The Folly of Math

I was a Comparative Literature major in college so my math skills are probably not as advanced as most, but let’s look at what President Obama has said regarding the stimulus bill which recently became law:

President Barack Obama says his $825 billion stimulus package will create or save 3 million to 4 million jobs.

The bill ended up costing taxpayers $787 billion dollars upfront and an estimated $3.27 trillion over the next 10 years (funding for newly created programs, debt servicing, etc…).  Remember, President Obama himself said that he is trying to create or save 3 or 4 million jobs.  That was his goal.  That was the reason…

Let’s do the most optimistic math first and say that 4 million jobs will be created at a cost of $787 billion:

$787,000,000,000.00 ÷ 4,000,000 = $197,750.00 per job

Now let’s do another math equation with only 3 million jobs and a total estimated cost of $3.27 trillion:

$3,270,000,000,000.00 ÷ 3,000,000.00 = $1,090,000.00 per job

Firstly, I’d like to know how I can get one of these jobs and, secondly, I’d like to know if this is really the most efficient use of taxpayer resources?  Since when did anybody come to the conclusion that, except for collecting taxes, when did any government become more efficient at creating jobs than the private sector?  Remember, the U.S. economy is 70% dependent upon consumer spending, not government spending.  The best way to stimulate consumer spending is job creation.

Let’s look back for a moment to the past, specifically the 19th Century.  Way back then there was a man named Frederic Bastiat who did a lot of thinking and writing on economic matters.  In his most widely known work, That Which is Seen & That Which is Not Seen he wrote of a hypothetical shopkeeper who had his window broken.  To the layman this was not a bad thing because the glass company would sell a piece of their inventory and one of their employees would be paid to install a new window, stimulating the economy.  Bastiat remarked that for the glass company and the glazier, this is That Which is Seen but for the shopkeeper, who had to spend, say, $100.00 on a new window, he would be unable to hire a new employee, buy advertising for his store, purchase new products, or buy new equipment.  For Bastiat, this is That Which is Not Seen.  In effect, the stimulus bill which President Obama signed into law is depriving taxpayers of $787 billion upfront and an estimated $3.27 trillion over 10 years.

Let’s do some more math on the upfront costs:

$787,000,000,000.00 ÷ 305,000,000 Americans = $2,580.00 per American

A second equation for the 10 year estimated cost:

$3,270,000,000,000.00 ÷ 305,000,000 Americans = $10,721.00 per American

So, in effect, the U.S. government is taking between $2,580.00 to $10,721.00 out of every wallet of every American (much more if we just use taxpayers) to create 3 to 4 million jobs at a rough cost of between $200,000.00 to $1 million per job!  Not only are these hypothetical jobs very expensive but because the U.S. government has removed this money from the pockets of consumers there will be less money to spend in an economy that is 70% dependent upon consumer spending!

According to a recent story by the Associated Press:

Job creation projections are uncertain even in stable times, and some of the economists relied on by Obama in making his forecast acknowledge a great deal of uncertainty in their numbers.

Beyond that, it’s unlikely the nation will ever know how many jobs are saved as a result of the stimulus. While it’s clear when jobs are abolished, there’s no economic gauge that tracks job preservation.

You don’t need to be a math major to see that, clearly, something is very wrong with this equation.

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