Federal aid for COVID for states and communities costs $ 855,000 per job

The huge federal bailout of state and local governments during the pandemic had little effect on overall employment levels, although it cost taxpayers approximately $ 855,000 in labor savings.

This is the conclusion of the new National Bureau of Economic Research working document published this week. In the article, three researchers tried to determine the effectiveness of nearly $ 1 trillion in aid from the pandemic era, distributed to state and local governments – most of which was provided as part of the US $ 1.9 trillion rescue plan in March 2021.

However, despite the skyrocketing price, stimulus spending has only a “modest impact on public employment and has not turned into significant gains for private business or the overall economic recovery of the United States,” said University of California, San Diego economists Jeffrey Clemens and Philip Hawkes. Stan Voiger, a senior fellow at the American Institute of Entrepreneurship, the three authors of the article.

Aid to states and local governments has also not had a significant impact on the wider economy, the paper said, in part because of other reactions from the pandemic government. “Both voluntary and mandatory restrictions on economic activity hamper standard transmission mechanisms that can make fiscal stimulus effective in other circumstances,” Clemens said. wrote on Twitter.

The case of rescuing state and local authorities has always been thin on paper. Despite fears of a huge budget deficit due to a combination of government-imposed blockages and changing consumer behavior during the pandemic, these deficits mostly did not materialize. Before the American rescue plan passed, there was widespread skepticism concerning the proposed rescuepartly because they had three other cost accounts from the pandemic era has already sent about $ 360 billion to help states and localities.

But instead of stimulating the economy or filling budget holes this mostly it didn’t existaid to states and local authorities simply left them equalize with cash. neither The reason reported that some of that money had been spent on unrelated things like losing money, state golf courses.

And while maintaining jobs or preventing layoffs was not the only goal of the US Rescue Plan’s spending on state and local governments, it was and remains a central goal of the rescue plan. “These funds ensure that governments across the country have the flexibility to vaccinate their communities, keep schools open, support small businesses, prevent redundancies and ensure long-term recovery,” said Deputy Finance Minister Wally Adeyemo. said in January this yearas the Biden administration loosened some of the restrictions on how these funds could be used.

Even in the context of other federal emergency plans, state and local bailouts seem extremely wasteful. Clemens, Hoxie and Veuger point out that the figure of $ 855,000 per job exceeds estimates of other emergency government aid.

Estimates suggest that the $ 770 billion wage protection program, for example, ended up costing between $ 169,000 and $ 258,000 per job saved– Although other researchers claim that the cost is only about $ 50,000 per job. The Obama-era US Recovery and Reinvestment Act (ARRA) ended up spending between $ 50,000 and $ 112,000 on a job created or maintained.

Federal aid to state and local authorities during the COVID-19 pandemic has already become one of the most unnecessary responses to this crisis. Now it can be remembered as the most extravagant.

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