Senate “Moderates” Cut 1 1/4 Million Jobs from Stimulus Bill
(Update: New numbers have come out indicating cuts are 88 billion, not the 120 we heard last night. In that case the difference between the original Senate and the Gang of four compromise would be 951,000.)
The bottom line on the changes demanded by "centrist" gang of four Senators Collins, Specter, Lieberman and Nelson is that the compromise Senate bill will create about 728,143 fewer jobs less than the House bill. This is a back on the envelope figure and very rough, but if anything it should be a slight underestimate. If you compare the compromised Senate Bill to the pre-gang Senate bill, it comes out to 1,271,000 fewer jobs.
Friday night during the stimulus debate Senator Ben Nelson (D-Neb) said that:
"Our plan pares back a very substantial amount of money that we believed didn’t belong in the bill. Didn’t belong in a bill that was designed to fix our economy called a stimulus package.
Now if we looked at these proposals many of them will work well in a budget or in another bill.
But we just didn’t think that they deserved to be in this particular bill which was about jobs, jobs, jobs. Now if we ask taxpayers to support it as we are, they deserve to get the biggest bang for their buck. The remaining plan will generate new jobs, save jobs and expands job opportunities all across America as it also boosts our economy."
Clearly, Ben Nelson doesn’t know what he’s talking about. Worse than that, White House Press Officer Robert Gibbs then congratulated Nelson and co. for gutting the bill:
On the day when we learned 3.6 million people have lost their jobs since this recession began, we are pleased the process is moving forward and we are closer to getting Americans a plan to create millions of jobs and get people back to work
Here are the assumptions and the math.
The House Bill was $819 billion. Of that $275 billion were tax cuts. Spending was $544 billion.
According to the CBO $140,000 of GDP means one job created. However different types of stimulus have different GDP multipliers. In general tax cuts, especially tax cuts like the AMT fix put into the Senate bill, have lower GDP multipliers. For the purposes of this analysis let’s assume that tax cuts have a .5 GDP multiplier. For spending we’ll assume a 1.4 multiplier, which is probably slightly low since, for example, food stamps appear to have been cut out of the bill and they have a 1.7+ multiplier.
The tax cut increases will increase job creation. Total tax cut increase is $52.6 billion. $52.6 billion/140,000×0.5 jobs = 187,857 jobs created.
The spending cuts will decrease job creation. Total spending cuts are $91.6 billion. $91.6 billion/140,000×1.4 = 916,000 job losses.
Add job gains to job losses and you get a net loss of 728,143 jobs.
We (Scarecrow) also compared the Gang of Four Compromise to the Senate Bill before the compromise. If we assume the Gang of Four stripped out $120 billion of spending and $20 billion of tax cuts (total of $140 billion reduction), and assumed multiplier effects of 1.4 and 0.5 respectively, then the total reduction in GDP would be $178 billion.
Using the CBO ratio of one job per $140,000 GDP, that means that "compromising" Senators managed to cut 1,271,000 jobs from the Senate stimulus package. In other words, the Gang of Four would lose even more jobs than the country has lost in the last two months, two of the highest job loss months on record.
Either way you look at it, the "moderates" now have the power to control whatever goes through the Senate. On Friday they used that power to deny Americans between three-quarters and one and a quarter million jobs.
Do note that these are rough figures. We’re using rough averages from the chart below, and assuming most tax cuts added are short term. If long term tax cuts are included, push that multiplier to .75 which reduces job losses by about another 93,929, meaning a bottom line figure of 634,2143 compared to the House bill.