erin8u4l: Making Easy Money

The stimulus package failed because it consisted mostly of tax cuts. Tax cuts are among the very worst ways to create jobs and certainly the most expensive.

The stimulus package authorizes 787 billion dollars. According to the official website (Recovery.gov) $565 billion has actually been spent or credited. There are three categories of "stimulus." Citing amounts spent, they are:

$243.4 billion in tax cuts.

$154.5 billion in contracts, grants, and loans. This is what we actually think of as a stimulus, construction and research projects.

$166.8 billion in entitlements. This is mostly money to the states to help with unemployment insurance.

Estimates of jobs "saved and created" by the package range from 800,000 to 2.4 million (both from the Congressional Budget Office), with other estimates at 1.25 million (IHS/Global Insight), 1.06 million (Macroeconomic Advisors), and 1.59 million (Moody's).

Let's use Moody's estimate (sort of the high middle, and independent) and round it off to 1.6 million jobs "saved and created."

That's $353,125 per job.

I'm sorry, but that's ridiculous. It's obscene.

If you have an essentially unlimited line of credit, as the government essentially does, it would appear relatively easy to create jobs.

"Hey, you, over there on the unemployment line, wanna work cleaning up our national parks? Yeah, we'll give you a twenty dollar rake, some biodegradable garbage bags, and twenty bucks an hour." That happens to be 47 cents an hour over the average wage.

No national parks or monuments in your neighborhood?

All right, there are lots of empty lots and abandoned homes due to the housing market collapse. "Let's clean 'em up. Same deal. That's forty thousand a year. You can live on that."

Presumably the government will be decent about it and pay the usual benefits -- social security, unemployment insurance, workman's comp, and so on -- which adds $8.11 an hour. That's a little less than $17,000 a year, making a total cost of $57,000 per year, per job.

Jobs don't exist in a vacuum, not even sweeping the streets by hand with a broom. There has to be a certain number of overhead costs. Not counting salaries of supervisors and such (which would be part of the job creation numbers), not counting benefits (already in there), 15 percent is a very generous number, for another $8,550, a total of $65,550 per job.

So that's what a "created" job should cost. About $65,000.

If you actually want to "create jobs," that's how you should do it. Go out and create them.

But that's not how we do things. We were not goddamn Communists. Or even socialists. We're capitalists. So we give out contracts to private enterprises and grants to universities and other institutions.

Construction projects, one of the primary forms of job creation has lots of costs beside labor. They have machinery, materials, a variety of business expenses (accounting, insurance, legal, etc.), the purchase of land and so on. Labor accounts for 20-30 percent of a construction contract. Let's take the low end, 20 percent, and assume that a construction job is one of those $65,000 wages plus benefits for a full year jobs, and the cost of that job then becomes $325,000.

That's pretty close to the $353,125 per job number we got using the Moody's estimate.

Except that all those other construction costs (excluding land purchase, which should be less relevant here) involve additional labor. For example, materials are manufactured, a certain portion of them here, in the US. Truckers transport them. Building supply company employees handle them. Machinery is built (some portion of it here), and maintained (all of it here). The construction company pays it's staff and the professionals (lawyer and accountants), and so on. All those people buy food (keeping supermarket workers employed), buy other stuff, pay their bills, and so on.

This is the famous Keynesian multiplier effect.

It's also very difficult to calculate how many non-site, indirect jobs does a construction project support with all its other spending. In the figures we're using, that 80% of the costs. It's reasonable to say that at least half of that goes into people's pockets as it moves down the line.

If we figure it that way, it should probably cost about $130,000 per job.

Let's go back to the breakdown.

First let's take out the aid to the states for unemployment insurance assistance. Obviously that doesn't add jobs. It helps people. It goes to keeping the community afloat, but it doesn't create a whole lot of jobs.

Let's take out the tax cuts. Just as an academic exercise, for the moment.

That leaves projects, grants, and loans. $154.5 billion.

If we have 1,600,000 jobs created and saved, and divide it into the money spent on projects, it comes out at $96,562 per job.

That actually makes sense. It's expensive. But it makes sense.

Direct job creation, or job creation through contracts (like road building), has a multiplier effect. Each job creates more jobs, both through the support jobs and through the spending by the people who are employed.

Job creation through tax cuts works the opposite way.

The price per job is multiplied many times over.

In this last election cycle, Carl Paladino was running against Andrew Cuomo for governor of New York. One of the charges that Cuomo leveled against him was that he got $1.4 million in tax breaks but created only one job from that.

The implication was that Paladino was a sleazy rip-off artist. At best.

He may be, but it is only a particularly vivid example of how the tax cuts to job creation equation actually works.

We are still arguing about extending the Bush Tax Cuts.

The Bush Tax Cuts cost about two trillion dollars.

They were originally labeled and promoted as "jobs and stimulus" packages. Let's take him at his word. Over the course of his two terms 1.1 jobs were created. That didn't even keep up with population growth. It also cost $1,818,182 per job.

Close to the same numbers that Paladino was working with.

The Obama White House, a prisoner of the prevailing 'tax cuts stimulate the economy and create jobs' theology, passed a stimulus bill that was 40 percent tax cuts, 30 percent unemployment insurance, and only 27 percent actual stimulus.

That's why it didn't work.

That's not even the bad news.

Here's the bad news. The tax cuts are still in effect. The odds are they will be extended, even for the very wealthiest.

Here's worse news. There's only one thing stupider than cutting taxes to create jobs. It's to cut spending. In the recent NY governor's race, for example, both leading candidates promise to cut spending. That means cutting jobs. That's happening state by state all around the country. Not only does cutting jobs mean, in a very direct one-to-one way, fewer jobs, it has a negative multiplier effect. It means there are fewer people with money to spend on the things that create jobs for other people.

The power of hands-on learning is indisputable. But when it comes to investing your money in the stock market, however, making a beginner’s mistake can cost you more than just your self-esteem. Thankfully, the web makes it easy to practice with virtual money.

There are a multitude of online investment games like Investopedia and gnuTrade that play with virtual money, but not all of them are easy for beginners. Here are five of the best free (because you shouldn’t have to spend real money to play with fake money) online games for getting your feet wet.

1. Wall Street Survivor

Invest $100,000 in virtual cash via drop-down menu choices. A friendly cartoon version of stock guru Mark Brookshire helps you make your final decision by providing some rating numbers when you input a stock. These include a rating for survivor sentiment, fundamentals, technical and a Motley Fool class='blippr-nobr'>Ratingclass="blippr-nobr">Rating.

For additional help choosing stocks, the site has an impressive resource library that spans beginner, intermediate and advanced levels. Start with Investing 101 and consider taking advantage of the community forums if you have specific questions. Those who need a little help getting started can also choose to adapt one of the preset portfolios created by proven traders.

While the $100,000 competition is most popular, anybody on the site can create a contest. Prizes vary, but most often consist of competitive pride.

2. HowTheMarketWorks

Owned by the same company as Wall Street Survivor, this game is great for investors looking to gain experience with a new type of portfolio. In addition to stocks and indexes, there are options to experiment with Forex portfolios, penny stocks, mutual funds and short selling.

Beginners can execute market order-based trades in a “fun mode” without worrying about things like set hours, maximum number of trades per day, per stock and order expiration. A “realistic mode” amps up the complexity after they’ve mastered the beginner level.

Players can manage up to three stock portfolios and three Forex portfolios on the site at once. For each portfolio, they select a starting value between $100 and $500,000 and set how much virtual commission you are charged per trade.

The competition aspect is optional. General monthly contests give each player $25,000 as a virtual starting point. Other public contests include challenging restrictions like “short sells only” or “penny stocks only.” Users can create their own password-protected games as well, which is a feature that teachers find helpful for creating class competitions.

3. Young Money Stock Market Game

Young Money Magazine’s stock exchange game is easy to learn but also fairly realistic, which is a hard balance to strike.

Realistic aspects include a virtual commission that’s taken out of each trade, adhering to market hours and rules about how you can invest. Unlike many investing games, trades are made at a real-time price. Learning aspects include convenient help icons on key terms and an intuitive tabbed interface.

The site runs a monthly contest with a $100 (real) cash prize that goes to whoever gained the highest percentage. Players can also create their own contests or join other user-made contests.

4. MarketWatch Fantasy Earnings Trader Game

MarketWatch will run this mock stock market contest for a total of four weeks, awarding the winner of each week with an iPad. It’s on week three right now, but there’s still time to get in on the competition for week four.

You must have your selections picked before the week starts on Monday. The shares that you select are “purchased” at Monday’s open and will “sell” automatically at Friday’s close.

The catch is that all players can only use the 15 to 20 symbols selected for each week. The companies are selected by the game owner for companies that are projecting their earnings during each week. Lining up picks is easy — players simply drag the company’s logo to their trading card and designate if they want to sell short or go long.

Although there are some pros playing, this game is especially manageable for beginners due to the limited stock options for each week.

5. UpDown

Like Young Money’s game, UpDown has helpful icons that explain key terms for beginners. More comprehensive resources in the education center mercifully cover even the most basic of investing concepts.

Community features, like the opportunity to collaborate with a group and to see the most-bought and most-sold stocks, are also helpful for beginners. The “watch list” tool provides a convenient dashboard for monitoring potential picks.

UpDown sponsors a monthly contest that rewards players who beat the market with real cash.

More Business Resources from Mashable:

- 5 Lessons to Learn from Web Startups/> - 20 of the Best Resources to Get Your Startup Off the Ground/> - 5 Startup Tips From the Father of Gmail and FriendFeed/> - 6 Ways to Recruit Talent for Startups/> - 10 Essential Tips for Building Your Small Biz Team

Image courtesy of iStockphotoclass="blippr-nobr">iStockphoto, H-Gall

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Monday, November 15, 2010

Making Easy Money

1. Wall Street Survivor

2. HowTheMarketWorks

3. Young Money Stock Market Game

4. MarketWatch Fantasy Earnings Trader Game

5. UpDown

More Business Resources from Mashable:

For more Business coverage:

1. Wall Street Survivor

2. HowTheMarketWorks

3. Young Money Stock Market Game

4. MarketWatch Fantasy Earnings Trader Game

5. UpDown

More Business Resources from Mashable:

For more Business coverage:

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