Jobs created or saved by ARRA stimulus? Much of it was pure fiction

The Obama administration has claimed that “stimulus” spending created or saved 300,000 to 400,000 jobs each quarter while its money was being doled out. Does anybody seriously believe that number? I don’t.

I was already a skeptic — to put it most politely — of such self-serving econometrics, but two things this week have made me even more skeptical.

First, a source who can’t be identified provided me with copies of documents that his company was required to fill out as a vendor on a contract that it was awarded by a school district. It was made clear to the company that it was expected to report that jobs created and saved, so that’s exactly what the report back to the district showed. Somewhere in the neighborhood of 20 workers had jobs only because of this project, according to the paperwork reported back to the federal government. In truth, nobody was hired just for the project. Nobody would have been fired if the project hadn’t come along.

The lie was just a formality to get a contract — so the school district could report the lie to the federal government and politicians could pretend to be creating and saving jobs. My source said it was clear to everyone in his industry that you were supposed to provide the paperwork and keep your mouth shut:

“This project was going to be built anyway, but the school district didn’t have to use local money to do it because this stimulus thing came along to pay for it instead. The district knew we weren’t creating jobs and we knew it, too, but it was in everybody’s interest to just give them the government the numbers they wanted and us and the school both got what they wanted. That was happening everywhere during that stimulus spending.”

The second piece of the puzzle comes from somewhere less anecdotal. The Mercatus Center at George Mason University just released a study based on extensive interviews with companies and their employees (as well as anonymous surveys inside the companies). You can read the introduction to the study here or download the PDF of the full study here.

The authors of the study concluded that the “stimulus” had very little effect, if any. You can hear George Mason economics professor Garett Jones talk about the study, its conclusions and its potential limitations on last week’s EconTalk podcast if you’d like the basic information without reading the full study.

I have no confidence in the theory behind Keynesian stimulus spending. I have no confidence in statistics reported by companies and government agencies with an incentive to lie. I have no confidence in politicians to seek the truth when the numbers on their reports say what they want them to say.

So what did that add up to? Well, unemployment is even higher now than what we were told ahead of time that the worst-case employment scenario was before the “stimulus” was passed. It doesn’t look good for Keynesian ideas after all this, does it?

Almost three years ago, NPR had a story that talked about Barack Obama giving Keynes’ ideas their first “real-world test.” If that was the test, isn’t it obvious that the ideas are flawed and don’t work? Isn’t it time to admit that the faith which the Keynesian-influenced economists have in their “stimulus” spending has nothing empirical behind it? Isn’t it time to consider an alternative — from the real free market school of thought?