Million Dollar Jobs

The other day, one of my favorite talking heads, who knows better, made a point along the following lines:  Since the financial crisis the FOMC has spent about $2 trillion (the approximate increase in Fed assets) to increase employment by about 2 million jobs (apparently Bernanke’s estimate in his recent press conference).

His conclusion was that each job cost $1 million—not a very good deal.

The arithmetic may be right, but the logic is wrong. The “spending” may have been motivated by the need to unfreeze credit markets and stimulate the economy and create jobs, but the spending was on Treasury securities, mortgage-backed securities, commercial paper and the like—assets that are still on the Fed’s balance sheet if they haven’t matured and been replaced. Those assets did not disappear. They can be sold or held to maturity. Meanwhile, they produce earnings which increase the amounts turned over to the Treasury by the Fed. Taxpayer funds have not been used; they have been augmented.

To repeat for emphasis, however many jobs the $2 trillion may have helped “buy,” it also bought $2 trillion of securities.

As I said, the author of the misleading statement is smart, well-educated, and surely knows better. My point is that his clever arithmetic, even if his fingers were crossed behind his back, can do real damage to his less sophisticated audience. It contributes unfairly to economic illiteracy and distrust of one of the few institutions actually trying to do something about our miserable economy, including jobs.



Comments (7)

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  1. bill says:


    Why do you think so many educated conservatives are propagating these dangerous economic fallacies and appealing to ignorant anti-Fed populism? I can only conclude it is a cheap political stunt, but the long-term damage from reinforcing such ignorant ideas into the minds of the public could be severe. All for the sake of beating Obama? Is it really worth it?

  2. Paula says:

    Thanks for your assumption that there are people who can still think. I appreciate your blog. The Fed never has losses from what I heard. If I heard wrong blog about it. How did they do with the AIG sale?

  3. Kyle says:

    Smart and well educated only means that he knows how effective it can be to polarize constituents.

  4. BigEd says:

    Not sure the Fed has SPENT 2 trillion. It has purchased the 2 trillion of various Govt and near Govt securities. Suggest that is more of an investment or, better yet, an exchange of assets — newly created money for securities that will pay out over time.

  5. August says:

    It is also important to take into account the job loss avoided.

  6. Emanuel Rosen says:

    Excellent education and important point.
    But isn’t it equally incorrect to ignore the cost to the purchasing power of the dollar?

  7. Alex says:

    That’s an interesting bit of accounting.