Saturday, March 11, 2006

130,000 jobs my ...

Major Moves is an interesting bill that has drawn a lot of partisan politics. I have not had time to read the complete bill nor have I had the time to “crunch the numbers” and make an intelligent decision about the entire proposal.

Republicans and Democrats are tossing around statistics that 100% contradict each other. I can tell you one thing for sure; no taxpayer should even consider believing the statistics that either side is putting out.

There is one statistic that I have decided to investigate. INDOT, Mitch Daniels, and The Republicans are claiming that the toll road lease will create 130,000 jobs. That is a bald faced lie that anyone with a calculator can discount in about thirty seconds. Do they think we are stupid? If claims like this go unchallenged; we need to retrain all Hoosiers in mathematics.

Please get out a calculator and let’s “crunch the numbers!”

Let’s assume that The Indiana Government gets 3.85 Billion Dollars for the 75 year lease and that all of this money is immediately spent to create jobs.

Next let’s assume that 100% of the 3.85 billion dollars will immediately go to pay construction workers.

If you divide 3.85 billion dollars by 130,000 workers then you get $29,615 dollars per construction worker. This would pay 130,000 construction workers for about 5 months (Not 75 years). This is assuming that there is no government waste, no fraud, no theft, no corporate profits, no managers, no supervisors, no accountants, none of the money is siphoned off by the government or politicians, no lawyers are involved, etc. This does not leave room to purchase any construction materials. Using this scenario the money would all be spent in about five months.

Republicans should be embarrassed to be quoting these false statistics. Heck, if these Construction Projects really create 130,000 jobs let’s look at the effect it would have on Indiana’s unemployment rate for about five months. According to the Department of Labor Indiana had 153,900 unemployed workers and an unemployment rate of 4.7% in January of this year. If 130,000 construction jobs were created and filled by Hoosiers our unemployment rate would immediately drop to .7%. Who thinks that will happen?

If you believe that Major Moves will create 130,000 new jobs please contact me immediately. I have some land that I own in Iraq that you can buy cheap. This land will make you a millionaire in just a few months. It is a great long term investment and there is absolutely no risk to you. Please shoot me an email at Mike.Sylvester@Verizon.net.

8 comments:

Editor said...

I am sure the math to this is not that simple. I'm sure INDOT has a staff of intelligent engineers, mathematicians and economists. There are a lot of factors that go beyond a 4th grade multiplication problem.

Tim Zank said...

Mike,While I find your "number crunching" a fascinating excercise in mathematics, it simply doesn't apply in this case. Nobody ever said the project would create 130k jobs instantly. Common sense would dictate the formula being used by INDOT is an inclusive one. One that figures in a "snowball" effect. For instance, more concrete being poured requires not only more guys pushing the concrete, it requires more concrete brooms, more tools, more trucks, more truck makers, more truckdrivers,and so on. One major project can create an enormous amount of ripple effect in a community. I think back to the GM plant being built in Allen County and all the people I knew from ALL walks of life that benefited from that project...from accountants to pipefitters to bartenders to hardware stores...it goes on and on. You gotta look a the big picture!

William Larsen said...

To both Jeff and Tim, Mike is most likely a lot closer to the truth than you think. Keep in mind one simple fact, you cannot get something from nothing.

As an engineer I have been asked to evaluate many an idea that on the outside seems to be great and within a few minutes it is shot full of holes using a back of the envelope calculation.

Here is the fact. $4 billion is the price tag over 75 years. Is that present value or total? Let us take present value, which is by far the larger of the two.

Governor Daniels states the toll road lease will provide $ 4 billion in revenues and produce 130,000 jobs, is this possible? To check this takes less than one minute. If we use a gradient formula we can calculate the today's dollar evenly over 75 years.

Assuming Indiana is paid $4 billion tomorrow, $104,201,747 is the amount that can be realistically spent in the first year and increased yearly by 4% if invested at 6%. At the end of 75 years, the balance is zero. If the state spends more than this amount in any given year, then some time within 75 years, there will be zero to spend thereafter. In simple terms we took future dollars and spent them now. This is theft.

$104,201,747 paying $50,000 to a worker would produce 2,084 jobs for 75 years. If you wanted to create 130,000 new jobs and keep them every year for 75 years, then the most they could be paid is $801.55 per year.

One of the largest mistakes school districts make in budgeting is they fail to match a bond term for new construction with the life span of this construction with no upgrades or maintenance. By setting the term greater than the life span with no upgrades or maintenance, you end up with the condition of having multiple bonds being used to pay for something that no longer exists plus a new bond to cover the new project.

It would be like buying a car and paying for it over 25 years. You replace the car in year ten with a new car and a new note. You now have fifteen years to pay yet on the first car and a new loan for the second car. After another ten years the second car is shot and you buy a third car. You have five years left on the first car, fifteen years left on the second car and twenty-five years left on the third car.

75 years is too long. The life span of a road without renovation is less than ten years easily. Therefore, the term should be no more than ten years and most likely closer to six years.

Keep in mind that when social security was created, they knew at the beginning it would not work and they did it anyway. More recently the $400 Billion Rx drug plan. They knew it would cost more and they used a $400 Billion number. Are all these people stupid or lacking intelligence? It is not that they who are lacking intelligence. They hope no one will challenge them.

One that figures in a "snowball" effect. For instance, more concrete being poured requires not only more guys pushing the concrete, it requires more concrete brooms, more tools, more trucks, more truck makers, more truck drivers, and so on. One major project can create an enormous amount of ripple effect in a community.

The ripple affect of the GM plant cost someone else dearly, did it not? Is GM making more cars and trucks now than before or is it about the same, just being made some where else? How many times can the $4 billion be spent? If it is 130,000 continuous, you are talking a 60-fold increase.

The IRS states there is Just over $6 Trillion reported in personal Income in 2004. The US employs about 160 million. This is $37,500 a year and our US economy has the ripple affect. The US Average wage is about $35,000 a year. How much ripple?

New job or displaced job or is he trying to take credit for a job that would have occurred anyway? What is the real scoop?

LP Mike Sylvester said...

Jeff and Tim, or course it is NOT as simple as what I listed...

But I bet I am far closer then INDOT.

INDOT has a vested interest in getting more money...

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Jeff Pruitt said...

I would like to find a single economist that actually believes the DOT study claiming the ridiculous job creation numbers. It has already been rebunked by numerous other studies including:

Congressional Research Study - "any employment gains generated by increased highway spending likely would by offset by job losses elsewhere in the economy."

Congressional Budget Office - "Some investments in public infrastructure can be justified by their benefits to the economy, but their supply is limited; some (perhaps substantial) portion of federal spending on infrastructure displaces state and local spending; and on balance, available studies do not support the claim that increases in federal infrastructure spending would increase economic growth."

Heritage Foundation - "The chief problem with the DOT study is that it relies on a type of model that is not an accurate description of how a market economy functions when millions of choices are made at any given point in time between hundreds of thousands of services and commodities, all in limited supply."

Also, the GAO went back and looked at the past performance of federal spending programs during the recession of the early 80's. Their conclusion - "Funds were spent slowly and relatively few jobs were created when most needed in the economy. Also, from its review of projects and available data, GAO found that (1) unemployed persons received a relatively small proportion of the jobs provided, and (2) project officials’ efforts to provide employment opportunities to the unemployed ranged from no effort being made to working closely with state employment agencies to locate unemployed persons."

And just ask yourself this - do you believe the new federal highway bill will create 13 MILLION new jobs? If so, well, then I suppose there's no arguing w/ insanity...

Van said...

Mike,

Why is it people will fall for numbers like that, without questioning the validity of them. It seems as though Republicans in general have had a great deal of trouble telling the truth that past several years.

Just calculating in my head, without looking up a lot of information I have based my decision on the following:

One thing to consider is the 130,000 “new jobs” are based on somebody earning about $9.00 per hour (plus some benefits, maybe).

In considering highway construction, in Indiana, I will guarantee you it WILL BE DONE by unionized labor. Since most of this type of work is done by Operating Engineers with current wage rate of $25.80 per hour, plus benefits that would be a good starting point. Adding the employer’s profit, and the cost of benefits, I would think that $40.00 per hour per worker would be accurate. Somewhere around $1,600 per week. 130,000 workers costing $1,600 per week is $208,000,000

The 3.85 Billion from Major Moves after materials, land acquisitions, and engineering costs of 60% leaves only 1.54 Billion to pay for this immense labor force. So, 1.54 Billion, divided by $208,000,000 per week means the cash cow is dead in about 7 weeks, with 74 years, 10 months, and 7 days left over.

This Major Moves thing comes to us straight from the creators of Weapons of Mass Destruction.

Van W. Cottom

Terre Haute, IN

LP Mike Sylvester said...

Jeff Pruit you bring up a great point about The Federal Highway Bill creating 13 Million jobs...

MIke