Federal COVID Aid to States and Localities Cost $855,000 Per Job Saved
A massive federal bailout of state and local governments during the pandemic had a negligible effect on overall employment levels despite costing taxpayers an estimated $855,000 per job saved.
That’s the bottom line of a new National Bureau of Economic Research working paper published this week. In the paper, a trio of researchers attempted to determine the effectiveness of nearly $1 trillion in pandemic-era aid distributed to state and local governments—the majority of which was delivered as part of the $1.9 trillion American Rescue Plan passed in March 2021.
Despite the eye-watering price tag, however, the stimulus spending had only “a modest impact on government employment and has not translated into detectable gains for private businesses or for states’ overall economic recoveries,” conclude University of California, San Diego economists Jeffrey Clemens and Philip Hoxie and American Enterprise Institute senior fellow Stan Veuger, the paper’s three authors.
The aid to states and local governments did not meaningfully affect the broader economy either, the paper argues, in part because of other government responses to the pandemic. “Both voluntary and mandated limits on economic activity inhibit standard transmission mechanisms that can make fiscal stimulus effective under other circumstances,” Clemens wrote on Twitter.
The case for bailing out state and local governments was always paper-thin. Despite fears of massive budget shortfalls due to a combination of government-imposed lockdowns and changing consumer behavior during the pandemic, those deficits mostly did not materialize. Before the American Rescue Plan passed, there was widespread skepti
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