There has been much uproar over the Obama Administration’s predilection for the metric “jobs saved.” Top advisers and the President himself will often say this program saved several hundred jobs or this bill saved several thousand jobs. His critics like Harvard economist Greg Mankiw say there’s no way to measure how many jobs a President rescued. They demand to ask for the methodology behind these statistics—does capitalizing the banks count for jobs saved because it indirectly keeps many financial jobs afloat? How about companies that now have a line of credit available to them and are subsequently eschewing firings they were otherwise going to make? Or does that metric only explicitly refer to a job directly created by the government? This thirst for rigor is certainly commendable, but specifying jobs saved is as legitimate or illegitimate as many other economic claims.
A variation of the notion jobs saved is jobs created, a favorite among politicians and professional economists. During the Bush Administration, for example, senior officials would often says his tax cuts created fifty-two months of job growth. The fact that there was a tax cut and the fact that there was fifty-two months of job growth are accepted facts. But the implied, or not even implied but stated relationship is his tax cuts caused the job growth. How can any economist that possesses the slightest facility with rudimentary logic make that claim with scientific confidence? The policies of Europe’s Central Bank (ECB), economic decisions by the Chinese government, and general weather patterns also played an undisputed role in America’s economic activity. Perhaps those variables, which are bigger than a 4.6% decrease in the income tax and 5% decrease in the capital gains tax, have more explanatory power. Yet that causal relationship was accepted among the intelligentsia. Why?
It was blindly regurgitated in the media because that causal relationship makes intuitive sense. The private sector has more money to spend, so it will hire more people. That statement is easy to accept, but it has no “intellectual rigor,” the thing that supposedly makes Larry Summers or Al Hubbard’s economic predictions more reliable than the predictions of ordinary citizens.
If we can accept that these causal relationships are more intuitive than scientific, then the notion of jobs saved isn’t so silly after all. Without the (successful?) execution of TARP (the debate can now morph into one about the relative importance of executing the law versus lawmaking), jobs would have hemorrhaged with more acceleration. Or perhaps the jobs saved is a despite argument because another President would have executed TARP better, which in turn would have made the capital markets work better and sooner? The more you think about it, the more complicated these seemingly basic arguments become. But if the goal is consistency and to avoid being hypocritical, then the same folks who criticize jobs saved should criticize jobs created or the same people who accept jobs saved should also accept jobs created. That much I know, or at least think I know.
