Monday, March 23, 2009

Gov. Quinn to discuss his 340K jobs bill this morning: is his analysis flawed?

Governor Pat Quinn [D-IL] holds a presser this morning at 10:00 am at the Rush University Medical Center-- Armour Academic Center, 600 S. Paulina, Room 994 (9th Floor), Chicago, IL, aka “The future site of Chicago’s first full-service green hospital at Rush University Medical Center.”

The Governor, who replaced the impeached Democratic Governor Rod Blagojevich less than two months ago and whose political base is in Chicago, will be surrounded at the presser by his labor union allies: Dennis Gannon, President, Chicago Federation of Labor, AFL-CIO; Mike Yauger; Teamsters International Coordinator/Helmets to Hardhats; Elizabeth Belcaster; Teamsters/Helmets to Hardhats Consultant; Paul Cerpa; Executive Director, Hispanic American Construction Industry Association (HACIA); Frank Christensen, Business Manager, Local 2

The Governor’s press release advises that at the presser he will “highlight Illinois Jobs Now! a $26 billion capital plan that will support more than 340,000 jobs throughout Illinois.”

Wow, that is some jobs program. President Obama’s stimulus program, which had a price tag of about 800 billion dollars, argued it would “create” or “save,” about 3 to 4 million jobs. Now, fellow Illinois Democrat, Governor Pat Quinn comes along and says for a mere 26 billion dollars, he can “support,” more than 340,000 jobs throughout Illinois. Pretty good, the cost to Illinois taxpayers of Quinn’s program is only about 3% of President Obama’s program and yet Illinois gets about 10% of the jobs promised by President Obama.

Or does Illinois really get that number of jobs from the Quinn program?. Note that the Quinn press release talks about “supporting,” jobs and President Obama talks about “saving,” or “creating,” jobs. Are we talking apples and oranges? Or apples and apples? Who knows?

This whole schematic of Gov. Quinn and President Obama is mistaken. People like Ralph Martire, head of the misnamed Center for Tax and Budget Accountability, [“CTBA”], who buy into this type of “job creation,” look at how much is to be spent (A), assume a certain number of “jobs created,” per dollar spent(B), and then multiply A times B to get the total number of jobs created. It does seem as if this analysis and those who employ it are interested in justifying an expansion of government programs, at the expense of private sector programs.

Of course, what Martire, Governor Quinn and President Obama forget is that the dollars to be spent come from somewhere, i.e., taxpayers and purchasers of bonds. The money given up by taxpayers and bondholders causes resources to be withdrawn from industries and thus is a loss of jobs—this is the opportunity cost ignored by Martire, Quinn and Obama.

What is the net effect of Obama’s Stimulus Plan? Of Governor Quinn’s Capital Plan? To answer that question, you need, as Senator and former Presidential candidate John Kerry might put it, a more “nuanced approach,” than that used by Martire, Quinn and Obama.” You need to estimate such things as the “crowding out,” effect of selling bonds and raising taxes. Unfortunately, most of these Keynesian analyses just don’t go the extra mile, leaving their estimates inflated.

It would be especially interesting to see the underlying documentation to support Gov. Quinn’s estimated “340,000 jobs created,” by his capital plan.
We can’t make it to this morning’s presser with Governor Quinn, but we are hopeful our colleagues will raise these issues-- including documentation of the job creation numbers-- with Governor Quinn and his friends from labor.

Also, with all of those labor folks on the dais, can Ralph Martire, whose organization has a very heavy labor influence, be far behind. [See the CTBA Board, described here] and see here for more about the association between Martire's organization and Labor, as well as the association between "Republican," Jim Ryan and his good friend-- Ralph Martire.
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