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In a post today Ian looked at the Senate stimulus compromise plan and how it is relatively less effective in job creation. I thought this might be a good starting place to spin out half a dozen scenarios to try to quantify what some of the options are. With regard to the Obama scenarios, I first split the difference between the $780 billion plan [claimed by Senate Gang of Four, but before Senate tax cut add ons] and the $819 billion version [House]. I start then with a figure of $800 billion. Since this is a 2 year cost, for the purposes of the first two scenarios, I cut it in half and use a figure of $400 billion a year.
As for the size of the stimulus, it is important to remember that conditions are rapidly worsening. State governments are likely to be facing shortfalls of $350 billion this year, and this number though large doesn’t touch the budget problems that cities are having. Next add in needed spending for K-12 education, universities, infrastructure, research, and alternate energy and it is easy to see how the size of an effective stimulus could expand into the $600 to $700 billion a year range.
In the following scenarios, I look at first the most likely Obama stimulus package and then a far less likely best case one. I then look at $600 billion and $700 billion stimulus packages under two different splits between spending and tax cuts. All of these numbers should be taken with a grain of salt. My purpose is not to engrave anything in stone but only to add a few more parameters to the discussion. One final fact in assessing these plans: the economy has already lost at least 3.6 million jobs since the recession began in December 2007.
1) The Obama stimulus
Spending 58% of $400 billion = $232 billion
Tax cuts 42% $400 billion = $168 billion
Stimulus effect Spending = $232 billion x 1.4 = $324.8 billion
Stimulus effect Tax cuts = $168 billion x .4 = $67.2 billion
Overall stimulus effect = $394 billion
Assumption: $140,000 of stimulative effect per job
Overall stimulus effect on jobs = $394 billion/140,000 = 2.81 million jobs
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2) The Obama stimulus Best Case
Assume tax cuts have a much higher stimulative effect of 1 rather than .4
Best case Stimulus effect Tax cuts = $168 billion x 1 = $168 billion
Best case Overall stimulus effect = $168 billion + $324.8 billion = $492.8 billion
Best case scenario on jobs = $492.8 billion/140,000 = 3.52 million jobs
Notes: This best case tax cut scenario is unlikely. The $160 billion Bush tax rebate had an estimated stimulative value of .3 or $48 billion. Many people saved or paid down debt with it. Conditions have worsened considerably since then and so even more people may use tax cuts this way, lessening their stimulative effects. This scenario brings us back only to near pre-recession levels and remember even at that point Bush’s job creation numbers were very poor.
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3) Alternate stimulus 1A
A $600 billion a year stimulus with a 90/10 split
Spending 90% of $600 billion = $540 billion
Tax cuts 10% of $600 billion = $60 billion
Stimulus effect Spending = $540 billion x 1.4 = $756 billion
Stimulus effect Tax cuts = $60 billion x .4 = $24 billion
Overall stimulus effect = $780 billion
Overall stimulus effect of $780 billion on jobs = 5.57 million jobs
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4) Alternate stimulus 1B
A $600 billion a year stimulus with an 80/20 split
Spending 80% of $600 billion = $480 billion
Tax cuts 20% of $600 billion = $120 billion
Stimulus effect Spending = $480 billion x 1.4 = $672 billion
Stimulus effect Tax cuts = $120 billion x .4 = $48 billion
Overall stimulus effect = $712 billion
Overall stimulus effect of $712 billion = 5.09 million jobs
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5) Alternate stimulus 2A
A $700 billion a year stimulus with a 90/10 split
Spending 90% of $700 billion = $630 billion
Tax cuts 10% of $700 billion = $70 billion
Stimulus effect Spending = $630 billion x 1.4 = $882 billion
Stimulus effect Tax cuts = $70 billion x .4 = $28 billion
Overall stimulus effect = $910 billion
Overall stimulus effect of $910 billion on jobs = 6.5 million jobs
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6) Alternate stimulus 2B
A $700 billion a year stimulus with an 80/20 split
Spending 80% of $700 billion = $560 billion
Tax cuts 20% of $700 billion = $140 billion
Stimulus effect Spending = $560 billion x 1.4 = $784 billion
Stimulus effect Tax cuts = $140 billion x .4 = $56 billion
Overall stimulus effect = $840 billion
Overall stimulus effect of $840 billion on jobs = 6 million jobs
77 Comments
hugh, thanx for this page which I’ll save as a favorite and use for referance
could you do me a favor?
this morning you showed the relative dollar comparison of this stimulus package versus fdr’s
we then multiplied by the amoung of people now and then to come up with about a 5 trillion dollar stimulus using fdr dollars today
could you post that breakdown on this thread?
thanx in advance
I think you should also point out on this thread that when the economy was not struggling the bush administration passed his “stimulous plan” which was a 1.7 trillion dollar “stimulous” comprised of nothing but tax cuts
I think it’s important to get that info on this page as well
hugh,
Do you have a link to the full language of the Senate bill? I have not been able to get it and would like to look to see if the language of the bill includes the formation of a National Infrastructure Bank.
It took me a bit to run down the comments. They appear in this thread:
http://firedoglake.com/2009/02…..e-economy/
I also had to run down more of the history. The original comment was about a $3.3 billion program which employed 2 million heads of household. This was the US Public Works Administration, part of the National Industrial Recovery Act which became law in June 1933. It was overturned by the Supreme Court in May 1935 in Schechter Poultry v. US.
So calculating the value of $3.3 billion in 1933 dollars:
http://www.measuringworth.com/uscompare/
According to the following indices:
Consumer Price Index: $54.8 billion
GDP Deflator: $45.5 billion
Relative to 1933 GDP: $835.6 billion
The US population in 1933 was 125.6 million.
http://www.infoplease.com/year/1933.html
The current US population is around 304 million.
So the population now is about 2.7 times what it was then.
Multiplying the above figures by 2.7 we get
CPI $148 billion
GDP Deflator $122.85 billion
Relative to 1935 GDP: 2.256 trillion This is the number I think you were looking for.
Note: In the original thread, I began with 1932 dollars (because I wasn’t sure when the NIRA was enacted) and this last came out to $2.165 trillion (I mistyped $2.65 trillion in the earlier thread) as a comparable fraction of 2008 GDP.
I haven’t seen a copy of the Senate version. We may not see one until after it is voted on.
time to repost this classic from jan 18, 2006 (my bolds):
Pelosi: ‘We Will Create the Most Open and Honest Government in History’
i’m sure there will be plenty of time for everyone to read the bill before it’s voted on. /s
thanx for revisiting those figures hugh, something the democrats need to do too
Good work Hugh.
Any suggestions on how to find out if the National Infrastructure Bank got slipped into the language?
Great work, Hugh, including the comparison with New Deal.
In the post’s first paragraph, you list the Senate plan as $819 and the House at $780. I think you mean the House bill was $819 and the Gang of Four claimed their Senate compromise was $780. Is that right. (Also, that doesn’t deal with the extra tax credits the senate had piled on for house/car purchases and AMT fix.) Of course, since you’re taking the average, this switch doesn’t matter and the rest of the analysis doesn’t depend on fixing that. But if you want us to switch the first numbers on Senate vs House, we can.
Yes, please. I’m about accuracy not ego.
There is an excellent op-ed in the Washington Post this morning that could use some more comments.
You Can Cap The Pay, But The Greed Will Go On
It’s time, past time for the real Dems to step up to the plate for the American people and the Peoples Party…the Democratic Party. If the Dems don’t get off the dime and put Progressive politics to work in America then what the hell are they good for? What? This also includes appointments by the President that are Progressive thinkers and doers. Without Progressive appointments there can be no difference between the Republican fascists and the Democrats. We are getting more of Bush government and not the needed change we were promised. We are waiting..
I am hoping someone can come up with the figure over the last 8 years, bush sr years and reagan years of this;
well paying jobs converted to poverty or near povert jobs
subtract those jobs from their job performance totals and that will give us an incredible tool to use when discussion “liberal” vs “concervative” economic strategy
if we can aslo find the figure of “liberal” strategy demonstrating poverty jobs converted to well paying jobs the two figures will be the most powerfull numbers we can come up with
As someone wrote elseblog, the Senate bill is basically the Limbaugh op-ed bill, written on the sly by wingnuts and bullshit centrists. That’s embarrassing.
Great post, Hugh. Thanks. Now we have to get these motherfucker’s attention in Congress.
Here’s a comprehensive list of everything that got cut out of the Senate’s stimulus plan. It’s pretty eye-popping.
I sort of pointed out that since December 2007 when the recession began we’ve lost 3.6 million jobs. I also pointed out that Bush job creation even before that was abysmal. Minimum there was a shortfall in jobs during the Bush years of 6 million, and more likely twice that. So we are way down in jobs.
But even looking at the last year on its own. We lost 3.6 million jobs. We needed to create at least 1.2 million during that time. So right now we are down 4.8 million jobs. In 2009 when the stimulus package begins we will need another 1.2 million jobs, or 6 million jobs total. Again this is take care of just the excess of this year and last year, (and not the previous 7). This is why the $700 billion stimulus packages (the last two scenarios) are closest to what we really need. It also shows why the current stimulus plans (the first two scenarios) are woefully inadequate.
Hugh, This is some of your best work. I always appreciate when
posters put in some green eyeshade time and produce pencil dust
in order to give us data that really informs the debate.
I’m thinking the recession started long before that, about 5 years me thinks
I’ll take option A how does this compare to what FDR did when adjusted for population?
Whats the ratio of total people employed now vs the Best year Clinton had?
Thats just to get back to where we were under Bush you are setting the bar to low we will lose in November with that because the population is growing.
About seeing the bill? So much for transparency.
This is wonderful analysis Hugh. It breaks down complex figures into understandable form. I will bookmark for future reference as well. Thanks
Yeah it should be on the Net so along with Hugh’s numbers so Everyone can look and see just what kind of bang for the buck we get with Stimulus vs tax cuts.
THis Comment needs to be repeated on every blog until the Damm Dems start using these facts!
Yes, I’m setting the bar low. I was looking at the absolute minimums. Even when we clear the backlog of unemployment and underemployment, we still are looking at something like 1.8 million new jobs a year or some 14.4 million over the 8 years of a two term President.
So again I set the bar low because I wanted to show that even bending over backwards the current stimulus plans still fall way short of what is needed.
Something that jumped out at me in the preface to your analysis was the state budget shortfalls:
that’s an average of $7B per state which meets a quick smell test as CA is facing about a $20B shortfall and I’d expect CA to lead other states due to its broken budget system. My immediate thought on reading this was could Obama be thinking about a separate $200B+ aid to state government package done as a separate bill? Which gets close to scenario 1B or 2B territory as states won’t be doing tax relief with that money, they would be paying state workers with it. The tax portion ($168B) of the combined stimulus ($400B + $200B+) would go down to 28%.
Dugg and added your 3 as a comment on Digg:)
From the dark side, a glibertarian view.
Here’s a site listing the projects for different states: stimulus watch.
Next Diary set the Bar high! and compare it to a 90% tax cut 10% stimulus like I’m sure the GOP wants.
Also if I miss the post how can I look back at your old diaries or anyone’s old Diaries?
That is my hope that and more spending cuts like ending all our wars.
There you go again. Arithmetic instead of politics. When will you learn that “feel good and subsidize the rich” is more effective politics than “do right and make the rich pay their own way”? The Beltway is built on such nonsense.
Hugh has just given Obama a way to say, “Yes We Can” to millions of voters who will shortly be keening down the necks of forty-nine state governors (Lobbyist Lord Haley Barbour in MS doesn’t count) and every other politician who makes a living outside the Beltway. Something tells me that’s a dynamic community organizer Obama can do something with. Will he?
Note to Rahm: If Obama wants a second term and you want to be Speaker, Senator and President, I suggest you help Mr. Obama find a way to say, “Yes, I have.”
Click on his “author” link – the name at the top of the post.
Tech Note: On the main page the link is broken – the “diary” subdirectory doesn’t appear in the URL.
CNN doesn’t understand — there by definition are no libertarian ideas to stimulate the economy, the economy stimulates itself.
Whats the Stimulus effect of National Healthcare?
Thank You
klynn, this is confusing. Thomas.gov isn’t friendly to links to searches. For those looking at trying to link, here is the explanation:
Let’s try this out on what I think is the current Senate version: American Recovery and Reinvestment Act of 2009 (Amendment in Senate)[H.R.1.AS]
http://hdl.loc.gov/loc.uscongr……110hr1.as
Now how do I see Diaries from Non Front Pagers?
One more small correction – In 5) Alternate stimulus 2A,
10% of $600B should be $60B, not $70B
Making the Tax Cut Stimulus effect $24B rather than $28B
Overall Stimulus effect of $906B
for 6.47 Million jobs
Right?
Work is also slowing in the oilfields. Rigs are being stacked out when a hole is completed, as opposed to being transported and rigged-up on a new location. Natural gas compression is slowing for new sites as well.
This is purely anecdotal from personal observances.
Do I hve to wait until they post another Diary to find an author link?
I read to the point where the asshole glibertarian said to stop spending money on New Orleans. Hate it when facts are NEVER involved in the free floating bullshit that leaks out of a glibertarian’s ears.
Another thing that jumped out at me today – the stimulus is a 2 year deal.
Blue Dogs (fiscal conservatives) talk about it as though the entire amount gets added to the debt immediately. Scary talk about a “$1T deficit” is blamed on the stimulus… whereas the $1T deficit is mostly inherited deficit from W ($140B or so of which is Iraq/Afghanistan cost IIRC).
That doesn’t work at all.
Oilfieldguy any idea why?
Very good point!
Are there any Good Lefty Sunday Politics talk shows or do I have to wait for Monday and KO and Rachel?
Of the money we have seen thrown around thus far let me ask you this, that 168 billion that our country borrowed to give away to us in the form of an “economic stimulus package” …did it do a darn thing to create jobs or stimulate our economy? NO, nothing. And we borrowed the money from China.
This past year the high cost of gas nearly destroyed our economy and society. More people lost jobs and homes as a direct result of that than any other factor in our history.
Fannie and Freddie continue to get all the blame. Of all the homes I have seen lost in my area SW FL and believe me I have seen many, none were due to an adjustable mortgage. They were due to lack of work.
Families went broke at the pump alone. Then added to that most saw record rate hikes at their utility companies. The high cost of fuel resulted in higher production and shipping costs that were passed on to the consumer, in most cases higher prices for smaller packaging.
Consumers tightened their belts, cut back, went out to eat less or stopped totally. Drove around on tires that needed replacing longer, some even quit buying medicines they really need.Unfortunately cutting back and spending less results in even more layoffs. A real economical catch-22.
And, as we are doing the happy dance around the lower prices at the pumps OPEC is planning to cut production to raise prices. They are even getting Russia in on the cutbacks. Oil is finite. We have used up the easy to get to reserves already. It will run out one day.
We have so much available to us. Solar and Wind are free sources of energy. Of course to get the harnessing process set up is somewhat costly it is still free energy.
It would cost the equivalent of 60 cents per gallon to charge and drive an electric car. The electricity to charge the car could be generated by solar or wind at least in part and in most cases totally.
If all gasoline cars, trucks, and suv’s instead had plug-in electric drive trains, the amount of electricity needed to replace gasoline is about equal to the estimated wind energy potential of the state of North Dakota. What a powerful resources we have neglected.
Jeff Wilson has a profound new book out called The Manhattan Project of 2009 Energy Independence Now. Powerful, powerful book! I think we need to rethink all these bailouts and stimulus packages. We need to use some of these billions to bail America out of it’s dependence on foreign oil. Create clean cheap energy, create millions of badly needed new green collar jobs and get out from under the grip foreign oil has on us. What a win -win situation that would be for America at large
http://www.themanhattanprojectof2009.com
The real question is what is creating more make believe dollars going to do for us other than creating tax slaves out of future generations? Rather than throwing trillions at banks, segregate their bad debt and let their share holders and bond holders worry about it. As we are already taking positions in banks or what Stiglitz, calls cash for trash, nationalize the banks. Would it not make more sense to use our tax dollars to purchase their good assets and then change their charters from federal Reserve banks to US Treasury banks with new US Treasury dollars backed by real assets?
Considering the bond bubble that is about to explode, the holders of our debt may well force us to do this anyway if they start dumping their T-bills and force the Fed to monetize its debt. As I’ve said before, it isn’t the amount of physical gold and silver we own that matters, It is what the world says it’s worth and right now it’s sitting at $912.00 yet our Congress says our gold is only worth $42.50? Why? Neat little game called a strong dollar policy. Make no mistake, the time is coming when those in the world who are holding our debt will begin dumping and then it’s game over.
I don’t know – there’s probably an author index somewhere on the Oxdown main page – I don’t find one though. Failing that the “73″ in the ORL suggests that each author has a number… try changing the numbers until you find the author you’re looking for. (Jane and Christy are authors 1 & 2 FWIW).
I don’t do tech for FDL, I checked that the link for Hugh worked, then replied and tried to check the link from a different tab, saw it was broken on the main page and figured that FDL techies should know.
I do do tech obviously. Know anyone that needs software performance tuning and QA work done? I’m looking…
Well if you took something like the McCain proposal of some $400 billion mostly in tax cuts, let’s call that with a 90/10 split, then
$40 billion spending x 1.4 (multiplier) = $56 billion (stimulative effect)
$360 billion tax cuts x .4 (multiplier) = $144 billion(stimulative effect)
So overall a $200 billion stimulative effect. Using the $140,000 per job number, that equates to 1.43 million jobs created. We’ve lost more than that in the last 3 months alone.
I tried a couple of other things. Nothing works. Anyway, I think that is the name, so if you go to Thomas and look for the link to “browse by popular and short titles”, you can find your way there from this title. I can’t figure out how to provide an actual link.
The political talk shows are on Sunday AM, so you have a choice of which church, whose revealed truths given the form of dogma demand assent in the absence of, or in the face of, any evidence you get to attend.
I’ll give church the edge, only because of that Jewish guy. Older than David Gregory, yeah, but much less full of himself.
The economy. Certain oil companies got used to a certain profit level. Smaller companies are still drilling, offsetting the ones on the sidelines. Still, the natural gas compression side concerns me, because compressors are what I haul. I see a switch to electric motors powering gas compressors in the future, as opposed to being powered by a natural gas engine. Electricity is cheaper than natural gas, even when natural gas is used to fire a generatorm due to the economy of scale. Further, an internal combustion engine requires maintenance–redo heads every two years and a complete overhaul every 4-5 years. An electric motor can run maintenance free for ten years.
The difference between an engine and a motor is an engine creates energy and a motor does not.
Further, emission people give gas compressor operators fits–no emissions from electric motors. The biggest problem is running the wires. Bigger gas plants require substantial power.
We have been in a decline for much longer than was “officially” recognized. People have been living on the equity in their homes for years. And I mean living on the equity not just buying crap with it. We have all been employed by the equity in our own homes and our neighbors. Now we have been set adrift by the banks and the government. We all knew it was coming. We have hit the wall with our over extended credit cards in our hands. The people would have the power to fix it are the people who broke it.
Demand has dropped, producing the oil or gas in the face of lower demand doesn’t make business sense.
Same reason there are tankers full of oil just sitting at anchor – if you’ve got 2M barrels of oil for $40/barrel and the future price is $50+/barrel it makes sense to hold it, given monthly tanker charter rates of $1/barrel.
Oops, I was cutting and pasting. Since it is a $700 billion package, the typo is that I didn’t change the $600 billion to $700 billion. The other numbers are correct. If there is a wandering mod out there, that would be nice to correct;
5) Alternate stimulus 2A
Spending 90% of $700 billion = $630 billion
Tax cuts 10% of $700 billion = $70 billion
That and that I interchanged the price of the House and Senate bills as Scarecrow mentioned. $780 billion is the size of the Senate bill and $819 billion is the size of the House bill.
The Japanese already introduced a car that can run on water by using hydrolysis. There are two companies in the US that can convert conventional gas engines to running on Hydrogen and they are starving for capital. Imagine getting 80 miles to a liter of water. That would create jobs and a totally new industry. oil as one writer has said, is finite. I sincerely hope that Secretary Chu is exploring this technology.
Numbers of just how much oil is sitting would be something Obama could attack
Sounds like a Diary:)
the following counts as my /s yippee /s
Soumds like a Diary Oilfieldguy.
I should have noticed the difference too. Oh, well… As you said It’s all about accuracy, not ego.
I’m surprised that on site generation is looked down on. Effectively they ship the gas to the power plant, convert to electricity and ship it back to run the compressor at the gas field? This cuts down on emissions?
Microturbines might make better sense than traditional IC engines for running compressors.
And McCain lecture Obama about the economy?
Sorry my 67 was a reply to Hugh reply seems not to be working for me today.
Do we want to generate lower cost for gasoline? Forcing more supply onto the market would drop prices, increase carbon emissions and make that SUV more economical to drive.
As it is those tankers will release oil during short term spikes in the spot price and smooth the increase in prices as demand picks up.
Ok, the best way to deal with this problem is to download a .pdf, because that way you can easily search the bill. I did that, and I don’t see the infrastructure bank. I’ll repeat: go to Thomas and look for the link to “browse by popular and short titles”, you can find the American Recovery and Reinvestment Act of 2009 (Amendment in Senate)[H.R.1.AS].
It wasn’t until I ran these numbers that I really began to get an idea of the magnitude of the problem. Nothing happens overnight except collapses and meltdowns but in the next few months we will likely continue to see large declines in those employed. Each of these jobs lost will just put us even further in the hole.
We also have to consider beyond the $140,000 cost of creating each job there is a maintenance cost as well. So if we say that the total cost of maintaining on average each job is $50,000 and we create what’s needed initially say 6 million jobs, then there is a $300 billion maintenance cost each year for these jobs. This cost has to be borne by local, state, federal governments as well as private businesses.
Even libertarians lie. We all know that EFCA plugs gaps in current law, and that under EFCA secret ballot or open card check is allowable as the choice of the employees affected. Unionization, to be fair, needs to be facilitated given the public record of how many employees who attempt unionization are intimitated or lose their jobs either right away or after a short while.
Guess the libertarians are running a bit scared, as their ideas are fairly well discredited these days. “Efficiency” and productivity are best engendered via workers making a decent wage who have some ostensible job security.
The “signal” the Obama Administration needs to send business is that business has been a large part of the problem with it’s greedy attitude, and that business is going to be expected to become more a part of the solution rather than part of the problem with so many shoddy shortcuts and the endangerment of the public.
Peanut butter, anyone?
Hugh — the edits are in [brackets], so any errors there are mine. It doesn’t affect anything else in your excellent post.
Fixed: $600 billion changed to $700 billion.
Thanks. I had gone through the pdf of the House version. The Senate version had not been posted at the time.
Thanks.
There are some areas of wording which read possibly as leaving a door open for creating a vehicle for infrastructure investment but no specific language for an Infrastructure Bank.
I have not seen any discussion here as to whether this Obama endorsed campaign issue would be welcomed or not. I had read that the NIB may get written in, in a subtle way. I guess I don’t understand why the need to be oblique?
Any opinions on the concept?
Thanks for doing that. Not everyone may read all the comments so it’s good when the original post reads clean.
excellent, hugh, as always. and thanks to link to post op ed, vg