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House Recovery Act Creates More Jobs than Senate Compromise

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Read also: Getting the Economic Recovery Bill Right

The $836 billion Senate-passed American Recovery and Reinvestment Act provides for 9 to 12 percent fewer jobs created or saved than the House-passed legislation despite costing $16 billion more. The House-passed legislation creates or saves between 343,000 and 444,000 more jobs than the Senate compromise. A state-by-state breakdown is shown below.

As outlined by Michael Ettlinger in “Getting the Economic Recovery Bill Right,” the greater job creation in the House bill is because it is more balanced toward investment programs than on less effective tax cuts. The reverse is true in the Senate compromise which, among other tax measures, includes a patch to the Alternative Minimum Tax that will not be as stimulative as investments in infrastructure or fiscal help to states that the compromise pares back.

Senate Bill Would Create Fewer Jobs than House Bill

State Fewer Jobs in the Senate Bill Compared to House Bill
Alabama 7,144 – 8,622
Alaska 1,312 – 1,589
Arizona 8,465 – 10,487
Arkansas 3,658 – 4,584
California 39,451 – 51,778
Colorado 4,615 – 6,097
Connecticut 1,027 – 2,288
Delaware 1,181 – 1,474
District of Columbia 1,651 – 1,910
Florida 24,689 – 30,385
Georgia 14,091 – 17,140
Hawaii 1,799 – 2,233
Idaho 1,857 – 2,339
Illinois 15,589 – 19,868
Indiana 8,355 – 10,465
Iowa 2,709 – 3,668
Kansas 2,390 – 3,268
Kentucky 5,424 – 6,805
Louisiana 6,398 – 7,865
Maine 1,440 – 1,893
Maryland 2,393 – 4,231
Massachusetts 2,532 – 4,836
Michigan 15,315 – 18,713
Minnesota 4,533 – 6,296
Mississippi 4,877 – 5,847
Missouri 7,451 – 9,413
Montana 1,330 – 1,661
Nebraska 1,438 – 2,009
Nevada 3,759 – 4,571
New Hampshire 592 – 1,014
New Jersey 3,395 – 6,581
New Mexico 2,598 – 3,252
New York 24,241 – 31,687
North Carolina 11,299 – 14,354
North Dakota 847 – 1,079
Ohio 13,683 – 17,480
Oklahoma 4,472 – 5,622
Oregon 3,943 – 5,190
Pennsylvania 11,981 – 16,273
Rhode Island 1,548 – 1,964
South Carolina 5,967 – 7,424
South Dakota 1,044 – 1,309
Tennessee 8,699 – 10,686
Texas 28,596 – 36,160
Utah 2,759 – 3,556
Vermont 767 – 1,000
Virginia 4,655 – 7,050
Washington 6,933 – 9,016
West Virginia 2,491 – 3,097
Wisconsin 4,664 – 6,480
Wyoming 746 – 940
Total 341,537 – 443,548

 

The 9 percent to 12 percent range reflects different estimates for the effectiveness of different provisions. Three sets of estimates were used: Congressional Budget Office “pessimistic” estimates, CBO “optimistic” estimates and the widely cited estimates of Moody’s Economy.com chief economist Mark Zandi. Using the CBO pessimistic estimates, the Senate compromise produces 444,000 fewer jobs than the House-passed legislation. Using the CBO optimistic estimates, the Senate compromise produces 343,000 fewer. Using the Mark Zandi figures, the Senate compromise also produces 343,000 fewer jobs.

The consequences of this lower job creation go beyond the immediate impact to the labor market of the recovery plan. The House-passed recovery and reinvestment legislation was designed not just to create jobs through spending but also to put the economy on an upward trajectory where the private sector is once again creating jobs without the aid of intensive government intervention. The compromise necessitated by conservative influence in the Senate weakens the ability of the package to achieve that aim.

Methodology

To calculate the relative job-creating and savings potential of the House American Recovery and Reinvestment Act and the Senate compromise, we assigned multipliers to every budget line in both the $820 billion House version that passed on January 28, 2009 and the $836 billion Senate compromise (the $780 billion Collins-Nelson compromise plus various amendments).

We used recently published CBO multiplier ranges, and also the much cited Zandi multipliers. Where it was not possible to assign a Zandi multiplier for a general spending measure, we used generic eight-quarter Romer/Bernstein multiplier numbers, which are 1.57 for government purchases and 0.99 for tax cuts.

To calculate the difference in jobs created between the House bill and the Senate compromise, we applied the percent differences in job creation that the respective size and composition of the packages imply to the original Romer/Bernstein projection, which presumed that the House Recovery and Reinvestment package would create or save 3,675,000 jobs. We used our state-by-state estimates of where the recovery money goes to estimate how many fewer jobs will be created or saved in each state.

Read also: Getting the Economic Recovery Bill Right

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