To Know the Stimulus Worked, You Just Have to Believe In It With All Your Heart

Andrew Sullivan warns that “it is important to resist the facile narrative that somehow Obama proved he was a radical leftist because he supported a stimulus package (after Bush's) in the face of the worst recession since the 1930s.” Why? Because the stimulus, you see, it worked! Says Sullivan:

Unemployment, sans stimulus, would therefore now be between 10.4 or 11.6 percent without the stimulus. Now you can argue that the economy should have been allowed to collapse entirely and rise from the eventually settled ashes. But you cannot argue that and criticize the president for high rates of unemployment today. He did about as much as he could within the bounds of fiscal responsibility.

He acted not as a liberal or as a conservative, but as a responsible, pragmatic human being.

I don’t know whether any of this proves or disproves that Obama or Bush or any of the other Hill-creatures who voted for stimulus are “radical leftists,” or secret socialists, or Marxist-fascist-anarchist-anti-American-commie-Europhiles who probably don’t even like baseball, or light beer, or whatever. Maybe it just proves that both Bush and Obama are cut from the same political cloth, and are both convinced that spending giant wads of taxpayer cash on grand efforts to save the economy is somehow heroic.

But it doesn’t prove that the stimulus created a slew of jobs and brought the unemployment rate down—no matter what our pragmatic, responsible president and his administration claim.

Sullivan’s evidence, like the White House’s, comes from a summary of a recent Congressional Budget Office report on the effects of the stimulus. Here’s the problem: Those CBO reports don’t definitively prove anything about the real-world effect of the stimulus. That’s because in order to produce those reports, the CBO effectively re-runs the same models that it used to estimate the effects of the stimulus before it started.

The reports aren’t based on a detailed measurement of real-world output. Instead, they’re based on measuring the input (how much money was spent), and then using models to project how big the multiplier effect has been. Measuring spending and modeling output means that you can believe the CBO when it says that the stimulus turned out to be more costly than expected, but you should remain wary about any claims made using the “real-world effects” side.

Indeed, CBO director Doug Elmendorf has explicitly made this point, agreeing at a speech earlier this year that that “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.”

So if in reality no jobs had been created, or only 10 jobs had been created, then the CBO’s reports would not reflect those numbers. It’s using the models that projected the stimulus would create lots of jobs to report that the stimulus did create lots of jobs. Color me unconvinced.

Models like the CBO uses can be useful to estimate a program’s effects before they’re passed. But they’re hardly compelling evidence for a program’s effects after it’s been up and running for years. They’re a way to make an informed guess about the future, but they can’t tell us what’s happened in the past.

I’ve made this point numerous times before, and Sullivan ought to be aware of it—if only because he’s previously linked to one of my posts on the subject and noted that it’s a good point. To which I say, “Thanks!” And in the interests of pragmatic policy judgments, I hope that it will instill, at minimum, some sense of caution into those who think we know what the policy’s overall economic effects actually are.

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  • ||

    "Unemployment, sans stimulus, would therefore now be between 10.4 or 11.6 percent without the stimulus...."

    Maybe, but that might be a result of the market reflecting reality. what sullivan fails to consider is that this is but chapter one of a long story. He might want to ponder whether the result of the stimuli will be to keep unemployment higher in the future than it normally would be as a result of more debt and higher taxes. just sayin.

  • Old Mexican||

    Sullivan's evidence, like the White House's, comes from a summary of a recent Congressional Budget Office report on the effects of the stimulus. Here's the problem: Those CBO reports don't definitively prove anything about the real-world effect of the stimulus. That's because in order to produce those reports, the CBO effectively re-runs the same models that it used to estimate the effects of the stimulus before it started.

    They learned their technique from the East Anglia's course on Statistical Models For Bullshitting.

  • ||

    Unemployment, sans stimulus, would therefore now be between 10.4 or 11.6 percent without the stimulus.

    So now we know *exactly* how many government jobs were saved by the stimulus?

    Yippee!

  • ||

    Strange. I just clicked my heels together, and now I'm on some dingy farm in Kansas. And I appear to have gone colorblind.

    Oddly good cell reception here, though.

  • ||

    Maybe I'm missing something, but I thought the stimulus as all Obama.

    What Bush supported and passed was TARP, which wasn't supposed to be a "stimulus" bill (although it quickly became an open checkbook, of course, in clear violation of its terms).

  • ||

    They're talking about the mid-2008 one-time checks that went out to people making below $95k or so (individuals) and to people on Social Security.

  • Old Mexican||

    "Unemployment, sans stimulus, would therefore now be between 10.4 or 11.6 percent without the stimulus."

    That from the same models used by the CBO to say the stimulus "saved" 3 million jobs?

    Because the original salespitch indicated that withOUT the stimulus, unemployment would go to 9.5% and that with the stimulus, it would not go above 8%. Now the bar is raised so the goals match the numbers...

    "Texas Shooter Fallacy", anyone???

  • ||

    The stimulus stopped an alien invasion and saved six billion lives.

  • ||

    But what about the zombie apocalypse?!?

  • ||

    If the stimulus got rid of that god awful beard of Sullivan's, I'd consider it a success.

  • Sullivan's Beard||

    Not a chance. Me and William Shatner's toupee are taking over the world. First against the wall, Mainer...

  • ||

    That's what the Re-Animatulus is for.

  • ||

  • Ted S.||

    This snarky comment created or saved 13 jobs.

  • ||

    More likely destroyed.

  • ||

    Well at least Obama is freezing all government salaries for two years (according to CNN)...at all time highs. That's some serious stimulatin' if you are a federal worker.

  • Chris||

    Bangerang, Peter.

  • ||

    The stimulus stopped an alien invasion and saved six billion lives.

    And they redirected that asteroid, and you never even thanked them, you ingrate.

  • ||

    Andrew Sullivan is too busy investigating the birth of Trig Palin to question the CBO's findings.

    Important priorities, those are.

  • ||

    I think we'd be better off, in the long run, if we kept the beard, and got rid of Sullivan.

  • ||

    I didn't even know Sullivan had a "girlfriend".

    But I agree: let's keep his beard, and get rid of him.

  • ||

    It amazes me that people still read Sullivan and Krugabe. What Sullivan doesn't mention is that Obama decided to cram a health care bill that changed every business in America's labor costs down the country's throat. Right when the economy was hitting rock bottom and should have started recovering, Obama started a year long health care debate that made it impossible to plan or hire.

  • ||

    I agree. The guy is a total ass hat.

  • Libertarians||

    "Whereas we are not burdened with such concerns as producing numbers to justify our claims, because we are just right."

  • Trespassers W||

    Shorter: "No, YOU suck."

  • BakedPenguin||

    Right when the economy was hitting rock bottom and should have started recovering, Obama started a year long health care debate that made it impossible to plan or hire.

    It's humorous that Democrats always love to pretend they're on the side of the little guy, and then they foist shit like this on little businesses.

  • ||

    They also pretend that government actions can only have positive effects on business never negative.

  • Big Business||

    They have a positive impact on our business.

  • Fiscal Meth||

    "He acted not as a liberal or as a conservative, but as a responsible, pragmatic human being."

    People seem to use the word "pragmatic" as self-evidently moral. In this context it just means dealing with every problem as it becomes too big to ignore and never bothering to make sure that your last emergency solutions didn't cause the current emergencies or whether current emergency solutions will cause future emergencies. A president should be ASHAMED to admit that he's making pragmatic decisions. It's an admission that he is lost.

  • MJ||

    Is it not odd how the "pragmatic" action follows generally liberal assumptions of how the economy works?

    The most insidious form of partisanism is the one that refuses to acknowledge or even intellectually recognize that it is partisan.

  • prolefeed||

    Unemployment, sans stimulus, would therefore now be between 10.4 or 11.6 percent without the stimulus.

    That he is allowed to peddle such obvious idiocy in anything other than a mimeographed dot-matrix pamphlet is evidence that lots of people are immune to logic.

  • Barely Suppressed Rage||

    I've always liked Robin Williams, but I do have to say he's done some pretty embarrassing movie roles.

  • ||

    Let me use a calculation to predict and outcome. Now let's use that same calculation to see if my outcome is correct.
    How could the end up so wrong. How did 8% become over 10%?
    Must be in the calculator. Obama, or one of his cronies could not have made that mistake.

  • ||

    You can't "prove" a counterfactual, i.e. what would have happened but for TARP and the stimulus. However, the combination of TARP and the ARRA stimulus correlate with turning around the job losses, which peaked in January 2009. They appear to be responsible for the improvement.

    Private Sector Jobs Added/(Lost) in thousands

    Jan-08 (12)
    Feb-08 (85)
    Mar-08 (58)
    Apr-08 (161)
    May-08 (253)
    Jun-08 (230)
    Jul-08 (257)
    Aug-08 (347)
    Sep-08 (456)
    Oct-08 (547) TARP passed
    Nov-08 (734)
    Dec-08 (667)
    Jan-09 (806) 2nd half TARP released
    Feb-09 (707) ARRA stimulus
    Mar-09 (744)
    Apr-09 (649)
    May-09 (334)
    Jun-09 (452)
    Jul-09 (297)
    Aug-09 (215)
    Sep-09 (186)
    Oct-09 (262)
    Nov-09 75
    Dec-09 (83)
    Jan-10 16
    Feb-10 62
    Mar-10 158
    Apr-10 241 Extended benefits cut off
    May-10 51
    Jun-10 61 Extended benefits cut off
    Jul-10 117 Extended benefits restored
    Aug-10 143
    Sep-10 107
    Oct-10 159

  • Shorter Karl from Chicago||

    I believe!

  • ||

    So do we have good reason to doubt that $800 bn in spending and tax cuts boosts demand? Or that this additional demand does not correspond to an increase in employment? Are there better models the CBO should be using to figure out this stuff?

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