Measuring Comparative Benefits Of Arra Spending


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Measuring Comparative Benefits Of Arra Spending

  1. 1.   Briefing  Paper  No.  1:    Dashboard  Economist  Team   Robert  B.  Cohen,  PhD;  Lawrence  Chimerine,  PhD;  Maryann  Feldman,  PhD   Measuring  Genuine  Impacts  and  Benefits  of  Federal  Investments  –  The  Dashboard  Analysis   Is   there   a   way   to   precisely   and   quickly   examine   the   impacts   and   benefits   of   Federal   Investments   regardless   of   purpose   or   timeline?   To   answer   this   question,   the   National   Dashboard   Project   has   combined   a   number   of   new   information-­‐gathering   techniques,   detailed   reports   on   funded   projects,   intelligent  data  mining,  a  massive  storehouse  of  historical  data  and  regional  input-­‐output  modeling,  to   provide   a   much   more   reliable   way   of   measuring   the   impact   of   government   programs   than   existing   methodologies.   This   methodology   provides   policy   makers,   fund   providers   and   recipients   with   a   more   sophisticated   way   to   estimate   impacts   of   each   component   that   a   Federal   investment   or   initiative   is   producing,   as   well   as   to   assist   with   future   investment   from   unspent   ARRA   and   emerging   reauthorization   programs  at  Federal  departments  and  agencies.     The  Dashboard  explores  impacts  on  local  economies  and  provides  a  comparative  baseline  from  historical   datasets  to  enable  predictive  impact  analysis  of  potential  future  investments.  The  Dashboard  offers  an   innovative  way  to  compare  Federal  initiatives  across  industries  and  geographies.  It  provides  the  metrics   that   government   officials   at   the   national   and   local   level   can   use   to   examine   the   impact   of   common   Federal   spending   and   more   traditional   anti-­‐cyclical,   federal   spending   and   tax   cuts   and   to   determine   what   adjustments   might   be   made   to   ensure   future   spending   provides   the   biggest   national   benefit   possible      This  capability  has  always  been  needed  but  in  current  economic  times  and  pressures,  current   and  future  Federal  investment  planning  and  execution  will  require  much  more  informed  and  integrated   knowledge  such  as  the  Dashboard  can  provide.   Some   may   ask   how   the   Dashboard   differs   from   any   comprehensive   set   of   tools   used   by   government   currently   to   do   investment   planning   and   allocation.   The   major   difference   is   that   government   records   contain   Federal   knowledge   but   the   impact   and   consequence   knowledge   is   contained   in   dozens   of   difference   data   collections   inside   and   outside   government   in   disparate   forms.   The   Dashboard   brings   together   Federal   data   from   many   sources   with   information   from   commercial,   state,   local   and   consulting   venues   to   create   a   comprehensive   picture   of   all   inputs   and   outputs   from   funding   decision   to   the   different  levels  of  transfer  and  consumption  down  to  individuals.   The  following  figure  illustrates  a  timely  example  of  how  the  Dashboard  could  be  used  to  understand  the   impacts   of   ARRA   spending   in   different   cities   and   across   occupations.   The   figure   presents   very   preliminary  findings  concerning  two  different  size  Midwestern  cities  labeled  City1  and  City2.    The  figure   indicates   that   the   local   economic   benefit   for   new   jobs   is   highest   for   healthcare   and   education   jobs   in     1  
  2. 2. City1.1   The   figure   compares   the   “benefit   ratio”   -­‐-­‐   the   value   a   single   job   adds   to   the   local   economy   (sales   less  labor  and  material  inputs,   estimated   on   a   per   employee   basis)  divided  by  the  cost  of  creating   a   new   job  -­‐-­‐  or  a  rough  impact  measure,  relative  to  the  cost  of  creating  new  jobs.  The  figure  also  shows  that   the   same   jobs   have   a   higher   “benefit   ratio”   and   cost   nearly   half   as   much   to   create   in   City1   as   compared   to  City2,  for  reasons  that  we  discuss  below.       Though  any  job  created  is  important  to  the  vitality  of  the  nation’s  recovery,  the  strength  and  durability   of   these   jobs   will   ensure   that   the   actual   investment   benefits   not   only   help   the   economy   in   the   short   term,   but   also   improve   the   long-­‐term   economic   competitiveness   of   states   and   communities.   The   impact   analysis  and  assessment  using  The  National  Dashboard  tools  and  data  has  already  given  us  insights  that   can  define  how  best  to  deploy  similar  or  new  funding  via  grants,  loans  or  contracts  in  the  future,     High-­‐level   Analysis   of   two   diverse   economies:   why   drilling   into   the   data   is   critical   to   performance   Looking  further  at  City1,  there  is  a  rather  steep  benefit  curve  for  the  four  types  of  jobs  we  examined.   Healthcare   and   education/training   jobs   in   City1   have   a   much   greater   economic   benefit   ratio   (more   than   1.0)   and   cost   less   to   create   than   comparable   jobs   that   the   funding   created   in   City2.   The   current   high   emphasis   energy   and   transportation/infrastructure   jobs,   the   focus   of   much   current   debate,   have   the   lowest  benefit  ratio  and  the  highest  cost.  For  City2,  the  benefit  line  is  much  flatter,  indicating  a  much   wider   range   in   the   cost   of   creating   new   jobs   and   a   narrower   range   of   benefits   from   the   jobs   the   Recovery   Act   created.   In   City2,   education/training   and   healthcare   jobs   continue   to   have   the   highest   benefit  ratio  and  the  lowest  cost.  Energy  and  transportation/infrastructure  jobs  again  have  the  lowest   benefit   ratio   and   the   highest   cost.     Though   preliminary,   this   result   comes   from   real   data   gathered   in   the   last  few  months  and  analyzed  by  the  Dashboard.   In   looking   at   similar   jobs   in   different   cities,   nursing   jobs   in   a   medium-­‐sized   city   might   provide   more   economic   value   relative   to   their   pay.   In   contrast,   nurses   in   a   larger   city   might   contribute   the   same                                                                                                                             1    Local  economic  benefit  is  measured  as  the  value  added  locally  (sales  less  labor  and  material   inputs)  divided  by  the  cost  of  creating  new  jobs,  a  “benefit  ratio,”     2  
  3. 3. economic  value,  but  have  a  lower  economic  impact  relative  to  their  cost  because  nurses  are  paid  more   in  larger  urban  centers.  Things  might  work  in  a  similar  way  for  jobs  in  education.  For  instance,  teachers   in  smaller  cities  are  paid  less  than  their  urban  counterparts,  but  provide  students  with  similar  learning   and  skills.  Consequently,  the  contribution  of  teachers  in  medium  sized  cities  to  the  local  economy  may   be   larger   relative   to   their   cost   or   pay   than   the   economic   “benefit”   of   teachers   in   bigger   cities   who   usually  get  paid  more.     Initial  Conclusions  from  The  National  Dashboard  Proof  of  Concept   For  the  sake  of  illustration,  one  could  draw  two  very  preliminary  conclusions  from  these  findings.  First,   healthcare   and   education/training   jobs   are   likely   to   contribute   larger   economic   benefits   to   the   local   economy   than   the   current   energy   and   transportation/infrastructure   jobs   the   current   emphasis   on   these   topics   is   creating.   Job   creation   is   necessary   on   a   short-­‐term   AND   a   long-­‐term   basis   for   local   recovery.   Within  these  four  sectors,  the  types  of  jobs  created,  the  overall  economic  environment  in  which  the  jobs   are  created,  and  the  ability  to  sustain  growth,  are  vital  to  understand.       Second,   jobs   created   in   medium-­‐sized   cities   are   more   likely   to   have   a   bigger   economic   impact   on   the   local  economy  than  jobs  created  in  larger  urban  centers,  primarily  because  they  contribute  more  value   relative   to   their   pay.   And   yet,   within   larger   urban   centers,   there   are   pockets   of   employment   and   job   creation   that   must   be   assessed   rather   than   rolled-­‐up   or   aggregated.   The   more   that   analysis   and   assessment   of   impact   can   be   drawn   to   the   locations   and   places   with   the   greatest   need   and   greatest   benefit,  the  more  targeted  certain  grants  and  contracts  in  the  future  will  create  improved  ratios.     The   economic   benefit   estimated   here   considers   only   the   local   economy.   It   does   not   include   broader   economic   benefits   that   result   from   spillover   effects,   such   as   spending   on   materials   purchased   outside   the   local   economy.   It   also   does   not   consider   secondary   benefits,   such   as   the   benefits   of   reducing   our     3  
  4. 4. imports  of  oil  that  would  result  if  the  United  States  creates  more  alternative  sources  of  energy.  These   benefits   and   measurement   techniques   are   being   explored   within   The   National   Dashboard   local,   state   and  regional  communities  where  critical  outcome  data  is  available.   Our  assessment  for  fellow  economists  and  policy-­‐makers  of  The  National  Dashboard:  it  provides  analysis   of  metrics  and  economic  decisions  that  are  difficult  or  nearly  impossible  to  create  from  other  sources.   Federal   government   statistics   do   not   provide   adequate   detail   at   the   level   of   the   local   economy.   The   Federal   government   and   private   sources   also   do   not   have   regional   models   that   can   easily   assess   the   impact   of   specific   programs,   such   as   the   components   of   unique   or   specialized   programs   that   emerge   from   several   sources,   and   not   from   just   one   grant   or   contract.   The   metrics   and   analytic   approach   developed  within  The  National  Dashboard  process  reveals  where  special  investment  initiatives  such  as   ARRA   is   succeeding   and   where   it   might   be   improved   if   additional   funding   is   approved.     In   turn,   The   Dashboard   Project   creates   and   leverages   new   knowledge   of   one-­‐time   or   special   investments   so   that   policy-­‐makers   can   enhance   their   planning   and   execution   of   traditional   federal,   state,   and   local   spending   patterns.       About  the  National  Dashboard   The  National  Dashboard  is  a  project  of  the  Center  for  State  and  Local  Government  Excellence,  and  a   consortium  of  organizations,  institutions,  and  individuals  focused  on  the  effectiveness  and  efficiency   of   federal,   state,   and   local   spending   for   economic   recovery,   competitiveness   and   targeted   use   of   public  resources.   For  more  information  on  The  National  Dashboard,  please  review             4