The Obama Administration estimates that up to 3.6 million jobs have been created or saved by the ongoing $878 billion Stimulus Spending Bill.

So what happens after the money has been spent?

Jobs created or saved will only be preserved if they are sustainable on an unsubsidized basis post-stimulus.  Spending must have created some persistent economic benefit capable of supporting continued employment.

TheAMD.com observes that the bulk of stimulus was spent on short-lived projects that produced nothing lasting.  Rather than occupy the unemployed over the long-term and/or generate sustainable benefit, Stimulus Spending has merely distorted depressed economic data over a two-year span.

The structure of the Stimulus Bill seems better designed to obscure the economy's health through the November 2010 election.  Its architecture bodes poorly for unemployment going forward.

The Question at Hand

If 3.6 million jobs were created or saved based on short-lived spending that produced little sustainable economic benefit, is it not reasonable to expect that the economy will lose some number of jobs approximating 3.6 million when Stimulus Spending concludes?

The Bridge to Nowhere

Government spending on long-term infrastructure may prove beneficial during a recession if those projects absorb economic slack for the duration of the downturn, allowing the private sector economy sufficient time to reabsorb the unemployed. 

If "The Obama Dam" was under construction until 2015, some amount of employment capacity would be productively disposed long enough for the economy to recover.  Conversely, if the private sector were today hiring aggressively as Federal spending lapsed, stimulus might have been worthwhile.

Sadly, there was never the chance of an economic rebound during the Stimulus timeline as structural impediments to a recovery persist through 2012.  Until ARM resets and foreclosures diminish, The Affordable Mortgage Depression will continue in some evolving form.  In fact, the Stimulus Spending Bill, which propped up housing prices and impeded the foreclosure market clearing process, has lengthened the downturn defeating its own intent.

The Obama Administration effectively built a poorly constructed Bridge to Nowhere at debilitating expense.

Sustainable Jobs Require Persistent Economic Benefits

Stimulus spending, like any expenditure, may produce perpetual economic and employment benefits if the money is used to develop self-sufficient and productive projects.  Examples include the TVA, Hoover Dam, Interstate Highway System, etc...

If the $878 billion had been spent on similar projects, some of the jobs created or saved would endure and portions of their construction GDP would persist after completion.

An analysis of how Obama's stimulus was allocated is not encouraging.  The Administration spent the money rapidly seemingly for its own sake.  Their stated argument was consumption by the Government on anything would produce a net economic benefit.   

Public Housing Street Lights, Thermoplastic Striping, New Carpeting and Medicine Cabinets

Much of Stimulus Spending was directed towards projects which produce no durable economic benefit.  Many of these projects supposedly saved or created jobs but consumed only days of work.  I performed an analysis of my local market and identified 15 "shovel-ready" projects that supposedly created 85 jobs. 



Link to spending analysis.  

Installing medicine cabinets, painting halls and replacing garage doors does not save or create jobs for more than a few days.  Once the $2,918 has been spent, the project is over and the job is lost.  Employing someone to install thermoplastic striping for an afternoon doesn't bridge a recessionary gap nor does it produce economic benefits thereafter.  Temporary jobs, claimed as "created or saved", have been or will be lost upon completion.  

The state of Illinois recently spent $650,000 of Stimulus Funds on 950 road signs advertising that the Stimulus Spending is creating jobs.  Even if this particular project was stimulative, its benefits were temporary and have been exhausted.  Link to article. 



In reality, these $684 road signs more closely resemble campaign placards not dissimilar to New Deal era propaganda.






Welfare for State and Local Governments

While stimulus was supposedly allocated towards "shovel-ready" projects, in actuality much was diverted to maintaining the status quo.  State and local governments received welfare from the Federal level to maintain bloated payrolls which had swollen during the Housing Bubble.

When the recession hit, companies adapted to the changed environment nimbly, and today many are experiencing strong profits.  State and local governments should have reduced headcount two years ago, and are today running massive deficits as a result of the delay.  Yawning budget gaps and excess public sector employment have been directly subsidized by deficit-financed Stimulus Spending. 

Government jobs tend not to be productive, especially at the margin.  Unnecessary public sector employment restrains economic activity by burdening the private sector with excess costs.  Maintaining or expanding superfluous public sector employment while the private sector shrinks is a direct impediment to an economic recovery. 

Since the subsidized state and local jobs are unsustainable without stimulus financing, they will disappear upon its conclusion making bad unemployment figures even worse.

The National League of Cities projects that state and local governments will lay off 500,000 employees from now through 2011.  These inevitable cuts were identified in The AMD Manifesto The Case for a Depression in 2008.  

The timing of these layoffs is the real tragedy.  They should have occurred relative to collapsing local government revenues.  Today the economy might be in the midst of a real recovery.  Instead 500,000 jobs were maintained to no productive end.  This burden has magnified the ultimate cost of the downtown and lengthened it materially by not allowing the economy to adapt to changed conditions.

Instead of resolving economic impediments to recovery, which include excessive government employment, the Obama Administration has consistently employed policies which have perpetuated our fundamental economic problems.  

Jobless benefits

Paying people to be unemployed may be humane, but it yields no benefits after the money is spent.  No capital infrastructure has been built, nor sustainable businesses developed.  This spending more closely approximates welfare, and is only "stimulative" while the checks are being cashed and spent.

Furthermore, unemployment benefits maintain economic activity below that which existed or would exist if recipients were working.  Jobs provide individuals more spending money than welfare checks do.  Even better, private sector jobs exist because they produce positive net economic benefits.  Unemployment welfare unproductively consumes scarce resources, and in our present case, does so in exchange for incremental public sector debt.

Dismal Reality

The purpose of correctly-defined Keynesian Stimulus is as a bridge in normal business-cycle recessions during which the private sector resolves short-term impediments to full-capacity production.

When the purported benefits of Obama's Stimulus Spending Bill evaporate, the economy will be in worse shape than before it was implemented. 

• Unemployment has increased and remains stubbornly high
• Housing prices have fallen and will resume depreciation
• Foreclosures are setting new records
• The private sector is burdened by several trillion dollars in incremental public sector debt
• Confidence and consumer spending are near Depression lows
• Private sector lending activity, capacity and standards are less favorable than when Stimulus was adopted
• The Housing Market and Public Sector at the local, state and Federal levels are more leveraged

There were undoubtedly projects imbedded within the Stimulus Spending which will produce lasting economic and employment benefits.  But these projects were not the intent of the Bill, and received only a fraction of the funding.

The vast majority of Stimulus Spending was an utter waste money and the economy is worse off as a result.  Had not a dime of stimulus been spent, the pain associated with the economy's productive reordering would have been more intense.  But today, we would be much closer to a sustainable recovery than we are and have not imperiled the nation's solvency in the process.

If 3.6 million jobs were "created or saved" by the Stimulus Bill, some number approximating that figure will be lost over the next 18 months.  Unless the private sector is able to recover and reabsorb this Government created source of unemployment, the economy will continue to erode as the fundamental forces which created The Affordable Mortgage Depression intensify.