Heckuva Job-Creation Estimate

The Congressional Budget Office's regular reports on the effects of the American Recovery and Reinvestment Act—otherwise known as the economic stimulus package—have been a point of pride for the administration and its defenders. Last December, for example, President Obama bragged that ARRA had created or saved "up to 1.6 million jobs," citing CBO reports to back up his assertion. And it's true that, in these legally required analyses, that's what the CBO has estimated. 

But if the stimulus had failed to create jobs, would the CBO's reports have picked up on this? Probably not. 

See, the CBO doesn't actually count jobs created. Instead, it uses models that assume that putting taxpayer money into the system results in additional demand, additional spending, and, consequently, additional jobs. Before the stimulus passed, it used these models to predict that the stimulus would create jobs. And now, in analyzing its effects, it's using those same models to estimate that it has created jobs. But because the CBO relies on slightly updated versions of the same, original models throughout the process, it wouldn't necessarily detect the fact that the stimulus didn't work if that were the case. 

Stimulus-boosters have basically ignored this. But the CBO, to its credit, has been fairly forthcoming about its methods and their limitations. In response to a question at a speech earlier this month, CBO director Doug Elmendorf laid out the CBO's methodology pretty clearly, describing the his office's frequent, legally-required stimulus reports as "repeating the same exercises we [aleady] did rather than an independent check on it." CBO tweaks its models on the input side, he says—adjusting, for example, how much money the government has spent. But the results the CBO reports—like the job creation figures—are simply a function of the inputs it records, not real-world counts.

Following up, the questioner asks for clarification: "If the stimulus bill did not do what it was originally forecast to do, then that would not have been detected by the subsequent analysis, right?" Elmendorf's response? "That's right. That's right." 

Earlier this month, I argued that jobs "created or saved" should be extended to jobs "created or saved or estimated or assumed."  (Hat tip to Brian Riedl for the link.)

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  • ||

    This is something else. They essentially run the models and assume reality fits them. If the model says that it created X number of jobs than it did. It is right out of Brazil or Catch 22. I won't say 1984 because it is more comical than dark.

  • ¢||

    They essentially run the models and assume reality fits them.

    That's not very generous.

    They only assume the press will headline the numbers without questioning or describing their provenance. Except on C-SPAN 9, one time. And if you saw it, you're a racist.

    They're casually evil, not retarded.

  • Cult of Personality||

    "They're casually evil, not retarded."

    They're not the ones abusing the reputation of a reasonably honest government agency to intentionally mislead people, if "they" means the CBO.

  • ||

    The CBO aren't the evil ones. They're doing the job that they're asked to do, and doing everything they can to draw attention to the rules that the politicians are putting on them. People just don't care, though.

  • Gilbert Martin||

    I expect that one could watch, listen or read every single "news" story dissemenated by the MSM about the stimulus plan or any of the administrations claims about it and not find this fact explained in a single one of them.

  • Tman||

    I can't think of a more ridiculous spin on the terms of unemployment than "created or saved".

    Listen you stupid monkeys, it's one or the other. Either employment goes up or it goes down, you don't get credit for "saving" jobs. I still can't believe people allow this line to be continually regurgitated without even a hint of dissent.

  • moogrogue||

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

  • Warty||

    A broken link to a satire about fraudulent job creation metrics? I think this falls under RC'z law.

  • ||

    Last December, for example, President Obama bragged that ARRA had created or saved "up to 1.6 million jobs,"

    I would note that if ARRA created or saved one (1) job, this would be a factually correct statement.

    Hope! Change! Aww, fuckit.

  • Cult of Personality||

    I would note that if ARRA created or saved 0 jobs, this would be a factually correct statement.

    Mathematically, he's saying that J.C.o.S.

  • Cult of Personality||

    damn HTML.

    That they created or saved less than or equal to 1.6 million jobs.

  • virginia||

    Following up, the questioner asks for clarification: "If the stimulus bill did not do what it was originally forecast to do, then that would not have been detected by the subsequent analysis, right?" Elmendorf's response? "That's right. That's right."

    Someone thinking on their feet and following up!!?? Must've been a racist.

  • Rich||

    Before the stimulus passed, it used these models to predict that the stimulus would create jobs. And now, in analyzing its effects, it's using those same models to estimate that it has created jobs.

    Oh, piffle. "Would create", "has created" -- that's just splitting hairs.

  • Paul Krugman||

    This Suderman is an IDIOT. He clearly knows no economics and is merely a shrill little man carrying water for the Republican's angry Tea Baggers!

  • Brad DeLong||

    The only thing I can add here is that Suderman is a dishonest, fear-mongering, sub-human idiot.

  • Barack Obama||

    Let me be clear - what is true is, I love you guys.

  • Kos Kidz||

    Have you IDIOTS read Krugman or DeLong? They clearly lay out, through ad hominem and circular arguments, why Suderman and this CBO guy are lying scum! Stop blaming poor people! This IS reason.com, isn't it?

  • ||

    DRRRRRRIIIIIIIINNNNNNKKKKK!!!!!!

  • Fist of Etiquette||

    Why has the Reason art department not photoshopped a mission accomplished sign behind Obama yet? On the deck of the U.S.S. Stimulus.

    OMG, I think I just wrote a Friday Funnies.

  • Cult of Personality||

    There's no way anything that witty and insightful would end up as a Friday Funny. That said, feel free to email the suggestion to one of the cartoonists (personally, I would make it the U.S.S. Obamacare since it's more topical for most people, but YMMV).

  • Fred||

    So $787,000,000,000 / 1,600,000 jobs "created or saved" = $491,875 per job

    (of course that does not include interest on the debt on all that borrowed money to pay for those short term jobs over the indefinite future)

    Did anyone at all in Washington D.C. pass fifth grade arithmetic?

  • Fred||

    So $787,000,000,000 / 1,600,000 jobs "created or saved" = $491,875 per job

    (of course that does not include interest on the debt on all that borrowed money to pay for those short term jobs over the indefinite future)

    Did anyone at all in Washington D.C. pass fifth grade arithmetic?

  • ||

    You obviously don't have the really advanced math necessary to understand why that is a bargain.

  • ||

    I don't see any reason to question the job saved/created numbers. After all, reality has a liberal bias, right?

  • Kos Kidz||

    you said it! its good to finally see some good REASON around here. AMIRIGHT?

  • ||

    Peter, given the picture Reason.com chose to go with, I'm glad you didn't expand your headline to "Heckuva Job-Creation Estimate, Brownie"

  • ||

    See, the CBO doesn't actually count jobs created. Instead, it uses models that assume that putting taxpayer money into the system results in additional demand, additional spending, and, consequently, additional jobs. Before the stimulus passed, it used these models to predict that the stimulus would create jobs. And now, in analyzing its effects, it's using those same models to estimate that it has created jobs. But because the CBO relies on slightly updated versions of the same, original models throughout the process, it wouldn't necessarily detect the fact that the stimulus didn't work if that were the case.

    David Brooks must be soooooo pissed.

  • louboutinvips||

    I don't see any reason to question the job saved/created numbers. After all, reality has a liberal bias, right?
    http://www.christianlouboutinvips.com

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