Economic Stimulus Harder than Obama Thought
(c) Walt Handelsman

Obama promised $787 billion stimulus package would create or save 3.5 million jobs

As Americans become more skeptical of the administration's promise that the stimulus package will create or save 3.5 million jobs, there's an added frustration: Even if the $787 billion act is successful in creating work, Americans may never know.

That's because counting the jobs involves estimating what would have happened without legislation, a slippery task even if the economy weren't so volatile.

"We will probably have a better sense two years down the road, after a number of careful studies," says Steven Davis, a University of Chicago economics professor. "But even then, there will be lots of arguments."

The Obama administration says that 150,000 jobs were created in the first hundred days after the stimulus was passed. But that figure comes from the same economic formula that predicted how many jobs the stimulus would create overall, not from reporting on the ground.

So far, two measures are being used, economic modeling and direct reporting.

The first, a formula from the president's Council of Economic Advisers, relies on the well-established idea that a certain amount of spending generates a given number of jobs. It's particularly useful since it accounts for ripple effects that direct reporting doesn't, like how a construction worker buying a sandwich on the job supports the local eatery and lets it hire more people.

But like many economic estimates, it's inexact.

The other yardstick is direct reporting, in which agencies tell the government how many people they hired with stimulus funds.

But that can also get murky. The Office of Management and Budget recently released guidance on such an assessment to stimulus funding recipients. Experts say that although it clarified how recipients are supposed to report jobs and other data, it doesn't make an exact count likelier.

"The fear was that [job reporting] would not capture the full extent of jobs created or retained," says Gary Bass, director of the watchdog group OMB Watch. "This does nothing to allay those fears."

Part of the problem is that job reporting goes down only to the first subcontractor level.

If a state receives a stimulus grant and subcontracts it to a city, for example, the state counts how many people it employed to administer the funding and estimates how many the city employed. The sum of the two is reported as the number of jobs created. But if the city contracts out the program, as expected, those jobs aren't added in.

Then, experts say, there is the question of how to count "saved" jobs, especially important since the final job numbers will lump those together with "created" jobs.

Some cases are clear-cut, like school districts' decisions not to pink-slip employees after stimulus funds came through. But as agencies get more information about what funding will be available and plan accordingly, defining a saved job gets trickier.

"It will likely become a question of 'If you did not have this money, what budget changes would you need to have made?' " says Leslee Fritz, director of Michigan's economic recovery office.

It's not unlikely that the White House will issue more guidance on counting stimulus jobs.

Given the intricacies involved, though, even the best methods won't yield a precise count, at least not before the recession's end.

Would Second Stimulus Create Jobs?
Liz Wolgemuth

Americans are stumbling through a job market that is overwhelmed with supply, stripped of security, and skimmed of hours and benefits, and the unemployment rate has already climbed much higher than officials had forecast. So, the real question is, what could a second Obama administration stimulus do that the first one couldn't? To answer that, it's necessary to know how the first $787 billion package has disappointed.

Why No One Can Guess When Recovery will Occur
Paul A. Samuelson

Federal Reserve Chairmen Ben Bernanke glimpses a possible recovery by year end. He is a cautious scholar, backed by the best forecasters in the world at the Federal Reserve Board.

I would be a rash fool to quarrel with this quasi-optimistic view that by year end some stability will occur. You and I should hope that there will indeed be a glimmer of light at the end of the tunnel ahead. ...

Joseph Stiglitz:
Will Capitalism Survive Wall Street Apocalypse
Matthew Bandyk

A few days after writing about how the United States is not heading towards socialism, Joseph Stiglitz suggests that might not be true about the rest of the world. Stiglitz argues that the lesson many Third World nations might take from the financial crisis is that capitalism is fundamentally flawed.

Not Going to Be Economic Depression
Global Economic Viewpoint

Last week at the Milken Global Conference, three Noble Laureates in Economics sat down to discuss the global recession -- Gary Becker (Nobel Prize, 1992), Roger Myerson (Nobel Prize, 2007) and Myron Scholes (Nobel Prize 1997).

All three agreed that this is not going to be a depression and that the free-market economy is fundamentally healthy.

The Complex Case of Complexity
by Alvin and Heidi Toffler

In an important recent speech, months after the current financial crisis began, the chairman of the U.S. Federal Reserve Board, Ben Bernanke, placed partial blame for the catastrophe on "the sharp increase in the complexity of the financial products offered to consumers." Unfortunately, his description of the problem comes late and underestimates its importance. ...

Why are Bankers Still Being Treated as Beltway Royalty
by Arianna Huffington

President Obama said that he's been "sobered by the fact that change in Washington comes slow" and "humbled by the fact that the presidency is extraordinarily powerful, but we are just part of a much broader tapestry of American life and there are a lot of different power centers." Well, one of those different power centers -- the entrenched special interests that continue to call so many shots on Capitol Hill -- is the main reason change in D.C. comes so slow. But despite all that I know about the reform-killing power unleashed by the nexus of lobbying, campaign cash and legislation, I have been flabbergasted by the amount of behind-the-scenes influence recently being wielded by the banking lobby.

Recent Commentary on the Economic & Financial Crisis

(C) 2009 PAUL A. SAMUELSON; (TM) TRIBUNE MEDIA SERVICES, INC.