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On Measuring Success by the Money You Spend

January 13th, 2010 . by economistmom

money-spilling-from-purseHmm….

It seems that the Obama Administration will start to measure the “success” of the stimulus (the “recovery and reinvestment act”) the same way the Bush Administration used to brag about the “success” of their tax cuts.  As AP’s Brett Blackledge reported last night (emphasis added):

WASHINGTON – The White House has abandoned its controversial method of counting jobs under President Barack Obama’s economic stimulus, making it impossible to track the number of jobs saved or created with the $787 billion in recovery money.

Despite mounting a vigorous defense of its earlier count of more than 640,000 jobs credited to the stimulus, even after numerous errors were identified, the Obama administration now is making it easier to give the stimulus credit for hiring. It’s no longer about counting a job as saved or created; now it’s a matter of counting jobs funded by the stimulus.

That means that any stimulus money used to cover payroll will be included in the jobs credited to the program, including pay raises for existing employees and pay for people who never were in jeopardy of losing their positions.

Yes, it’s a lot easier doing cost-benefit analysis when you don’t have to worry about measuring the benefits.  Have I told you recently about how much money I’ve spent on my kids–their college applications and visits, their ballet lessons, their sports programs, and why, even their stylish wardrobes?…  I must be a really successful parent!

And on my dogs?  I don’t think I’ve yet told you about my newest dog (adopted him 3 1/2 months ago), but let me give you a hint about how great he is…

money-dog

And if you want a successful marriage, start with an engagement ring like this one.  Hey, it’s from Costco even!  ;)

5 Responses to “On Measuring Success by the Money You Spend”

  1. comment number 1 by: SteveinCH

    Diane,

    Lack of ROI analysis is nothing new for government. I rather suspect you could go through most major and minor government policies and find no real discussion of ROI anywehre in there.

    Frankly, the ROI analysis on the stimulus to date has been of two types. The macro analysis (e.g., there’s a multiplier of x for government spending) is simply an application of an assumption so it’s not much different than giving yourself credit for spending.

    The micro analysis, which, we must at least give the administration credit for trying, was so fraught with awful data, that it defied credibility from the outset.

  2. comment number 2 by: AMTbuff

    For a politician, ROI = Votes per dollar.

  3. comment number 3 by: Jim Glass

    That means that any stimulus money used to cover payroll will be included in the jobs credited to the program, including pay raises for existing employees and pay for people who never were in jeopardy of losing their positions.

    With the The NYC transit workers taking $370 million of stimulus money from the construction budget (Second Avenue Subway, we hardly knew ye) for a pay raise, that’s another 35,000 jobs “credited”! Even as they slept!

    For a politician, ROI = Votes per dollar.

    Cynic. Not that cynicism isn’t truth here. Add the cost- benefit analysis of the carbon trading bill … the Social Security COLA payment in lieu of a COLA cost increase for seniors … *destroying* all the clunkers the govt bought with taxpayer cash, etc.

    OTOH, here is an interesting cost-benefit analysis of fiscal stimulus (.pdf) across the OECD, indicating quite a large variation in payoff by nation. Form your own opinions of what it means.

  4. comment number 4 by: murf

    Great post!

  5. comment number 5 by: SteveinCH

    Jim,

    I clicked through to the link and I just had to sigh. The cost benefit analysis is simply using the multiplier for stimulus in the country. So it’s basically an assume that x in stimulus produces y in benefit. These analyses are in no way sufficient for an ROI calculation.

    Imagine a company thinking about building a new manufacturing plant saying, well, the ROIC on our current plants is 40% so this one should be too. The manager who brought that capital proposal forward would be fired on the spot