The economics of government stimulus investments can be very muddy. It can be argued that one dollar spent by the government today will have a lasting ripple in the economy as it flows through different outlets. On the other hand, immediate and direct benefits of stimulus money can often be measured rather easily as was the case with new homes purchased due to the home owner’s tax credit or the new cars purchased due to the cash for clunkers program. In the case of Cash for Clunkers, the cost to the taxpayer for every incremental car sold was $24,000. In the case for the home-owner’s tax credit, the cost to the taxpayer for every incremental house sold was $43,000.
Not to be outdone, the latest statistics came out regarding the federal stimulus money that was released to “Save or Create” jobs in the United States. According to the Obama administration, the stimulus program has “saved or created” 640,329 jobs since its enactment in February. Based upon the $157.8 billion that was released for the program, that equates to a taxpayer bill of $246,436 per job. On the other hand, had they just hired a bunch of people to sit around and collect $60,000 they could have *created* $2.6M jobs!
I know, I know…the effects of having people employed and productive in our society cannot be underestimated. I just want to bring to light the immediate economics of these situations. Stimulus spending is expensive, plain and simple.
