White House 3M Jobs Figure Not Based on Real Numbers

Three Million Jobs: Really?   [Veronique de Rugy]

The White House can repeat these “jobs saved or created” numbers as often as it wants; it won’t make them true. Consider this Business Week report on a study released today by the Council Of Economic Advisers:

The report says the stimulus has “saved or created” about 3 million jobs, and is moving toward a goal of 3.5 million jobs by the end of the year, according to an administration official speaking on condition of anonymity before the report’s release today.

As it turns out, when you unpack the numbers, you find that Romer and her team didn’t actually count how many people got a job thanks to the stimulus. Instead, the number is a projection that relies on the myth that a dollar of government spending creates up to 2.5 dollars of economic growth.

That’s strange. Robert Barro of Harvard University has estimated that, even in the best-case senario, $1 of government spending will generate between $0.40 and $0.70 ofeconomic growth, i.e., much less than the amount of growth that we would get if that dollar was invested privately. What’s more, if that dollar has previously been taxed out the economy, then the overall effect of $1 of government spending is a destruction of $1.10 of economic growth. Not exactly the rosy projections that Romer is touting today. (And Barro is not alone. Even the most optimistic projections of the economic effect of government spending never display such numbers. Never.)

Recovery.gov, which actually counts the number of jobs created (if in a very favorable light), only displays roughly 680,000 jobs, not 3 million. Why would the White House not up that number if in fact 3 million jobs had been created? Because they don’t have names and addresses to back up their gargantuan projections.
 
The business community itself doesn’t seem to know where these miraculous jobs are. A few weeks ago, the chairman of the Business Roundtable — the association of top corporate executives that has been President Obama’s closest ally in the business community — accused the president and Democratic lawmakers of creating an “increasingly hostile environment for investment and job creation.” The stimulus, they say, is hurting them, not helping:

“In our judgment, we have reached a point where the negative effects of these policies are simply too significant to ignore,” Seidenberg said in a lunchtime speech to the Economic Club of Washington. “By reaching into virtually every sector of economic life, government is injecting uncertainty into the marketplace and making it harder to raise capital and create new businesses.”

Romer, on the other hand, lives in a fantasy world where the administration’s policies will encourage investment:

The economic stimulus legislation pushed by U.S. President Barack Obama last year will help encourage $280 billion of investment by private industry and local governments, according to an administration report being released today.
The analysis, by the White House Council of Economic Advisers, estimates that about $100 billion in government grants, loan guarantees, interest subsidies and tax breaks will be matched almost three-to-one by other spending on clean energy projects, economic development and building construction.

Well, not exactly: The Federal Reserve has calculated that almost $2 trillion of capital is sitting on the sidelines right now, waiting for the government to stop its policy of destruction. The business community is not investing $1.8 trillion because of the uncertainty injected by the government’s policies, including the stimulus.
 
I am about to release the third Stimulus Facts report based on Recovery.gov data, which show that four out of five jobs created were created in the public sector. Remember the promise made by Romer herself when the stimulus was passed, that the bill would create 3.5 million jobs in two years, mostly in the private sector? Almost two years later,682,370 jobs were reported created, not 3 million, and over 510,000 of these were in the public sector. (My preliminary data is online here; my paper on whether government spending stimulates economic growth is here.)

Basically, the White House can claim all the job creation that it wants. The data show a completely different story. I am testifying before Congress and Rep. Paul Ryan at 1 p.m.to make these points.

A Market Solution to Capping CEO Pay

I personally believe that CEO's of PUBLICLY Traded companies, should never be paid more than 10X the Median income in the State they do business in because of that. It's a publicly traded company, not a completely private firm, doing business with completely private money. However, I DO feel that there definitely should be Stock Options given to attempt to match the pay at private companies.

How would this work?

Let's say that you're the CEO of Fannie Mae, and your pay is around 500,000 a year, which is about 10X the median income in DC, where the company is headquartered.
As part of your compensation package, you also get a pool of Stock Options, let's say 500,000 shares (about 1 for every dollar earned), that you can exercise in 5 years. Let's face it, any decisions you make today, won't really impact the company for at least 3 to 5 years.
Now if you did as the last CEO of Fannie Mae did, and lower the value of the stock from 70 bucks a share down to a couple of bucks today, then your Stock Options would be absolutely worthless. Why? Options are given at the price they are the day they are given. In other words, if the price of a share was say $70.00, and over 5 years went up to say $100.00, then your options would be worth around 30 bucks a share, or 15 Million Dollars. 50% higher than today's average "Big Gun" pay of 10 Million a year, but here's the big difference in my "Market Driven" compensation plan.

If you drove the company into a ditch, as Fannie Mae is in now, the options are worthless and you get ZERO bonus. Since it takes 5 years for the Options to kick in, the "Serial CEO", would be gone. Long term growth and stability would take center stage, instead of this mindset of "Short Term" gains.

A perfect example of this is the guy that went to Sears about 30 years ago, fired all the full timers, replaced them with part timers with no benefits. Since this dramatically cut Sears cost of doing business Profits boomed. Before long, he took MASSIVE bonuses and then left just a few years later, JUST as the effects started being felt that eventually drove the company into bankruptcy. What effects you say? Do you think that Part timers are as dedicated to the long term growth and stability to the Company as are full timers, some of which had been at the company for decades? Of course not Can you imagine going over to Mobil, GE or Boeing and saying, "I'm going to cut all the full timers and hire a bunch of part timers and the company's going to make more money". The board would think you're a nut job and fire you.

This same idiot was then hired by Home Depot, where he tried to do the same thing, cut full timers, cut training budgets, took massive bonuses, then left just as Home Depot stock took a 10 years slide. The problem with these kinds of CEO's is that while there's an IMMEDIATE up-tick to the stock price, because of improved profitability, over the long term, they lose their best employees and end up with a sinking ship.

I have no problem with massive compensation to the top guns that run these companies, as long as it is DIRECTLY tied to their performance as CEO's. Take a look at the banks, still getting multi-million dollar bonuses after they had US bail them out, that's sickening. Can you imagine if Paton Manning, who's getting 14 Million a year, decided to get Fat and Lazy and didn't perform as well as he has? He'd be CUT. His 14M a year GONE.

Why do these CEO's continue to get paid MASSIVE salaries from public companies, Government sponsored Enterprises (GSE's) like Fannie Mae and Freddie Mac, publicly Traded AND publicly funded companies like these top banks, Monopolies like the Utilities and so on. It's insane, and it's definitely NOT capitalism. It's Crony Capitalism, it's "Who do you know". It's almost a Reverse Socialism, where the Super Rich are supported by the little guy.

While I still believe in a very limited government, I do believe that common sense regulations should be in place to protect Wall Street and the public sector from the excessive gluttony that we've seen when it comes to CEO pay. The reason I say this is because it's gotten to the point to where their pay has ABSOLUTELY NOTHING to do with the level of performance at the companies.

Proposals like Obama's 500K cap on pay means absolutely nothing because all the board needs to do is give the CEO's additional pay in the form of direct Stocks, (not stock options like my plan would propose). If the board was hell bent on giving the CEO 5 Million bucks, even if the stock went all the way down to $1.00, they would simply give him 5 million shares.

In the mean time, the Government continues their attack on the true hero of the American Economy, the small business owner. God Forbid, any of these guys make over a Million, we have to tax them to death. These guys aren't taking any public money, they're not taking public stocks and grinding them down to nothing. They're not ruining the Pension funds of America, yet they're made out to be the bad guy. Those "Evil People" over there making more than 250K a year. While we're being RAPED by the bank CEO's.

Something to think About

A friend of mine just emailed me this and I thought it would make a nice addition to my blog:

Every once in a while, someone puts together some interesting, yet true thoughts.


To Whom It May Concern

Who ever this boss is he has it nailed down perfectly........read his entire message and the last 3 paragraphs will make total sense to you....and if you are a left leaning socialistic democrat this type of thinking just may get you to re-evaluate your sense of direction for this country. Cuba is a prime example of where we could be if we keep heading towards thinking that the government can provide for our every need.........but first get clear in your head "WHAT AND WHO IS THE GOVERNMENT'....just what does the government produce, plant and harvest, and sell to earn the money that they so freely give to those that could but do not produce and contribute to the productivity of this country. Don't remember where it came from...BUT...once! everyone is in the wagon there will be no one left to pull it.

A letter from the Boss:

To All My Valued Employees,

There have been some rumblings around the office about the future of this company, and more specifically, your job. As you know, the economy has changed for the worse and presents many challenges. However, the good news is this: The economy doesn't pose a threat to your job. What does threaten your job however, is the changing political landscape in this country.
However, let me tell you some little tidbits of fact which might help you decide what is in your best interests.

First, while it is easy to spew rhetoric that casts employers against employees, you have to understand that for every business owner there is a Back Story. This back story is often neglected and overshadowed by what you see and hear. Sure, you see me park my Mercedes outside. You've seen my big home at last years Christmas party. I'm sure; all these flashy icons of luxury conjure up some idealized thoughts about my life.

However, what you don't see is the BACK STORY :

I started this company 28 years ago. At that time, I lived in a 300 square foot studio apartment for 3 years. My entire living apartment was converted into an office so I could put forth 100% effort into building a company, which by the way, would eventually employ you.

My diet consisted of Ramen Pride noodles because every dollar I spent went back into this company. I drove a rusty Toyota Corolla with a defective transmission. I didn't have time to date. Often times, I stayed home on weekends, while my friends went out drinking and partying. In fact, I was married to my business -- hard work, discipline, and sacrifice.

Meanwhile, my friends got jobs. They worked 40 hours a week and made a modest $50K a year and spent every dime they earned. They drove flashy cars and lived in expensive homes and wore fancy designer clothes. Instead of hitting the Nordstrom's for the latest hot fashion item, I was trolling through the discount store extracting any clothing item that didn't look like it was birthed in the 70's. My friends refinanced their mortgages and lived a life of luxury. I, however, did not. I put my time, my money, and my life into a business with a vision that eventually, some day, I too, will be able to afford these luxuries my friends supposedly had.

So, while you physically arrive at the office at 9 am, mentally check in at about noon, and then leave at 5 pm, I don't. There is no "off" button for me. When you leave the office, you are done and you have a weekend all to yourself. I unfortunately do not have the freedom. I eat, and breathe this company every minute of the day. There is no rest. There is no weekend. There is no happy hour. Every day this business is attached to my hip like a 1 year old special-needs child. You, of course, only see the fruits of that garden -- the nice house, the Mercedes, the vacations... you never realize the Back Story and the sacrifices I've made.

Now, the economy is falling apart and I, the guy that made all the right decisions and saved his money, have to bail-out all the people who didn't. The people that overspent their paychecks suddenly feel entitled to the same luxuries that I earned and sacrificed a decade of my life for.

Yes, business ownership has is benefits but the price I've paid is steep and not without wounds.

Unfortunately, the cost of running this business, and employing you, is starting to eclipse the threshold of marginal benefit and let me tell you why:

I am being taxed to death and the government thinks I don't pay enough. I have state taxes. Federal taxes. Property taxes. Sales and use taxes. Payroll taxes. Workers compensation taxes. Unemployment taxes. Taxes on taxes. I have to hire a tax man to manage all these taxes and then guess what? I have to pay taxes for employing him. Government mandates and regulations and all the accounting that goes with it, now occupy most of my time. On Oct 15th, I wrote a check to the US Treasury for $288,000 for quarterly taxes. You know what my "stimulus" check was? Zero. Nada. Zilch.

The question I have is this: Who is stimulating the economy? Me, the guy who has provided 14 people good paying jobs and serves over 2,200,000 people per year with a flourishing business? Or, the single mother sitting at home pregnant with her fourth child waiting for her next welfare check? Obviously, government feels the latter is the economic stimulus of this country.

The fact is, if I deducted (Read: Stole) 50% of your paycheck you'd quit and you wouldn't work here. I mean, why should you? That's nuts. Who wants to get rewarded only 50% of their hard work? Well, I agree which is why your job is in jeopardy.

Here is what many of you don't understand ... to stimulate the economy you need to stimulate what runs the economy. Had suddenly government mandated to me that I didn't need to pay taxes, guess what? Instead of depositing that $288,000 into the Washington black-hole, I would have spent it, hired more employees, and generated substantial economic growth. My employees would have enjoyed the wealth of that tax cut in the form of promotions and better salaries. But you can forget it now.

When you have a comatose man on the verge of death, you don't defibrillate and shock his thumb thinking that will bring him back to life, do you? Or, do you defibrillate his heart? Business is at the heart of America and always has been. To restart it, you must stimulate it, not kill it. Suddenly, the power brokers in Washington believe the poor of America are the essential drivers of the American economic engine. Nothing could be further from the truth and this is the type of change you can keep.

So where am I going with all this?

It's quite simple.

If any new taxes are levied on me, or my company, my reaction will be swift and simple. I fire you. I fire your co-workers. You can then plead with the government to pay for your mortgage, your SUV, and your child's future. Frankly, it isn't my problem any more.

Then, I will close this company down, move to another country, and retire. You see, I'm done. I'm done with a country that penalizes the productive and gives to the unproductive. My motivation to work and to provide jobs will be destroyed, and with it, will be my citizenship.

So, if you lose your job, it won't be at the hands of the economy; it will be at the hands of a political hurricane that swept through this country, steamrolled the constitution, and will have changed its landscape forever. If that happens, you can find me sitting on a beach, retired, and with no employees to worry about....

Signed, THE BOSS

God Bless America & God Bless Our Troops

------ End of Forwarded Message