economic stimulus

UK Economy Survives Pandemic: Government Assistance and Remote Work the Reasons

Wendell Cox — Thu, 08 Jul 2021 20:28:58 -0400

In an article entitled “Financial hit from Covid far less drastic than feared,” The Times of London reported on July 8 reported that “Unemployment, debt and earnings have not worsened significantly as a result of the pandemic, Britain’s leading economic think tank has concluded, hailing the findings as “astonishing”.

The report by the Institute of Fiscal Studies (IFS) expressed “surprise” that unemployment is much lower than was expected, that there has been only a small increase in people in arrears on bills and that the number of people using food banks increased minimally during the pandemic and is now below pre-pandemic levels.

At the same time, IFS noted “while the national picture was remarkable, its figures masked groups who have seen clear increases in hardship, particularly the self-employed and families already experiencing in-work poverty before the pandemic hit.”

The article attributed the positive developments to government interventions to support working people, more than one-third of whom received government support during the pandemic.

We add that, had it not been for the conversion to remote work, these results could not have been achieved. According to the OECD (See Note below), in Mid April of 2020, 49% of the United Kingdom pre-pandemic work force was working remotely, while 20% were working at their physical employment locations, leaving 31% who were not working (Figure). This data suggests that about 70% of the working population was teleworking (Figure). Had remote work not been embraced, the unemployment rate would have been far higher and the economic disruption would likely have been at least as bad as the most dire expectations.

Note: OECD, “Working during COVID-19: Cross-country evidence from real-time survey data.” At oecd-ilibrary.org

Wendell Cox is principal of Demographia, an international public policy firm located in the St. Louis metropolitan area. He is a founding senior fellow at the Urban Reform Institute, Houston, a Senior Fellow with the Frontier Centre for Public Policy in Winnipeg and a member of the Advisory Board of the Center for Demographics and Policy at Chapman University in Orange, California. He has served as a visiting professor at the Conservatoire National des Arts et Metiers in Paris. His principal interests are economics, poverty alleviation, demographics, urban policy and transport. He is co-author of the annual Demographia International Housing Affordability Survey and author of Demographia World Urban Areas.

Mayor Tom Bradley appointed him to three terms on the Los Angeles County Transportation Commission (1977-1985) and Speaker of the House Newt Gingrich appointed him to the Amtrak Reform Council, to complete the unexpired term of New Jersey Governor Christine Todd Whitman (1999-2002). He is author of War on the Dream: How Anti-Sprawl Policy Threatens the Quality of Life and Toward More Prosperous Cities: A Framing Essay on Urban Areas, Transport, Planning and the Dimensions of Sustainability.

Why the Green Jobs Movement Failed

Michael Shellenberger and Ted Nordhaus — Wed, 24 Aug 2011 17:12:21 -0400

"Federal and state efforts to stimulate creation of green jobs have largely failed," the New York Times reported last week, drawing similar conclusions to the ones we drew in our essay for The New Republic last October. Silicon Valley, home to the green jobs movement, actually saw the number of green jobs decline from 2003 - 2010.

The signature green jobs program was retrofitting homes and buildings to become more energy efficient, which boosters thought would create "millions" of jobs in the inner-city. In 2009 the Center for American Progress claimed that $5 billion in stimulus funding for weatherization and a price on carbon would lead to the retrofitting of every building in America in ten years, generating 900,000 jobs. In reality, we noted in TNR, the weatherization program had created just 13,000 jobs. "Two years after it was awarded $186 million in federal stimulus money to weatherize drafty homes," the Times reported, "California has spent only a little over half that sum and has so far created the equivalent of just 538 full-time jobs in the last quarter... the program never really caught on as homeowners balked at the upfront costs."

Most of the approximately $70 billion in green stimulus money went to retrofitting or stimulating the old economy and just one-third went to building a new one. Notably, even those modest investments in manufacturing and technology had a salutary effect, saving the American renewables industry, which was in free fall after the 2008 financial crisis, and giving a boost to U.S. manufacturers of electric car batteries.

Obama could have focused on winning a long-term commitment to public investment in green innovation and manufacturing. Instead, he threw his political capital behind cap-and-trade, a pollution control program that was never imagined by the economists who invented it to be a means for creating vibrant new industries.

The Rest of the Story on Krugman and the Economy

Bill Watkins — Tue, 15 Feb 2011 19:38:48 -0500

Paul Krugman really doesn’t like the possibility that there is a structural shift in employment, because it weakens the argument for the massive Keynesian spending spree he’d like to see the government initiate. To that end, he published this piece on his blog February 13th.

Before we go on, some readers may wonder what a structural shift is and why it weakens the argument for Keynesian spending. A structural shift is when employment permanently shifts (well, as much as anything is permanent in economics) from one economic sector to another, say from construction to healthcare.

The reason that a structural shift weakens the Keynesian’s argument is that moving workers from one sector to another takes time. They may need retrained. They may need to move to another location. Think of our construction worker moving to health care. He or she probably doesn’t have the skills to be immediately employable in health care. Some sort of education or training has to happen first.

This poses a problem for Keynesian expansionists, because their argument is that the only problem is a drop in aggregate demand (consumer spending) brought about by….well, animal spirits. Since there is no real problem, government can increase spending (it doesn’t matter what you spend the money on. You could dig holes and fill them back up), fool the consumer into thinking she is better off, and voilá, aggregate demand goes up with the government spending.

Problem solved. It’s a beautiful thing.

However, spending can’t solve the problem of unemployment brought about by a structural shift. It takes time to retrain the affected workers. There are things government can do to speed the process, but spending willy-nilly is not one of them.

Hope that clears things up. Let’s get back to Krugman’s piece.

He claims that unemployment in every sector has just about doubled since the recession began, and that this is proof that no structural shift is going on. He has a nice chart to show the increase in unemployment by sector.

There is a problem though. The Bureau of Labor Statistics—the same source that Krugman claims originated his data—reports that construction jobs fell by 2 million, or 26.7 percent, from December 2007 through December 2010, while education and healthcare jobs grew by1.2 million, or 6.5 percent.

This appears to contradict Krugman’s data, but it is possible that both sets of data are true. If they are both true, then Krugman is being no less dishonest than if he created his numbers out of thin air.
If Krugman is telling the truth when he presents a graph showing that unemployment approximately doubled from 2007 to 2010 in both the construction and the education and healthcare sector, then is must be that large numbers of unemployed construction workers migrated to being unemployed education and healthcare workers.

There is no other possible explanation.

This, of course, completely contradicts Krugman’s argument. If his data are true, he’s using data that confirms a structural shift to argue that there is no structural shift, by neglecting to disclose the jobs data I’ve disclosed above.

Krugman is not a dumb guy. He has a well-deserved Nobel Prize for his work on international economics. He has a career of looking at data, in depth and with insight. His failure to provide the entire story has to be considered something besides an oversight. We have to conclude that he’s purposely being deceitful.

I don’t know why a guy with all of Krugman’s gifts and accomplishments would use data deceitfully. It is a shame, though, that an economist at the top of his profession and with the New York Times bullhorn uses that bullhorn to confuse instead of to enlighten.

McClatchy-Medill: Real $timulating News

Susanne Trimbath — Mon, 23 Aug 2010 08:38:43 -0400

I saw this story in the Omaha World Herald last week: Benefits of stimulus bill spread unevenly over U.S. As I read through it, I became increasingly impressed. The journalists start off by laying out who said what about the benefits of stimulus spending. They provide quotes and facts from the White House, the Congressional Budget Office, and Joe Biden’s spokesperson. They include viewpoints and analysis from professors at Berkeley, Harvard, George Mason and the editor of the Journal of Economic Perspectives. They even talked it over with the National Association of State Auditors, Comptrollers and Treasurers – the people in charge of receiving and accounting for the billions of dollars represented by the American Recovery and Reinvestment Act. What impressed me most, though, was that they did their own research – not just reporting what the Administration or Congress told them was happening or was supposed to be happening.

“Spending the Stimulus” is a website put together by McClatchy Newspapers and the Medill News Service to track what was promised and what was done, how much was actually spent and where and on what the stimulus billions were spent. I was intrigued by their finding that “much of the stimulus money has yet to go out the door” eighteen months after the emergency, gotta-fix-it-now legislation was passed. After Congress approved $750 billion for the Wall Street Bailout in October 2008, I’m pretty sure all that money was out the door before December!

Even more intriguing is the finding that the money was spread around rather unevenly. Beyond the infantile “Why Did North Dakota got More Than Me?” rhetoric going around among the states (by the way, the McClatchy-Medill per-capita graphic shows that most of New England got more than North Dakota), is the more interesting discussion of where would the spending be most stimulating. Transportation money was directed to the states under the “usual formula” despite the fact that the Great Recession didn’t follow a formula as it spread throughout the economy. The result: “researchers were unable to find any relationship between unemployment in a given area and the amount of stimulus dollars spent there.” If unemployment is lower in some areas than in others, it wasn’t because of the stimulus spending.

Maybe this is a good thing. Instead of focusing on the political necessity of justifying billions of dollars to pull the country out of the Great Recession (unlike the complete lack of justification for bailing out Wall Street), the McClatchy-Medill report raises more interesting points. Is it “rewarding failure” to send more money to the states that most failed to develop diversified economies that are resilient to downturns? Would we be throwing good money after bad to provide more spending for states that didn’t manage the cash inflow from the rapid rise in property taxes that came with rapidly rising home prices? Finally, did we really want a central government to make every decision – county by county – about where and on what the money would be spent?

If you missed this story last week, I highly recommend perusing the “Spending the Stimulus” website for more stimulating idea.

The Fog of Stimulus

Fri, 06 Nov 2009 11:21:08 -0500

The news is full of stories about the the impact of the ARRA on job creation, including this one from the The Wall Street Journal about a shoe store owner who created or saved nine jobs with less than $900.

In the story, the Army Corps of Engineers spent $889.60 buying boots from shoe store owner Buddy Moore of Kentucky. Because the boots were purchased with ARRA funds, the Corps asked Buddy to report how many jobs the boot order had “created or saved.” He and his daughter struggled with paperwork, online forms, and a “helpline,” only to make a wild guess 15 minutes before the reporting deadline that they had created nine jobs.

Though not completely spelled out in the article, the impression is that Buddy and his daughter reasoned that they had created or saved nine jobs, because their boots had “helped nine members of the Corps to work.”

This sort of misreporting is now fodder for ARRA opponents, and is the last thing that the White House wanted on its hands. In July the Office of Management and Budget (OMB) issued this memorandum and created a series of PowerPoints and PDFs intended to assist ARRA recipients with their reporting.

These documents do not appear to be currently available on the White House website, but you can find the Google doc here. This list (also not directly available) shows that the Army Corps of Engineers is and was considered a primary recipient. Given its status, it is the one required in the initial PowerPoint to report the “job creation narrative and number.”

As a prime recipient, the Corps should have been briefed on the fact that the key data issue to avoid was: “Significant Reporting Errors: (which are) instances where required data is not reported accurately and such erroneous reporting results in significant risk that the public will be misled or confused by the recipient report in question.”

They also would have had to listen in to this presentation on data quality, which stresses that prime recipients are fully responsible for the quality of the data. The Corps could have caught the reporting mistake by running a simple math equation, which would have indicated that the shoe store had created a full-time job for every $98.84.

If this were true, only $2 billion (administered by Buddy Moore) would have reemployed every single unemployed person in the US, a savings of $785 billion to the American taxpayer.

In the end, it turns out that because the payment made by the Corps was less than $25,000, the Corps (while responsible for reporting the total number and amount of small sub-awards less than $25,000) was not required to have Buddy Moore report anything.

Prime recipients are still responsible to report a total jobs creation estimate based off what sub-recipients and vendors do with the funds they disperse. To do that, the Corps could have called up Buddy and asked him to estimate the extra hours he worked for that specific order, and calculated Full Time Equivalents using those hour(s) by “… adding the total hours worked by all employees in the quarter, and dividing by the total hours in a full-time schedule.”

In this case, let’s assume he worked an extra hour filling the boot order. A quarter-year full-time job would take 520 hours to complete, so he would report that the Corps funds created 1/520 of a quarterly FTE (.001923 FTE), or just about 2/1000th’s of a full-time job for a quarter of the year. The shoe store’s estimate of job creation, therefore, was 4,680 times too big.

The OMB’s method of job reporting is, by our estimation, a good way of quantifying job creation. The problem, highlighted by the WSJ article, is that average businesses and recipients have had a hard time understanding what data was needed in the first place, and then what they were supposed to do with it.

Mark Beauchamp is a customer service representative at Economic Modeling Specialists Inc., an Idaho-based data and economic analysis firm.

Illustration by Mark Beauchamp.

Layout for the Bailout: $3.8 Trillion and Counting

Susanne Trimbath — Sat, 21 Mar 2009 21:24:53 -0400

Bloomberg.com reporters Mark Pittman and Bob Ivry are reporting a running total of the money the U.S. government has pledged and spent for bailouts and economic stimulus payments. The total disbursed through February 24, 2009 stands at $3.8 trillion; the total commitment is $11.6 trillion. The Federal Reserve is providing the largest share at $7.6 billion, followed by the U.S. Treasury $2.2 trillion and FDIC $1.6 trillion. The Department of Housing and Urban Development (HUD) and support for Fannie Mae and Freddie Mac, combined with purchases of student loans – bailout money that comes closest to directly bailing out Main Street – total only $760 billion – less than 7 percent of the total.

The national debt currently stands at $10.8 trillion — versus an authorized limit of $12.1 trillion.

Last week, U.S. Treasury Secretary Timothy Geithner got into a tiff with the rest of the world (denied by President Obama) by telling them that they should spend at least 2 percent of their GDP on their own stimulus packages.

The U.S. commitment of $11.6 trillion equals 81 percent of U.S. 2008 gross domestic product (GDP). The $787 billion fiscal stimulus is 5.4 percent of GDP. Just the two-thirds of the stimulus that represents new spending (one-third is tax cuts) is 3.6 percent of GDP. Here’s what financial institutions in various countries got from U.S. taxpayers by way of the AIG bailout:

Country	Bailout Benefit
US	$ 31.1
France	$ 19.1
German	$ 16.7
UK	$ 12.8
Switzerland	$ 5.4
Netherlands	$ 2.3
Canada	$ 1.1
Spain	$ 0.3
Denmark	$ 0.2
Italy	$ 0.2
Serbia	$ 0.2