Created or Saved or Estimated or Assumed

The Congressional Budget Office's predetermined stimulus reports

In selling the American Recovery and Reinvestment Act—otherwise known as the economic stimulus—to the American public last year, the Obama administration promised that the massive spending package would serve as a sort of Keynesian Red Bull, allowing the tired economy to keep partying hard by pumping up GDP and trapping unemployment in single digits. Or, as the administration put it in January 2009, the bill was to create or save three to four million jobs over the next two years, with over 90 percent of those jobs in the private sector.

Instead, the economy reacted like it just downed a glass of whiskey and warm milk: Private sector output fell sharply, and last fall, the unemployment rate hit 10.2 percent.

Yet the Obama administration continues to defend the stimulus, aided in no small part by legally required reports issued by the Congressional Budget Office. But those reports rely on assumption-packed models that effectively predetermine their outcomes; what they say, in essence, is that the stimulus worked because we assume it did. 

Here's what the Congressional Budget Office's (CBO) most recent report on the matter estimates the stimulus' effects were in the fourth quarter of 2009: Thanks to the stimulus, America is somewhere between 1 and 2.1 million jobs richer than it would have been with no government intervention. Federal dollars have fattened up our GDP as well, adding somewhere between 1.5 and 3.5 percent to the size of the economy. 

Naturally, the Obama administration is keen to take credit. And in touting the CBO's stimulus figures, the White House repeatedly employed the phrase "created or saved." After widespread eye-rolling at such an obvious rhetorical gimmick—not to mention significant evidence that many of the jobs it was claiming credit for were not, in fact, created or saved—the administration altered its lingo and started referring to jobs "funded." But this too is not as accurate as it could be, at least in the context of the CBO's reports; a better phrase might have been "created or saved or estimated or assumed." 

That's because CBO's estimates are generated using models that significantly boost the figures provided by existing measurements (measurements which themselves have been called into serious question). To some extent, that's understandable—determining how many jobs would exist in the absence of a policy is impossible to do with any certainty; no matter how good your models, building a counterfactual is always a guessing game. But it's also a game that's awfully easy to rig, or at least tilt in your preferred direction. 

That's especially true when estimating government spending's productive effects, which is accomplished by plugging numbers into a formula that assumes that government spending produces a multiplier—an increased return for every government dollar spent. In other words, it extrapolates from how much money is put in rather than from what has actually come out. And it does so using a formula that dictates that if money is put in, even more money will come out. According to the CBO's estimates, depending on how the money is spent, one dollar of government spending can produce total economic activity of up to $2.50. What a deal! 

It's certainly a good bargain for the administration, because this methodology grants them a certain amount of predictability in what the outcome of the CBO's stimulus reports will be. Since the stimulus was enacted, the CBO explains that it has only made "small revisions" to its formula (for the previous report, in December, it made no revisions). The CBO's multipliers are estimated from sources similar to those used by the Council of Economic Advisers when it first projected what the stimulus' effects on job creation would be. So for all practical purposes, the same multipliers that were used to predict how many jobs would be created are being used to estimate how many jobs have been created.

That still leaves us with a question: How many jobs did the stimulus actually create? The best answer to that question is not 1 million or 2.1 million or any of the other figures that have been batted around in recent months by the administration and its defenders. It's not even a figure at all; instead it's another question: Who knows? 

But don't take my word for it; take the CBO's. Unlike the administration, the CBO is a nonpartisan entity without a particular interest in strengthening its claims further than they should. All the numbers it produces are estimates, and the agency devotes plenty of ink to explaining its methodology and the uncertainties it entails. Last month's report cautioned that "considerable uncertainty exists about many of these economic relationships that are important in the modeling," which is why many of its estimates come in rather wide ranges. And its December report noted that "it is impossible to determine how many of the reported jobs would have existed in the absence of the stimulus package."

In other words, don't blame the CBO, which is merely doing its lawful duty to produce compliant estimates (a fact which it dryly makes clear in the introduction). Instead, blame the administration, the government-spending enthusiasts, the liberal pundits, and anyone else who treats these pre-cooked estimates as settled fact.

Peter Suderman is an associate editor at Reason magazine.

Editor's Note: We invite comments and request that they be civil and on-topic. We do not moderate or assume any responsibility for comments, which are owned by the readers who post them. Comments do not represent the views of or Reason Foundation. We reserve the right to delete any comment for any reason at any time. Report abuses.

  • Brad Potts||

    I had read a litany of articles and blog posts both saying that the stimulus had created millions of jobs and that anyone who didn't see it that way refused to accept established fact.

    Upon looking into the way the numbers were calculated I thought to myself "These numbers are estimated from the spending, not the results. How can these be acceptable?"

    Then I read the article by Robert Barro which acknowledged exactly what I had feared and went a step further and calculated that the stimulus had done nothing.

    This article is exactly correct, and in the face of what is a self-apparent fact in the troubles with the economy, rising unemployment, and slow growth, I simply wonder how can anyone actually take these estimates at face value.

  • Jordan||

    The stimulus accomplished exactly what it was supposed to do: pay off Democratic cronies.

  • Slid Marx||

    "You know what this is in my hand? The world's smallest violin, paying for your stolen liberty.

  • Slid Marx||

    "playing" but the RC is kind of good too.

  • Lester Hunt||

    I seem to remember BHO promising the porkulus would "jolt the economy back to life." Whatever else you might think of it, it sure did not do that.

  • Rich||

    Such shenanigans get discussed ad nauseum (or ad lulz) often in this neck of the intertubes.

    A proposal for an additional 2010 Census Question: Was your job created (or saved) by the American Recovery and Reinvestment Act?

  • Some Guy||

    I like it. (Of course, if that was our actual method of measuring then you might not like the results.)

  • Chad||

    It's funny watching you guys get all in an uproar because the government can't count the jobs affected by its policies. Of course is can't! Once this money is dumped into the economy, it is impossible to follow. Where do you think the word "invisible" comes from in the expression "invisible hand".

    Let's say the government gives $1,000,000 to your local school district as stimulus. How many jobs does this "create or save"? Well, IF you knew what cuts the district would have made without the money, you could make an estimate of how many first-order "creates or saves" you have, but it is not really likely that you have this information. And of course, you have no idea how many second-order "creates or saves" you have. How many writers of educational software owe their jobs to the fact that there are more teachers with larger classroom supply budgets than without the stimulus? How many more insurance peddlers at TIA-Cref? How many more guys making parts for buses owe their jobs to the non-cuts at the stimulated schools?

    Why don't we just have a conversation about pin-head dancing angels? It would be just as productive.

  • Angelologist||

    I see a pin-head right over there.

    I count ... 666 angels dancing on his head, and 13 sitting.

  • ||

    How about a conversation about trolling sockpuppets, Choad? For once, you'd actually know what you were talking about.

  • ||

    If you're aware of this Chad, then why isn't the government? Are you suggesting that the site they devoted to doing the counting is propaganda? Are they lying? Or, are they just fucking stupid?

  • Chad||

    Of course it is propaganda. The left needs to have at least some of it to counter the right, which consists of nothing but.

  • TripleB||

    You mean other than a few hundred newspapers and every major network? If you really think it's OK to use taxpayer money to disseminate propaganda, then you are more of a statist than I imagined. Frightening.

  • Sean W. Malone||

    Oh, naive one... Imagine the worst statist you can possibly think of and Chad will surpass that figure by leaps & bounds.

  • JohnD||

    Care to be more specific about the Reps propaganda? No one lies like a liberal.

  • ||

    It's funny watching you guys get all in an uproar because the government can't count the jobs affected by its policies. Of course is can't! Once this money is dumped into the economy, it is impossible to follow.

    If I hadn't read some of your previous postings, I wouldn't believe that you could be so stupid. Not because of the above statement, but because you STILL favor the government pissing away gazillions even though you admit there is no way to know if it produced a positive, or any, effect. You think it did, you hope it did, your guy claims it did, so good enough? Idiot.

    Where do you think the word "invisible" comes from in the expression "invisible hand".

    This is the most ignorant thing you have posted on this site to date, and that is saying something. The "Invisible Hand" is something that Adam Smith describes quite well. It has absolutely, positively, nothing to do with not being able to track pissed away government money.

    Read "The Wealth of Nations" you clearly have a lot to learn, about almost everything, apparently.

    How can you consider yourself educated and not know to what the "invisible hand" refers?

  • alan||

    His source on the concept was a few Mario Cuomo speeches from the 80's where it was intentionally mischaracterized. Sad, but truly evident in his words that that has to be the source.

  • Sean W. Malone||

    I'm glad I read downthread a bit, as I was just about to point out that the invisible hand has nothing what-so-ever to do with the government not being able to track where money is going...

    Has to do with this;

    The Importance of Profits

    (obligatory self-plug!)

  • justsaying||

    The invisible hand is about how the economic choices we make fuels efficiency. Best allocation of resources. That said, the point is that money circulating in the econommy is like an invisible hand. It is virtually imposible to capture/record it directly, but you can counts/see/estimate its effect. Bottom line Chad makes a good point..

  • ||

    Instead, blame the administration, the government-spending enthusiasts, the liberal pundits, and anyone else who treats these pre-cooked estimates as settled fact.

    Oh, I am. But I mostly blame the chupacabra. And ProL.

  • ||

    I also blame Tony, and LoneWacko. Why? Because it's fun.

  • ||

    I blame you.

  • Michelle||

    Don't blame me, I voted for McCain.

  • alan||

    Bah, the anti-human cock fighting vote can tuckus lingus my nut rest!

  • Zenmaster||

    I blame Canada.

  • Canada||

    Fuck you.

  • PickledGherkin||

    Sorry its all my fault

  • Brock O'Bahma||

    I blame Bush

  • ||

    "But those reports rely on assumption-packed models that effectively predetermine their outcomes"

    Oh great. Another global warming arti.....oh, never mind....

  • ||

    I've been toying with the idea of making the CBO (or something like it) a fourth branch of government, a truly 'non-partisan' (or at least a less-influenced-by-politics) institution with authority to monitor and analyze and report accounting and budgetary games played by the rest of the government. They can report on this kind of crap without having to worry so much about political pressure to give the 'right' answers.

  • Some Guy||

    Be happy that it is as independent as it is. I can't conceive of a way to make it any more so while working within the bounds of reality.

  • ||

    Created or saved or estimated or assumed or wished or manipulated or "hoped" or "changed".....

  • Jimmy 'Crack' Corn||


  • Mr. J||

    Regardless of whether the stimulus made any difference or what direction the economy went in, the response was going to be "it worked" or "we need more stimulus".

  • ||

    Ya there was no way to lose.

  • Almanian||

    What they say, in essence, is that the stimulus worked because we assume it did.

    Well, DUH. The science is settled. Please start posting about something not settled, like whether or not you turn to stone if you stare at the First Lady long enough.

    I say just notice that she's kind of buck toothed, and sit really still wondering why people talk about how "attractive" she is, even though she's not. But you don't turn to actual stone. Discuss....

  • Medusa||

    Almanian, you know you can't look at people either.

  • Jimmy 'Crack' Corn||


  • Medusa||

    JCC,you popped my +2 cherry.

  • ||

    So somehow, by magical and unspecified means, each dollar spent by the Gov't
    turns into $2.50 that suddenly appears in the economy at large?

    Reminds me of the story of two drunks walking down the road. One has a big jug of wine, the other a dollar bill. And when one gets thirsty, he hands the other one the money and gets the jug in return. And down the road they go, swapping the same jug for the same dollar bill, back and forth. The level of the wine gets lower and lower, and the two of them get drunker and drunker, but it's the same dollar bill. Finally, as night falls and the jug runs dry, the two drunks curl up in a haystack, saying " we'll have headaches in the morning, but with sales this brisk, we'll surely be rich!"

  • Byron||

    With this awesome 2.5x multiplier, we should just pour our entire GDP into this program!

  • directly affected||

    I can speak from authority on ARRA.
    I am a registered architect whose three-decade long career was destroyed by the construction meltdown and financial crisis of 2007-2010 (and counting). I was out of work for four months the first layoff and was out of work and drawing unemployment for nine months the second time I was laid off. In both cases, it was from strong, well managed architectural firms whose practice dried up completely. In both cases, those firms were reduced to skeleton staff, on half-days or less, if anyone was left at all.

    Hundreds upon hundreds of resumes resulted in very few interviews, in which I was competing with several hundred other applicants for ONE position.

    I am not the only one. Thousands of construction professionals and field personnel are in the same catastrophic circumstances.

    Finally, and luckily, after all this time, I found a position in management of construction for projects that are administered under ARRA. It isn't architecure, but it has to suffice. It pays less than half what I used to make in salary, but it will have to suffice. I'll do the very best I can to make it work for those who are counting on the results. I don't care who is President or who is in control of Congress. I don't care about the fat Wall Street cats who were complicit in my misfortune and continue to profit from deceptive derivates bundling based on liar loans, or the greedy politicians and businesses who enabled it to happen. I don't even care about those with uneducated opinions that think a clever or snarky bit of comment is warranted in order to belittle and comdemn something they have no understanding of.

    What I DO care about is that I am employed. I DO care about the fact that my employment offers me the opportunity to make valuable decisions that will help others solve their problems as a result of the ability to use this ARRA program, for what little it will provide, in the endeavors I am involved with.

    I don't see the bigger picture so I can't comment on it. There may be wasteful use of the funds and there may not, but where I can make a difference, for what it may be worth, I WILL make a difference.

    That's the best I can do. What are YOU doing to help the citizenry of this country?

  • ||

    "That's the best I can do. What are YOU doing to help the citizenry of this country?"

    Err..... not using public money to solve my private problems?

  • Jimmy 'Crack' Corn||


  • Horde4Lyfe||


  • ||

    directly affected:

    Fuck you, you sniveling unich.

    I presided over the failure of a $20m business that employed 150+ people. I've lost my home and I literally have $10k to my name. I've lost everything that I own in an effort to save my business.

    As an aside, my father-in-law is the managing partner of an architecture firm who employed 40+ in mid-2007. Now they are down to four, which includes him and my brother-in-law.

    I went out a got a PRIVATE SECTOR job, and I am hatching my next entrepreneurial moves.

    If I knew you personally I'd punch you right in the nose. You should move to western Europe, crybaby.

  • dang girl smartin'||

    "...failure of a $20m business that employed 150+ people" I don't see it has a failure when you employed 150+ and had financial success for a time. The reality is a business can have a shelf life. Good luck.

  • ||

    P Suderman:

    I would like to see Director Elmendorf get a lot more ink for his stalwart efforts to maintain his agency's independence and integrity. The Democrats' increasingly shameless, and depressingly successful, gaming of CBO constraints has begun to have a toxic effect on its ability to produce useful cost estimates and, tragically, on its reputation for supplying the only largely non-partisan numbers in DC.

    On an even larger scale, what may -- or should -- be a most alarming development in Democratic Washington, is the ease, speed and unapologetic openness with which Federal agencies, from Treasury to the DoJ, once known for the sober influence of "career professionals" have been politically corrupted. What is almost equally astonishing has been Congressional willingness to cede vast regulatory powers to the Executive Branch and its political appointees, while failing to conduct virtually any meaningful oversight.

    Constitutionally derived checks and balances suddenly seem far less sturdy than they once appeared to be. Perhaps that's why Americans, by virtue of either wisdom or instinct, are once again contemplating the benefits of dividing control both between political parties and between federal and state governments. Let's just pray the sleeper has well and truly awakened.

  • ||

    In answer to Directly Affected:

    What am I doing to help the citizenry of the country? Not much apart from paying approximately 40% of my income to the government to support every wonderful spending scheme the best minds in community organizing can come up with. Glad to hear you've gotten work. That's good for you and your family. However, the money used to fund ARRA will eventually have to be paid back, as it was all borrowed. That means that I, my children and my children's children will forego consumption in the future in order to pay even higher taxes. Our lower level of consumption (and that of all future taxpayers) will cost other people their jobs in the future.

    There is no compelling evidence that the ultimate multiplier for government spending is greater than 1.0 and some reason to believe that it is less than 1.0

    Bottom line: robbing Peter and Peter's progeny to pay for Paul to have a job does not add to national wealth or living standards. Paul's progeny may not be too happy about it in the long run, either.

  • ||


    I saw a video on the internet saying that all this Obama Cash comes from his "stash."

    Please do not mislead the American people into believing there is no such thing as a free lunch.

  • Andrew_M_Garland||

    Let's Counterfeit Our Way to Wealth

    Team Obama claims that every dollar in stimulus creates $1.50 (or $2.50!) in wealth. This is economic fiction. The costs of the stimulus reduce future growth. As we see now, the so-called stimulus isn't even very stimulating in the present, because it has gone or will go to government consumption, and the threat of future taxes puts people out of work now.

    The 1.5 wealth multiplier is ludicrous. It is the Keynesian myth of distributing money to promote a recovery. As a counterexample, if it were true, then the government could license counterfeiting and we would all become rich. Actually, the government attitude toward printing money is very close to counterfeiting.

    Consider that the government has been spending money wildly for 20 years. If government spending produced lasting prosperity, then we should all be rich already. The housing boom, financed by government borrowing and guarantees, was a period of substantial, increased spending. Where is our lasting prosperity now?

  • NumbersGuy||

    Since gov't spending takes money out of the private market that would have been used to innovate, a better measure for gov't spending would be jobs "created, saved, delayed, or destroyed". That should about cover it all

  • .lemonttaylor||

    at least in the context of the CBO's reports; a better phrase might have been "created or saved or estimated or assumed."

    ... or guessed at or made up."

  • ||

    When President Obama took office, the employment data showed the following net jobs added / (lost) in thousands:

    Dec-07 120
    Jan-08 (72)
    Feb-08 (144)
    Mar-08 (122)
    Apr-08 (160)
    May-08 (137)
    Jun-08 (161)
    Jul-08 (128)
    Aug-08 (175)
    Sep-08 (321)
    Oct-08 (380)
    Nov-08 (597)
    Dec-08 (681)
    Jan-09 (741)

    The economy had gone over the cliff and was gaining negative velocity. We were in the middle of six months with job losses exceeding 500,000 jobs per month. The TARP program in the fall of 2008 was the first attempt to stop this slide. The Economic Recovery bill was the next attempt. We tried housing credits and cash for clunkers. The bills that passed Congress were filled with a mish mash of extended unemployment benefits, funding for infrastructure, and pure pork. Anyone would admit they were less than perfect. So what happened?

    Feb-09 (681)
    Mar-09 (652)
    Apr-09 (519)
    May-09 (303)
    Jun-09 (463)
    Jul-09 (304)
    Aug-09 (154)
    Sep-09 (139)
    Oct-09 (127)
    Nov-09 64
    Dec-09 (150)
    Jan-10 (20)

    Job losses started to decline. We have slowed the slide in job losses. We have two consecutive quarters of positive economic growth. If current trends continue the economy will shortly start adding jobs again.

    Fortunately we will never know how deep a recession we could have had if we had not had stimulus spending. Absent the TARP spending, the Economic Recovery Act and the various other stimulus efforts there is no telling how many jobs would have been lost. Even if we had continued to lose "only" 500,000 jobs per month for the last year it would have been a lot.

    I'm glad Herbert Hoover wasn't around to lead us into another great depression, although his followers from the Hoover Institute tried. Thankfully first President Bush and then President Obama took active steps to stop the slide.

  • justsaying||

    +100... AMEN!!

  • Ernie the Bear||

    Or, just as likely:

    Incompetent meddling by economic illiterates made the recession worse, and actually delayed a recovery that would have already been underway. No one really knows, and if they tell you otherwise, they're full of shit.

    Every job, company or project that is "rescued" by "stimulus" is, by definition, not economically viable, and will eventually still collapse. Until they do, the recession will never really be over. Every dollar flushed down the stimulus toilet will cost us at least $2.50 later on, in money and lost productivity, and we'll have nothing to show for it except make-work WPA projects that never should have existed in the first place.

    So yeah, there's your "multiplier effect". Beautiful.

    Making shit up is fun, ain't it?

  • moogrogue||

    Joe Biden introduces new job creation metrics here. (Satire)

  • ||

    I've wondered for a while if your Joe-average non-thinking voter sees through the bullshit on this the hell can they prove a job was saved??

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  • david||

    i agree.

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  • 50 Inch Flat Screen Tv||

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  • insulin resistance||

    I've wondered for a while if your Joe-average non-thinking voter sees through the bullshit on this the hell can they prove a job was saved??


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