The Republicans have become fond of saying that President Obama's stimulus package will cost $275,000 for every job created. The media have been typically derelict in simply reporting this number without making any assessment to evaluate it -- as though readers in their spare time are supposed to determine whether it is accurate or not. Okay, let's do the reporters' work for them. First, where do the Republicans get this number? They divide the the $825 billion cost of the stimulus by 3 million jobs that President Obama had originally pledged. Their arithmetic is right but both numbers are wrong. First, the projections from the Obama team is that their package will create 4 million jobs, not 3 million. Furthermore, it is important to note that this over 2 years, not one year. The cost is also wrong, or at least misleading. If we assume that the stimulus will work as planned, then it will boost GDP by approximately 1.5 times the amount of spending or $620 billion a year. If GDP rises by this amount, then it will translate into roughly $155 billion a year in higher taxes/lower spending than if we didn't do the stimulus. This is money that should be subtracted from the cost to the taxpayers. So, if net out the increased revenue from the growth generated by the stimulus we end up with a 2-year cost of $515 billion which will generate roughly 8 million job-years. That comes to about $65k per job year, less than one-fourth of the Republicans' number.
--Dean Baker
