Obama: Stimulus Economic Plan Could Create 4 Million Jobs

Team Obama released an economic analysis by advisers Jared Bernstein and Christina Romer on the impact of the stimulus/recovery plan. (Estimated cost: $775 billion.) Here are the key conclusions:

• A package in the range that the President-Elect has discussed is expected to create between three and four million jobs by the end of 2010.

• Tax cuts, especially temporary ones, and fiscal relief to the states are likely to create fewer jobs than direct increases in government purchases. However, because there is a limit on how much government investment can be carried out efficiently in a short time frame, and because tax cuts and state relief can be implemented quickly, they are crucial elements of any package aimed at easing economic distress quickly.

• Certain industries, such as construction and manufacturing, are likely to experience particularly strong job growth under a recovery package that includes an emphasis on infrastructure, energy, and school repair. But, the more general stimulative measures, such as a middle class tax cut and fiscal relief to the states, as well as the feedback effects of greater employment in key industries, mean that jobs are likely to be created in all sectors of the economy.

• More than 90 percent of the jobs created are likely to be in the private sector. Many of the government jobs are likely to be professionals whose jobs are saved from state and local budget cuts by state fiscal relief.

• A package is likely to create jobs paying a range of wages. It is also likely to move many workers from part-time to full-time work.

It should be understood that all of the estimates presented in this memo are subject to significant margins of error. There is the obvious uncertainty that comes from modeling a hypothetical package rather than the final legislation passed by the Congress. But, there is the more fundamental uncertainty that comes with any estimate of the effects of a program. Our estimates of economic relationships and rules of thumb are derived from historical experience and so will not apply exactly in any given episode. Furthermore, the uncertainty is surely higher than normal now because the current recession is unusual both in its fundamental causes and its severity.

 Me: It is also interesting to note that this plan predicts the unemployment rate will be 7.0 percent in the fourth quarter of 2010 if it is passed vs. 8.8 percent if it isn't. Basically, Team Obama is saying their plan will neutralize, overall, the predicted job loss over the next two years. More to come as I digest the analysis.