Saved by the Stimulus

Last night I went out to grab a drink with the fiance and a few of her friends. I met one of her college friends for the first time, and as we fell into conversation. She had an interesting personal story to tell about the impact of the much-maligned American Recovery and Reinvestment Act  of 2009 (AKA "the stimulus").

You see, she's a lawyer who now works for the federal government.  But she wasn't working when she graduated law school in the summer of 2008. She went to a top-50 law school and probably one of the 3 best ones in the south-central region -- so not tip-top, but solid quality. Insofar as law school prepares you to be a lawyer, this lady was prepared to be a lawyer. Over the next year, she applied for dozens of law jobs -- many in areas she didn't specialize in or had little interest in. But with the economy crashing around her, law work had dried up.

But in the spring of 2009, the Social Security Administration suddenly got an influx of federal from the ARRA to hire employees and improve administration -- about $1.1 billion (see page 6, footnote A).

Guess who got hired to work with disability claims?

Notice four things happen here. First, Fiance's College Friend (FCF) gets a job. Second, because FCF gets a job, she's able to go out more often for drinks at fine eating establishments in Houston, which helps those establishments stay in business and helps their employees get bigger paychecks and tips. That money then keeps accelerating through the economy. Note that those two things would happen even if FCF does nothing but look at cat pictures on the Internet and does nothing useful for society or Social  Security. But that's not the case, because third, she actually gains skills at a job that she seems to like and becomes more useful over time. And finally, skillfully evaluating disability claims means more efficient service for people filing claims and better value for taxpayers wanting efficient use of government resources.

Look, we can argue about how well the stimulus was targeted, or whether it was big enough, but it's actually full of millions of little stories similar to FCF's. And, as Alan Blinder and Mark Zandi (among others) have shown (see page 8 in particular, those stories cumulatively added up to keep the  unemployment rate about 1.5 percentage points lower than it otherwise would have been -- saving or creating roughly 2.7 million more jobs across the public and private sectors

Food for thought for policymakers, especially as I keep searching for a job.