Measuring Comparative Benefits Of Arra Spending
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Transcript of Measuring Comparative Benefits Of Arra Spending
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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
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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,”
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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
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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 www.nationaldashboard.org