By Arnold Kling
The average American worker earns only about $40,000 per year; why does the administration, even on its own estimates, need to offer $500,000 in tax cuts for each job created?
Krugman’s arithmetic is to take the ten-year revenue loss from the tax cut, divide that by the number of jobs that supposedly will be created, and compare that with the one-year salary of a worker. It seems to me that this inflates the cost of each job created by a factor of 10.
He may be correct that tax cuts are not the most efficient way for the government to increase employment. But I do not think that this way of doing arithmetic is his best argument.
For Discussion. What are the challenges with measuring the job-creation impact of fiscal policy, even after the fact? Shouldn’t the duration of the gain in employment be taken into account?