Nothing like getting stabbed in the heart by NPR on my commute to work this morning.
"Most Asian stock markets rose modestly Monday as Asian exporters expect to get a boost from Obama's massive economic stimulus package."
The crime turned out to be reflux, the pain ephemeral, and meta-analysis could have just been filler on a day when US markets were closed. After all, why would Asian exporters think they would get an immediate boost from the US economic stimulus package?
The short answer is... "Why wouldn't they"? There are no safeguards to ensure that the goods used in the rebuilding and expanding of our infrastructure are manufactured domestically. In the absence of these safeguards, government agencies charged with spending the stimulus money will be pressured by their own purchasing laws to scrimp on non-labor hard costs.
In other words, the shovels in our "shovel ready" projects will probably be Made in China. Does this make sense? Do the math.
Obama is proposing $120 billion of the $850 billion stimulus to be spent directly on infrastructure projects to stimulate employment, which will directly employ 1.2 million laborers in construction, manufacturing, transportation, and energy. These jobs will indirectly create 2.4 additional new jobs as retailers and services expand to meet the needs of the newly employed. Each billion of infrastructure investment is expected to result in 30,000 new jobs.
Why? The INTRALOCAL MULTIPLIER. A working class laborer keeps money in the community longer, shopping at a neighborhood store instead of multinational chains at shopping malls, renting the top floor of a two family home from a private individual instead of sending in a mortgage check that's been syndicated to investors in dubai, paying in cash instead of on a credit card. His shopkeeper and landlord recycle this money in much the same way, leading economists to believe that every $1.00 invested in working class employment results in $1.50 in economic activity.
As a factory owner I think spending $1000 per year, per laborer, on safety and weather gear, tools, equipment, and uniforms over the four year life of a public works project is a reasonable projection. I'm assuming imported goods will win all bids on price. 1.2 million workers X $1000 X 4 years = $4.8 billion dollars. If the same gear is manufactured domestically, it may cost 20% more, or $6 billion.
Lets compare the two scenarios:
$4.8 billion spent on imported goods to support the stimulus workers: zero jobs, zero GDP
$6.0 billion spent on domestic goods to support the stimulus workers: 180,000 jobs, 9 billion in GDP
Return on $1.2 billion premium for domestic goods:
$6,000,000,000 x 30,000 jobs/billion = 180,000 jobs
$6,000,000,000 x 1.5 intralocal multiplier = $9 billion in GDP
Here's the punchline:
Government cost per job created by domestic requirement: $1,200,000,000/180,000 = $6,666
Government cost per job created by economic stimulus: $850,000,000,000/3,600,000 = $236,111
I don't think I could comment on that without sounding obnoxious, so I'll just let it stand. Even if this stimulus plan weren't about creating jobs, the tax revenue on the $9 billion increase in GDP exceeds the government cost savings.
