About that Perry Jobs Plan

October 17th, 2011 at 11:03 am David Frum | 54 Comments |

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The governor’s jobs plan is to open more of the US to energy exploration and production.

He promises that such a policy will create 1.2 million new jobs. When I heard this, it seemed to me utterly implausible: the US oil and gas industry employs 2.1 million today, coal under 100,000 – and these at a time of high prices and active production. 50% more jobs on top of that? In a capital-intense industry?

Michael Levi of the Council on Foreign Relations checked Gov. Perry’s math on the Atlantic website. Here’s what he found:

1) The promise of 1.2 million new jobs is subject to a deadline of … 2030! These are not new jobs that would be created in the here and now, but over a long timeline of future production.

2) The promise is also subject to a bold prediction that energy prices, high now, will rise even higher over the next 18 years, oil to $180 / barrel in today’s money, natural gas to $12 per thousand cubic feet. That might happen, but then again, it might not. After all, Perry is hoping for a big increase in energy supply. Remember what happens to price as supply rises?

3) The plan rests upon heroic assumptions about the multiplier effect of oil and gas jobs. Fewer than 400,000 of Perry’s 1.2 million promised jobs will take the form of new hires by the oil and gas industry. The great balance are supposed to come from the – ahem – stimulative effects of oil and gas production. Specifically, he assumes that every 1 new job in production will support 2.5 new jobs somewhere else.

But wait a minute. The precondition for the entire estimate is an assumption that energy prices more than double in real terms over the next 18 years. If that assumption holds, we’re going to see a reverse-multiplier effect, with higher energy prices destroying many more jobs than are produced by oilworkers spending their money at the mall.

In other words: Perry’s 1.2 million figure is not a net figure. If he’s right about the energy outlook, then his 1.2 million new energy-related jobs will hardly begin to offset a much larger number of energy-related job losses.

4) The biggest kicker of them all comes from this question: how new are Perry’s jobs really? Suppose we don’t elect Rick Perry president. Suppose we just continue on the present policy path. What happens to those 1.2 million jobs in that case? And the answer is: many of them show up anyway. Perry hypothesizes that the Obama administration will impose future regulations to inhibit the development of the gas-fracking industry in the US – and then counts as “new” jobs the jobs that would come by not imposing those as-yet-nonexistent regulations. Likewise he counts as “new” jobs the jobs that would come from approval of pipelines to Canadian oil sands. Yet those approvals are roaring ahead anyway.

Last thought:

Where’d Perry get these numbers?

Answer: he found them in a pre-existing study conducted for the American Petroleum Institute. (That same study also undergirds the Senate Republicans’ job plan.)

You’ve got to ask though: if a candidate’s entire jobs plan depends on taking a single industry’s policy wish list, tearing off the cover sheet, and putting his own name on the work, without even bothering to net out the costs and benefits for the whole US economy – how serious is that candidate?

As we’ve seen throughout the Perry campaign the answer is: not very.

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54 Comments so far ↓

  • jdd_stl1

    “Where’d Perry get these numbers?

    Answer: he found them in a pre-existing study conducted for the American Petroleum Institute. (That same study also undergirds the Senate Republicans’ job plan.)”

    So this analysis can be applied to the Senate Republicans plan also, right?

  • jdd_stl1

    On a somewhat related topic, can someone here point me to
    who the top Conservative Economists are? Who is the “Paul Krugman”
    of the right? Who do the Republicans turn to for their economic advice?

    I’m sure I will get some flippant answers to that one, and that is fine,
    but I really am interested in finding out who the really serious economists are.
    I’d like to read more about what is behind the Republican’s economic ideas.
    Thanks.

    • Rick123

      Mark Zandi was the economist for the McCain campaign.

      Unfortunately for Republicans, most of his recent analyses have been supportive of Obama’s jobs plan.

      • armstp

        There are several, but one of the favorites is Marty Feldstein at Harvard, who was for the stimulus before he has against it.

        There are plenty of hack or unserious or non-credible conservative economists who work for all these weird conservative “think”-tanks or for no-name colleges.

    • valkayec

      Try Harvard’s Greg Mankiw.

    • indy

      Douglas Holtz Eakin, Andrew Samwick, Glenn Hubbard, and Richard Posner to name a few more.

      Intellectually, none of these names hold a candle to Posner. However, with a book like A Failure of Capitalism I’m not sure any conservatives would actually claim him. But he fits my definition.

      • icarusr

        Posner is an economist? I know he writes a lot on Law and Economics – but he has been backtracking on much of that nonsense over the last few years …

        • hisgirlfriday

          His day jobs are working as a 7th Circuit Court of Appeals judge and University of Chicago law professor but yeah, he does bill himself as an economist, but you are absolutely right about him backtracking on a lot of his old dogma in that realm.

        • indy

          Q: How many conservative economists does it take to change a light bulb?
          A: None. If the government would just leave it alone, it would screw itself in.

          As I said, Posner is the one smart enough to figure out where he was wrong given the events of the last few years and he did it better and faster than the rest.

          University of Chicago economic thought has dominated US economic policy and financial theory for the last 25 years. How do you not consider one of the leaders of that school of thought an economist? If only a PhD in economics can make one an economist, I guess you could deny he is one on that basis. Rather petty but whatever.

          The doubts I harbor have to do with whether or not to consider him a ‘conservative’ one any more. He now thinks that lax monetary policy and deregulation helped bring about the current economic problems and he converted to Keynes not too long ago.

    • Marquis

      John Taylor of Stanford and Robert Lucas Jr. of the University of Chicago (’95 laureate) are heavily cited in economics journals and often consult for government . Less well known are Robert Barro of Harvard and Vernon L. Smith of George Mason University (’02 laureate). The problem with this question is that you can’t readily extend the traditional “conservative” vs. “liberal” dichotomy to the field of economics. Although economics is far from a precise science, it is by far the most precise social science (compared to say, history or psychology). In history, for example, you can have a liberal historian interpret events one way and a conservative historian interpret events another way. But the field of economics is increasingly quantitative and often utilizes nontraditional statistical models from other fields. For example, one of my stats professors in college was an astrophysicist who worked as an engineer for Raytheon and also published in economics journals. Another of my physics professors held a masters in economics and a doctorate in physics, and worked as an analyst for a bulge bracket firm. Keep in mind, too, that many economists and academicians since Milton Friedman have moonlighted as “public intellectuals.” You have to separate the “pop” economics that people like Krugman present to the media from their scholarly, published work. You might be surprised to know that the results they publish through rigorous methodology often contradict their public opinions.

  • balconesfault

    Answer: he found them in a pre-existing study conducted for the American Petroleum Institute. (That same study also undergirds the Senate Republicans’ job plan.) … You’ve got to ask though: if a candidate’s entire jobs plan depends on taking a single industry’s policy wish list, tearing off the cover sheet, and putting his own name on the work, without even bothering to net out the costs and benefits for the whole US economy – how serious is that candidate?

    Much better when it comes from Heritage or AEI? Not sure if Frum is concerned about the content, or just that it wasn’t properly laundered by some well-funded right wing think-tank first.

    • armstp

      it could have came from AEI or Heritage which could very well be funded by the API… i guess it would have been better if it came from one more layer of shell companies or institutes…

      oil company > API > Heritage…. > and now we know Heritage pays Limbaugh and Beck to promote their stuff, so even goes to them in the chain.

      oil company pays API, which pays Heritage, which pays Limbaugh or frankly pays the political candidate in terms of political contributions.

      that is usually how it goes if they want to disguise who is really saying what…

  • armstp

    A few thoughts:

    1) Then energy business is not a particularly labor intense business. You can crank up the production and exploration pretty easily without adding many more employees. If you want to create jobs, this is not the industry to be creating them in.

    2) Given all the shale base drilling that is going on right now in the U.S. the price of natural gas is not going to go up significantly for the foreseeable future. There is too much production or supply. In fact, the price of natural gas has fallen by 50% in just the last couple of years as too much supply has come on. The natural gas subsector of energy should actually probably shrink and not expand, unless natural gas all of a sudden becomes a big new source of energy for things like cars, which is not going to happen anytime soon.

    3) I suppose oil could go to $200 a barrel, particularly if you believe in “peak oil”, but that does not mean that the oil companies will hire a lot more people.

    4) There is already plenty of leased land and offshore areas that the oil companies currently have access to that they are not using or have yet to exploit. Just opening up new areas to exploit probably will not change anything or very much.

    None of this is surprising. This is what we have come to expect from the modern day Republican party.

    They do it on everything; immigration, deficits, economic stimulus, healthcare, national security, etc. etc. etc. They just lie, make stuff up or completely distort the reality. There is no honesty from the GOP and their surrogates anymore.

    • bidthesoldiers

      We shouldn’t draw any conclusions from the fact that the government is silent about the topic of peak oil.

      Isn’t it the responsibility of modern, enlightened governments to keep secret from their citizens any intelligence that might have a negative impact on their lives? Will it matter if we have depleted all fossilized organic crude, if the earth’s core is spinning out abiotic oil like cotton candy at a carnival?

      The possibility of the existence of peak oil is probably the biggest secret our government has had to keep since Roosevelt approved in 1939 what eventually became the Manhattan Project. Until we dropped ‘Little Boy’ on Hiroshima in 1945, we weren’t entirely sure what our 6 years of research and testing had wrought.

      I don’t like the idea of peak oil any more than anybody else, but I find it difficult to ignore it. Talk about the 600 lb. gorilla

  • LaLupa

    Does Mr. Frum think that Romney’s 59 point plan is serious? If he does, then his criticism of Perry is rather hollow.

    • medinnus

      Not that I’m a supporter of Romney, but can’t Frum’s criticism of Perry’s plan stand on its own merits? Either its an egregious waste of paper and ink, or not – and it seems to be.

      Romney’s plan should also be evaluated, but on its own merits.

      Frum won’t do it, as he’s now firmly in the Romney camp, predicated on the theory that since Romney has shown a spine that is cartilaginous rather than bone, it doesn’t matter what he actually says he’ll do, as what he will actually do as Flip-Flopper In Chief may or may not have relationship to what he says now.

    • icarusr

      That would work about as well as Pawlenty’s refusal to repeat his “Obamneycare” insult.

      Perry is done for. The constant hammering on an already closed coffin door, I reckon, is an attempt to divert attention from the weakness of Romney himself.

  • indy

    I find it kind of odd how totally unprepared Perry was. It seems to me he was watching tv on Tuesday and then on Wednesday he decided to run and Thursday he had a debate where he looked sort of like a deer in the headlights. I don’t know about you, but I want that guy to be President.

  • Frumplestiltskin

    another fallacy of the drill here drill now crowd is the shortage of trained petroleum engineers, big rigs, etc. Does Perry imagine that oil production is akin to Jed Clampett shooting at a racoon and striking oil?

  • armstp

    Perry says a lot about politics and the quality of politicians in Texas. No wonder that that state is a basket case. Take-out the energy industry and Texas is really nothing. Terrible public education, terrible healthcare, etc.

  • valkayec

    Mr. Frum, last week I read the Michael Levi article in The Atlantic. I was thoroughly stunned by API’s job projections and claims. Talk about con jobs! Whatever happened to truth in advertising? Mr. Levi is correct in taking them down along with Perry’s job plan.

    As the OWS movement shows, people are tired of being taken advantage of, of being lied to, and of being conned and manipulated. After more than a decade of rampant dishonesty, we want truth, honor, and integrity.

    • nuser

      “Whatever happened to truth in advertising” False advertising was a regulation first introduced in California in the eighteen hundreds. Republicans have been screaming about
      less regulation, you don’t suppose?

  • jdd_stl1

    What is not mentioned in this post is that the Atlantic piece by Michael Levy also
    attacks Mitt Romney’s energy jobs claims. Apparently Romney used a very
    similar argument to what Perry is putting forward.

  • Rob_654

    Can’t we just give Texas back to Mexico, apologize for ever wanting it, and then just treat them as we would any other country we buy and sell things with and given their huge growth in minimum wage jobs we can just outsource our crap jobs there instead of all the way to China…

    • Carney

      Sort of the opposite of secession eh? I have a large number of jurisdictions I’d like to subject to involuntary secession (expulsion?) first.

  • rbottoms

    He took all the new gas station attendants that would be hired and multiplied…by six. He’s at least as clueless as Megamind.

    • laingirl

      The only gas station attendants I’ve seen in the last couple of years are employed at a high priced station in Beverly Hills, not here in Texas.

      • valkayec

        The gas station attendants are the mini-mart cashiers. They are the largest block of oil industry employees, earning on average $8/hr.

  • Sinan

    Conservatives often cite employment numbers at the state level and then point to them as proof that their policies would work at the national level if only we let them loose. High cost states such as California are often maligned or targeted as ripe targets for these conservative states. They never admit that the real cost of doing business in California are the high housing costs and cost of living. But even if you ignore that obvious fact that any Californian knows intimately, their policies may work for one state competing against another state but does this scale for the nation? Texas has low housing costs, low taxes, low wages, few regulations and sells itself as business friendly. How does it attract jobs and where do these jobs come from? Do they come from China? Mexico? Indonesia? No. They come from other states and are mostly replacement jobs at lower costs. In this race to the bottom, Texas, South Carolina and Nevada can sell their states in comparison to California and lure a few companies away. They can lure financially strapped people away as well. But does this mean that if we did this nationally we would get any more jobs overall? Would this expand our exports? Which products and industries would benefit competively from this type of national race to the bottom? I thought the idea was to let the Third World compete for cheap labor and we were supposed to be a “service” economy or one led by our engineering and science graduates. When Ross Perot told the nation about the “giant sucking sound” he also finished the thought with a prescient point. He said that after all our 12 dollar an hour manufacturing jobs went overseas what exactly were we all going to do? Work for 6 dollars an hour? How does the wealth come back to us after we open the store? Well, the idea was that we would all share in the increased shareholder wealth created by all these wonderful new corporate profits. Anyone get a check yet?

  • StreetSign

    Neither Perry’s nor Cain’s actual plan matters. What’s being sold is the perception of a personality which can take Obama down. Right now Cain is leading the perception war. That fight creates a path for Romney. The only question is whether it will be Santorum as V.P or someone much worse.

    • Carney

      Santorum is Catholic. Romney has to pick an evangelical Protestant who has never been a social liberal. But he’s too cautious and risk averse to pick a gaffe-prone loose cannon, a verbal stumblebum, a radical, or a non-credible contender.

      In my view that filters the entire rest of the field, and most current politicians. Remainders include Tim Pawlenty, Bob McDonnell, and John Thune.

      • beowulf

        Mike Huckabee, Baptist minister, former governor, Fox talk show host; he’s a triple threat.

        • Crime Dog

          Nah…say what you will about Huckabee but he’s no sell out. He knows Romney’s a phony just like everyone else. I agree with Carney that McDonnell and Thune are the most likely choices. I’m leaning towards McDonnell because he really has no better place to go. He’ll have to leave the Governor’s mansion in 2013 and I really can’t see him knocking Mark Warner out of his Senate seat in 2014. The next statewide election wouldn’t be until 2018 and George Allen might be holding that seat.

    • Clayman

      “The only question is whether it will be Santorum as V.P or someone much worse”

      That’s impossible–> Can’t get worser than Santorum.

  • think4yourself

    To be fair, the Obama adminstration has offered similar rosy predictions of where job creation will come from without have substantive backing for it. That has been one of the issues with the TARP money that came back and bit them, it didn’t create the jobs they promised (not blaming them for the use of money, the distribution of funds was based on selling a deal that the GOP (hopefully) and that the Blue Dog Dems could support).

    That’s doesn’t make Perry’s predictions acceptable (someone else here criticized Romney’s plan as well). It just means that politicians all tell people what they want to hear without saying, “we can’t guarantee anything we try will work, but here is what we want to try.”

    • armstp

      TARP money was suppose to create jobs? That is a new one….

      TARP was used to stabilize the financial system, which it did and part of it was used to save the U.S. auto industry, which it did, but can you tell me where exactly in the TARP program it was used for job creation.

      “Obama adminstration has offered similar rosy predictions of where job creation will come from without have substantive backing for it. ”

      Can you give us any examples of the Obama adminstration making rosy predictions of where job creation will come from and they have substantively backed of it? I have been following these issue pretty closely for the last several years and I do not recall the Obama adminstration ever making rosy job predictions. Can you give us a direct quote from anyone in the Obama adminstration making rosy predictions and then backing off them? You got the entire Interweb to search…

    • bidthesoldiers

      Job plans are great for the primaries and the General but from now on, once somebody is inaugurated, it’s “all hands to the pump.”

  • bdtex

    When reached for comment,Gov. Perry could be seen lacing up his Sharron Angle running shoes.

  • PracticalGirl

    Tech gods at FF—-Why are all of my comments getting dumped? No language or incivility, and I’m shown as logged on. Irritating.

    And WTF- this one shows up, but none of the other content?

    • icarusr

      There be Gremlins in the system … type three dots and then modify.

    • willard landreth

      I’ve had that problem today also. Censorship???

      • Clayman

        They’re filtering stories not too flattering about our host. Like the piece in thedailykos about Frum’s article in the Ottawa Citizen

        FrumForum.com encourages robust and lively, but civil participation from our readers.

        • Traveler

          i thought i was being blacklisted too. Nothing like that. Just type a dot, then edit. odd way to have to post, but it works like a charm. See a lot of dot posts though. I thought they were an indication of how little the poster thought of the subject comment.

        • PracticalGirl

          I’ve never been paranoid about my content being censored, but I certainly watch my language. Thanks for the posting tip, but…

          FF Tech Gods…Please fix this.

  • willard landreth

    Too bad Frum and friends don’t deal w/ the real issues facing America today. rather they complain about Perry, Palin, Cain or Bachmann.
    No comments on McCain’s recent talk about the republican alternative job plan called the *real American job act*. No discussion about the republican obstruction of anything Obama.

  • Clayman

    …Frum’s September 28th column in the Ottawa Citizen is littered with factual errors and non-sequiturs. It is an embarrassingly bad piece of journalism.

  • Clayman

    America that pushes the envelope on a new direction for our country.

    So tell your friends there’s a new playground in the neighborhood. Now let’s have some fun!

    MICHAEL STEELE
    http://steeleforum.com/