The Job and Tax Math of the Stimulus

By John Latta

A report from the House of Representatives Transportation and Infrastructure Committee indicates that the stimulus, the American Recovery and Reinvestment Act of 2009, created or sustained nearly 350,000 direct, on-project transportation and infrastructure jobs during the first year of implementation.

And, says the report, this direct job creation from ARRA has meant that $343 million in unemployment checks have been avoided and nearly $419 million will be paid in Federal taxes.

But how does the committee calculate “a job”. And how are the tax and unemployment check numbers figured?

A little background.

Of the $64.1 billion provided for transportation and infrastructure programs under the Recovery Act, Federal, State, and local agencies administering programs within the Committee’s jurisdiction had announced 19,470 transportation and other infrastructure projects totaling $62.7 billion as of June 18. This amount represents 98 percent of the total available funds. Of this $50.6 billion has been obligated for 19,147 projects.

The committee says, and there’s a lot of public support from lobby and industry groups for this proposition, that ARRA has played a key role in putting Americans back to work. Of the $38 billion available for highway, transit, and wastewater infrastructure formula program projects under the Recovery Act, $34.7 billion, or 92 percent, has been put out to bid on 18,396 projects, as of May 31, 2010. Within this total, 17,405 projects (totaling $33.1 billion, or 87 percent) are under contract. Across the nation, work has begun on 16,103 projects totaling $31.8 billion, or 84 percent. Within this total, work has been completed on 5,862 projects totaling $4.6 billion.

So, to the job and tax numbers.

During the first year of implementation, these projects created or sustained nearly 350,000 direct, on-project jobs, said the committee. But how do they figure this? According to the report, the number of direct jobs is based on direct, on-project full-time-equivalent (FTE) job months. One person working full time or two people working one-half time for one month represents one FTE job month. FTE job months are calculated by dividing cumulative job hours created or sustained by 173 hours (40 hours per week times 52 weeks divided by 12 months = 173 hours).

Total employment, which includes direct, indirect, and induced jobs, reached almost 1.2 million jobs, the report reported. To calculate total employment, the committee assumed that an expenditure of $7,667 creates one FTE job month ($92,000 creates one FTE job year). The multiplier is based upon the President’s Council of Economic Advisers’ guidance.

During the first month of the second year of implementation (March 2010), the Recovery Act created or sustained 55,000 direct, on-project jobs. Total employment, which includes direct, indirect, and induced jobs, surpassed 140,000 jobs.

Direct job creation from these projects has resulted in payroll expenditures of $2 billion. Using this data, the committee calculates that $343 million in unemployment checks have been avoided as a result of this direct job creation.

The value of unemployment checks avoided is determined by multiplying FTE direct job months created or sustained by the average monthly unemployment benefits paid ($1,448.33) times the percentage of unemployed workers collecting unemployment benefits (58.6 percent). The Congressional Research Service (CRS) provided the committee with this information.

Furthermore, says the report, these direct jobs have caused nearly $419 million to be paid in Federal taxes. The value of Federal taxes paid is calculated by multiplying the direct jobs payroll by the average total Federal tax rate (20.45 percent), the sum of the average tax rate with respect to adjusted gross income (12.8 percent) and average social insurance payments (7.65 percent) for the 2008 tax year).v

Freight Movement Crisis

A new report looking at the movement of freight in America portrays a scary scenario if infrastructure in America remains stalled.

The American Association of State Highway and Transportation Officials (AASHTO) has released its Unlocking Freight Report. Not surprisingly, it offers more proof that our transportation infrastructure needs more investment. Current levels do not even offer the possibility of maintaining that infrastructure, according to this report. The new report identifies key projects in 30 states that would improve freight delivery and dependability, and offers a three-point plan to address what is needed to relieve freight congestion, generate jobs and improve productivity.