.

The opponents of the Stimulus seized on this number to further criticize the Stimulus.  In their mind, the cost per job is highly excessive and is further proof of the government’s inability to spend money efficiently and effectively.  The White House argues the calculation was skewed, and the Recovery Act was intended to do much more than create jobs.

Despite all of the rhetoric coming from all sides of the political spectrum, the long-term benefits of the Recovery Act remain questionable.  One long-term effect is easily quantifiable – the additional debt incurred to fund the Recovery Act.  Since the government didn’t have $862 billion of extra cash on hand, we had to borrow it.  Thus, every American is responsible for an additional $3,800 of debt as a result of the Stimulus.

The effectiveness of the Stimulus may be debated a long time to come.  Whether we are better off or not, no one will ever truly know.  However, one thing is probably clear.  We’re not likely to see another $800 billion Stimulus Bill anytime soon.  With a $14 trillion debt, which is growing by over $3 billion per day, we simply can’t afford it.

If your job was created or saved as a result of the Stimulus, you probably think it was money well spent, although I doubt you actually got $278,000.  If you did, let us know how you achieved it.  Then again… maybe you better keep it to yourself.

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