ECONOMISTS DEBUNK CORZINE’S CLAIM HIS PROPOSED $4 BILLION CONSTRUCTION PROGRAM WILL CREATE TENS OF THOUSANDS OF NEW JOBS

Assemblyman Richard Merkt today charged that over the past two months Gov. Jon Corzine and administration officials have made “conflicting and erroneous claims” that their plan to accelerate the expenditure of more than $4 billion in state funds on road, bridge and school construction projects will create, at least 40,000 and perhaps as many as 120,000 new jobs.

“It turns out that there is no scientific validation for the Democrats to make such outlandish claims,” said Merkt, R-Morris. “Respected economists say these job projections are unsubstantiated and as likely as snow during the dog days of August.”

Beginning with the announcement of his economic stimulus plan before a joint session of the Legislature on October 16, Corzine and state Transportation Commissioner Kris Kolluri have said repeatedly that tens of thousands of new, permanent jobs would be created by the administration’s infrastructure initiative.

Generally, these estimates are based on the premise that for every $1 billion spend by New Jersey on capital construction projects, between 11,000 and 35,000 jobs will be created.

“The only problem with this boast is that it is based on a distorted interpretation of a statement contained in a 2002 study by the federal Department of Transportation, which even the DOT has tried to correct,” explained Merkt.

Brian Riedl, an economist with The Heritage Foundation, a Washington D.C.-based policy research institute, wrote in the Wall Street Journal on November 14, that the study doesn’t actually make that claim.

 “Legislators and lobbyists tout a 2002 Department of Transportation (DOT) study that they believe proves that every $1 billion spent on highways adds 47,576 new jobs to the economy,” Riedl wrote.

“The problem is that the study doesn't actually make that claim. It stated that spending $1 billion on highways would require 47,576 workers (or more precisely, would require 26,524 workers, who then spend their income elsewhere, supporting an additional 21,052 workers). But before the government can spend $1 billion hiring road builders and purchasing asphalt, it must first tax or borrow $1 billion from other sectors of the economy, which then lose a similar number of jobs.

“In other words, highway spending merely transfers jobs and income from one part of the economy to another. As economist Ronald Utt has explained, ‘The only way that $1 billion of new highway spending can create 47,576 new jobs is if the $1 billion appears out of nowhere as if it were manna from heaven.’”

Riedl, senior policy analyst and fellow at the foundation, noted that the DOT tried to correct this misperception in an April 2008 memo specifying that their analysis refers to “jobs supported by highway investments, not jobs created” (italics in the original). He said the Government Accountability Office and Congressional Research Service also released studies making the same point.

“You can’t create jobs that already exist,” said Merkt. “Corzine should stop hold out false hope to people who are out of work and need immediate help.”