This paper uses variation across states to estimate the number of jobs created/saved as a result of the spending component of the American Recovery and Reinvestment Act (ARRA). The key sources of identification are ARRA highway funding and the intensity of state sales tax usage.
We estimate the Act created/saved 450 thousand government-sector jobs and destroyed/forestalled one million private sector jobs. State and local government jobs were saved because ARRA funds were largely used to offset state revenue shortfalls and Medicaid increases (Fig. A) rather than boost private sector employment (e.g. Fig. B). The majority of destroyed/forestalled jobs were in growth industries including health, education, professional and business services. Searching across alternative model specifications, the best-case scenario for an effectual ARRA has the Act creating/saving a net 659 thousand jobs, mainly in government.
The study also shows that despite the entire idea of the stimulus creating "shovel ready," or construction/infrastructure jobs, infrastructure employment has drastically decreased despite stimulus spending.
Our benchmark results suggest that the ARRA created/saved approximately 450 thousand state and local government jobs and destroyed/forestalled roughly one million private sector jobs. State and local government jobs were saved because ARRA funds were largely used to offset state revenue shortfalls and Medicaid increases rather than boost private sector employment. The majority of destroyed/forestalled jobs were in growth industries including health, education, professional and business services. This suggests the possibility that, in absence of the ARRA, many government workers (on average relatively well-educated) would have found private-sector employment had their jobs not been saved. Searching across alternative model specifications, the best-case scenario for an effectual ARRA has the Act creating/saving a net 659 thousand jobs, mainly in government.
The findings in this study are disturbing. The private sector fuels the public sector and the stimulus is a perfect example of how the government fails to create sustainable jobs and destroys the private sector in its overreach. And what did the American taxpayers get out of the deal? A stalled economy, no long term job growth, stunting of growth in the overall economy and another trillion dollars in debt.