Is the Stimulus Package Doing What it is Supposed to Do?

I recently had a discussion with Miles Moffeit, a reporter for the Denver Post, about the recent announcement that about 8,100 jobs had been created or saved in Colorado through funding from the American Recovery and Reinvestment Act (ARRA). Some highlights from the discussion, which led to an article in the Post, follow in the subsequent paragraphs.

The federal government requires recipients to report the number of jobs saved or created. Based on our experience conducting federally-funded research, there are significant challenges associated with quantifying the impact of any public or private assistance funding efforts. One of the challenges is accurately attributing the impact for the assistance, relative to other internal or external funding. For example, a company may receive a total of $10 million in funding, with $1 million in funding coming from the ARRA program leveraged against $9 million from other sources. If 50 jobs are retained or created because of the total $10 million in funding, what portion of those jobs should be attributed to the investment from the ARRA program?

A Return on Investment (ROI) analysis of jobs created or retained should also account for the differences in worker type and their varied impact on the economy (salaried, hourly, commission, part-time, temporary, full-time, and contract workers). Because each type of worker impacts the company and economy in a different manner, they should be accounted for differently.

Job growth and retention are essential for economic expansion and stability. When final revisions are made to the 2009 employment data, it is likely that Colorado jobs losses will exceed 100,000 jobs. If the ARRA program has helped create or retain jobs, that is good for the state. This is the upside. (Based on recent trips to the mountains and Southwest Colorado, it seems apparent that a number of construction jobs have been created throughout the state as a result of the ARRA.)

The downside is that the ARRA program is an incredibly expensive tool for creating jobs. The expense for job creation is further heightened by the costs of administering the program and tracking the ROI. Time will tell whether or not the ARRA investments effectively deterred further erosion of the economy and a case can be made that the ARRA should not be measured based on the cost of a job created, but rather on impact the program had on preventing a major depression.

For further information on the ARRA reporting, click here.