Now that the federal stimulus investment from the American Recovery and Reinvestment Act (ARRA) is well under way, it is time to begin sharply scrutinizing the return on the investment in terms of jobs created. That may be more difficult than it sounds because of the multifaceted approach under the law. It combines infrastructure investment and other direct federal spending with individual income-tax cuts, a two-year patch to the alternative minimum tax, investment incentives, aid to people directly hurt by the recession and state fiscal relief.
A May 11 report by President Obama’s Council of Economic Advisers sheds little light on the complex issue. The puny 12-page report shows the council clinging to initial employment estimates from February, when the law was adopted. It says ARRA will increase employment by 3.5 million by the fourth quarter of 2010 by creating or saving jobs. According to CEA, a “simple rule” for judging ARRA’s impact is that $92,000 of government spending creates one job-year, with 64% of the job-years representing direct and indirect spending effects and 36% induced.