Did the stimulus save or create jobs?

posted at 10:13 am on May 27, 2010 by Ed Morrissey

The news media went agog yesterday in announcing that Barack Obama had finally found some corroboration on numbers of jobs “saved or created” by the Porkulus package last year.  ABC News was a good example of this:

In a counterpoint to our earlier post on the skyrocketing debt: the nonpartisan Congressional Budget Office has a new report out on the now-more-than $800 billion off-budget stimulus program that Congress passed last year. Republicans have criticized that law ad-nauseum, pointing to the near-10 percent unemployment rate to argue that the stimulus did not work.

But today’s CBO report confirms that things could have been much worse without the stimulus. For instance, the report guesstimates that the bill created 1.8 million to 4.1 million (a huge spread!) jobs that wouldn’t have existed otherwise and the unemployment rate would have been between .7 to 1.5 percent higher without the stimulus.

The effects of the stimulus, according to the report, will continue to increase through part of 2010, before subsiding.

But is that actually what the CBO said?  No.  In fact, as Reason Magazine reported afterward, the director of the CBO took pains to note that his report only confirmed that the money went out:

“Critics of the stimulus listen up: CBO estimates that it put 2.8 million ppl to work in 1st 3 months of 2010.”  But it’s stimulus boosters who ought to be paying more attention: Douglas Elmendorf, the head of the Congressional Budget Office, has stated plainly that his team’s estimates do not measure real-world outputs (just inputs), that they do not serve as an independent check on its success or failure, and that if the stimulus had not created jobs, the CBO’s figures would not reflect that fact. So no, sorry, try again: The CBO’s updates do not actually confirm whether or not the stimulus is creating jobs.

Peter Suderman reported on this in March:

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.”

In other words, the CBO only verifies what got spent. It then relies on the same White House formulas to determine the numbers of saved and created jobs — which also just rely on output, not real-world verification.  That’s one of the reasons why the White House claimed that they had saved or created over 12,000 jobs in New Hampshire when the Recovery.gov site (which uses feedback from the opposite direction) could only find 1432.  The CBO isn’t involved in that process at all.

So how do we measure the success of Porkulus?  Right now, we’re still down over 8 million jobs, the economy has slowed considerably after an artificial boost, and growth estimates from the private sector put the rest of the year at an anemic 1.5% pace.  Those are the measures that count, especially to the Americans who have to live with them.  Fewer and fewer people are impressed with the imaginary calculations of a White House that seems to find itself lost in academics rather than working to build actual economic growth.

Update: In another real-world measure, the first quarter GDP number has been lowered to a 3.0% annual growth rate, down from the previously announced 3.2%.


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Can we put Keynes to bed…forever now?

Inanemergencydial on May 27, 2010 at 10:16 AM

Fooooooooooock No!

Oh, wait. Was that a rhetorical question?

PappaMac on May 27, 2010 at 10:17 AM

I thought they dropped the “saved or created jobs” nonsense and settled on “funding jobs”.

Doughboy on May 27, 2010 at 10:18 AM

Look at the actual report. They lead it off with the word “estimated”. That should tell everyone this is not an actual economic report, it is just a Scientific Wild A$$ Guess.

Johnnyreb on May 27, 2010 at 10:18 AM

Maybe 1 job,

a special prosecutor!!

canopfor on May 27, 2010 at 10:20 AM

Anyone who states that the stimulus was even nominally successful is either a liar or an idiot.

Corrupt payoff to Democrat contributors, that’s all it ever was.

NoDonkey on May 27, 2010 at 10:21 AM

Yes, lots of well paid public sector jobs that the remaining vestiges of the private sector will have to work twice as hard to subsidize with benefits.

abobo on May 27, 2010 at 10:21 AM

So it’s hogwash.

forest on May 27, 2010 at 10:21 AM

The bill created or saved 1.8 to 4.1M jobs. Close enough for govmint work. Wait til they start estimating saved or lost lives under Ocare.

Kissmygrits on May 27, 2010 at 10:22 AM

Government spending cannot produce anything. It can only consume, and in the process it creates rent-seekers who labor to deplete resources while producing no value.

Inanemergencydial on May 27, 2010 at 10:22 AM

“Data on actual output and employment during the period since ARRA’s enactment are not as helpful in determining ARRA’s economic effects as might be supposed, because isolating those effects would require knowing what path the economy would have taken in the absence of the law. Because that path cannot be observed, there is no way to be certain about how the economy would have performed if the legislation had not been enacted, and data on its actual performance add only limited information about ARRA’s impact.”

They pretty much say in the report that there is no way to tell if any jobs were saved or created. ABC news needs to work on their reporting skills.

Johnnyreb on May 27, 2010 at 10:22 AM

Those eight million newly out of work Americans aren’t actually jobless, they are ‘employment disabled’, so they don’t count.

Before leaving on vacation tomorrow, the hardest working POTUS in history will say, “Just lower the damn unemployment rate!” and things will recover by this time next week. He has that power.

Bishop on May 27, 2010 at 10:23 AM

The worst part about the WH’s stupid accounting gimmick is that they do not make any attempt to factor in the costs, beyond what is actually spent by the government. In other words, they don’t even attempt to measure the number of jobs that are LOST because of the disastrous new taxation, regulation and lack of capital for business that their policies create.

There is a reason why the Fed government is the only growth sector in our economy these days but they refuse to acknowledge that their actions in any way prevent or discourage private sector expansion.

MJBrutus on May 27, 2010 at 10:23 AM

But today’s CBO report confirms that things could have been much worse without the stimulus.

Er, how can you ‘confirm’ that something ‘could’ have been one thing or another?

EnglishMike on May 27, 2010 at 10:24 AM

Ahh, you have go to love Keynesian circular logic. Keynesian theory works, because if you calculate the economic effects using Keynesian theory, it shows that Keynesian theory works.

Now that is science!

JamesB on May 27, 2010 at 10:25 AM

For instance, the report guesstimates that the bill created 1.8 million to 4.1 million (a huge spread!) jobs that wouldn’t have existed otherwise and the unemployment rate would have been between .7 to 1.5 percent higher without the stimulus.

Your chocolate ration has been increased from 30 grams to 25 grams.

GUESTIMATE, F*CKING GUESTIMATE???? This is pure propaganda gladly handed out by the media. I fear for our country.

jukin on May 27, 2010 at 10:26 AM

This report is garbage. If this is the best the CBO can do, dismantle it and save the money. Getting nothing for something is the underlying theme throughout every part of this administration. It is difficult to create jobs when no one selected to serve his highness has ever had one.

volsense on May 27, 2010 at 10:26 AM

Hey, depending on how you measure something, almost any conclusion is possible. Just ask Pons and Fleischmann. I’m sure from France to Russia, we’ll soon have other reports of Government Stimulus working.

seismedia on May 27, 2010 at 10:27 AM

Well,I think,the job numbers are still down!!
==============================================

Regional and State Employment and Unemployment Summary

http://www.milkh.com/news.release/laus.nr0.htm

canopfor on May 27, 2010 at 10:27 AM

Er, how can you ‘confirm’ that something ‘could’ have been one thing or another?

EnglishMike on May 27, 2010 at 10:24 AM

Thats why I said above that ABC needs to work on their reporting skills.

Johnnyreb on May 27, 2010 at 10:27 AM

A real stimulus would have been to slash corporate/business taxes so they can hire more people and more international companies would set up shop on our shores*.

*in “right-to-work” states, of course

visions on May 27, 2010 at 10:28 AM

To quote from the report,

“One pitfall of this approach is that the direction of causation between policies and the economy is not always clear. For example, poor economic conditions can prompt the government to enact policies such as ARRA in an effort to boost economic activity. If weak economic performance led to such a policy, it would not be accurate to ascribe that performance to the policy, rather than vice versa. Likewise, if states and localities reduced purchases and laid off employees when their budgets deteriorated in a recession, it would not be accurate to blame the cuts in government spending for causing the recession. When causation runs in both directions in this way, the historical correlation between variables may not be a good guide for predicting the effects of a newly proposed policy.”
 
At first I was worried that these were just estimates, but knowing the solid methodology for making this rosy conclusion, I for one, am perfectly reassured. So, as the owner of a good-sized business, I’m going to start investing more into it. Using these new “Estimated Output Multipliers“, I figure I can plan on some major growth in the coming years. Of course, I’ll have to adapt, because according to the CBO, a inordinately large portion of the new growth comes from the “purchases of goods and services by the Federal Government”, so I need to start looking into offering new products and services, like shovels and porn.

seismedia on May 27, 2010 at 10:30 AM

This is known as ‘gambler reporting’. It works like this — You come home from a gambling session and report to your family/friends that ‘I won $200.’ That sounds all good and all, unless someone asks the key follow-up question of ‘How much did it cost you to win that $200?’ Then the true result comes out of ‘well, it cost me $500 to win it.’

This is what is being reported on the stimulus. We ‘gained’ a couple of million jobs but lost five million jobs gaining them. Recall that the unemployment rate would not exceed 8% if the stimulus is passed. That is getting tossed under the rug.

GnuBreed on May 27, 2010 at 10:30 AM

The CBO is nothing more than a political tool now.

WisCon on May 27, 2010 at 10:31 AM

They are no longer to be called Journalists. That term is used for people of ethics.

From now on, they shall be called Professional Rumor Mongers (PRM).

Seriously, there is a reason they report the way they do. They just aren’t that bright.

PappaMac on May 27, 2010 at 10:32 AM

In other news, we have always been at war with Eastasia.

rbj on May 27, 2010 at 10:35 AM

The CBO is nothing more than a political tool now.

WisCon on May 27, 2010 at 10:31 AM

The CBO can only report on what is provided to them. If Congress gives them garbage, CBO has no choice but to report garbage back.

Johnnyreb on May 27, 2010 at 10:36 AM

Figures don’t lie but……

jnelchef on May 27, 2010 at 10:36 AM

Journalists are brain-washed scum.

Dhuka on May 27, 2010 at 10:40 AM

You know, it occurs to me that we have absurdly high unemployment for a couple of reasons:

1) Minimum wage. Since it is cheaper and therefore more competitive to hire illegals who you don’t have to pay minimum wage, not to mention taxes, we have an illegal immigration problem as well because of the minimum wage.

2) Regulations on safety so that companies find it much more affordable to buy from countries like China. (not saying I’m against safety, but overregulating “safety” so that people work come in at 8, take a break at 10, take a lunch break at noon, another break at 3 and leave at 5… means the company is stuck paying for a lot of time employees aren’t even working)

3) Unions. High benefit packages, generous pension plans, not to mention $$ for the union itself… all eat into profit margins so that companies look for other ways to employ. That means jobs going overseas (or to illegals).

The truth is that so many are unemployed or underemployed because the system is now set up to incentivize employers to NOT hire Americans. Hiring an American is far more expensive, time-consuming, and difficult than hiring an illegal or sending the jobs overseas. Until this changes, unemployment is not going to get better.

UnderstandingisPower on May 27, 2010 at 10:42 AM

Republicans have criticized that law ad-nauseum ad nauseam, pointing to the near-10 percent unemployment rate to argue that the stimulus did not work.

Don’t use foreign expressions if you don’t know how to spell them: no hyphen and it’s not analogous to a museum.

BuckeyeSam on May 27, 2010 at 10:44 AM

Never really understood why the jobs “saved or created” are not weighed against jobs “suppressed or destroyed”.

Dale Wyckoff on May 27, 2010 at 10:47 AM

ABC and CBO still telling the emperor that his clothes look great.

Where’s our little boy to tell Americans who are buying this crap the truth?

BuckeyeSam on May 27, 2010 at 10:48 AM

What about these real numbers?

http://www.foxnews.com/politics/2010/05/26/spending-food-stamps-time-high-sparking-debate-welfare/

Is it the recession or the ever expanding government dependency program? That is the debate within the article. And even without the costs of Obamacare the article states that Obama projects to spend 10 Trillion on the poor over the next decade. Unsustainable borrowing from China.

journeyintothewhirlwind on May 27, 2010 at 10:48 AM

But ABC really does want this POTUS to succeed…it’s their duty…/

d1carter on May 27, 2010 at 10:49 AM

Was it yesterday’s New York Post that reported on the Census workers being continually hired, fired, then rehired for the purpose of inflating job numbers? Does the serial dishonesty of this administration and it’s worshippers in the media actually surprise ANYONE?

oldleprechaun on May 27, 2010 at 10:50 AM

This is known as ‘gambler reporting’. It works like this — You come home from a gambling session and report to your family/friends that ‘I won $200.’ That sounds all good and all, unless someone asks the key follow-up question of ‘How much did it cost you to win that $200?’ Then the true result comes out of ‘well, it cost me $500 to win it.’

GnuBreed on May 27, 2010 at 10:30 AM

And ABC would go even further: it would “confirm” that if you hadn’t been gambling, you ‘could have’ spent even more money, so gambling saves money!

LASue on May 27, 2010 at 10:53 AM

Can we put Keynes to bed…forever now?
Inanemergencydial on May 27, 2010 at 10:16 AM

Collectivism stopped being a potentially viable economic theory over a hundred years ago.

This is not a science; it is a CULT. Reality has never ended one of those, and it never will.

logis on May 27, 2010 at 10:53 AM

I’m sure dear leader will still give a shout out about during his pressser today. Or the Msm will pitch him a soft ball question about it.

cmsinaz on May 27, 2010 at 10:53 AM

Like the commercial: “How much does it cost to produce this stuff? What stuff?? This, this stuff—-. Maybe millions!” Meaningless stuff for fodder to fuel the constant go-nowhere arguments. Geez.

PaCadle on May 27, 2010 at 10:59 AM

“ABC News was a good example of this: … Republicans have criticized that law ad-nauseum…”

That’s pathetic. Bald-faced editorialism.

Unexpected! /sarc

KS Rex on May 27, 2010 at 10:59 AM

This is known as ‘gambler reporting’. It works like this — You come home from a gambling session and report to your family/friends that ‘I won $200.’ That sounds all good and all, unless someone asks the key follow-up question of ‘How much did it cost you to win that $200?’ Then the true result comes out of ‘well, it cost me $500 to win it.’
GnuBreed on May 27, 2010 at 10:30 AM

That never happens.

I mean, yes, of course the numbers work out that way. But the jerkoffs who do that sort of thing will never, ever SAY that. In fact, they are congenitally incapable of giving a straight answer to any question.

These people literally CAN’T face up to reality. They’re not just lying to you; they are lying to themselves.

logis on May 27, 2010 at 10:59 AM

But ABC really does want this POTUS to succeed…it’s their duty…/

d1carter on May 27, 2010 at 10:49 AM

d1carter: “Historical” don’t cha know!!

canopfor on May 27, 2010 at 11:03 AM

Table 1. Civilian labor force and unemployment by census region and division, seasonally adjusted

US Department of Labour/PDF

http://www.milkh.com/news.release/pdf/laus.pdf

canopfor on May 27, 2010 at 11:10 AM

Is this a variant of “Don’t Ask, Don’t Tell“?????

belad on May 27, 2010 at 11:19 AM

But ABC really does want this POTUS to succeed

They’re not helping him by covering up his mistakes.

It’s only compounding his mistakes, he’s actually dumb enough to believe his biased press reviews.

NoDonkey on May 27, 2010 at 11:21 AM

“Data on actual output and employment during the period since ARRA’s enactment are not as helpful in determining ARRA’s economic effects as might be supposed, because isolating those effects would require knowing what path the economy would have taken in the absence of the law. Because that path cannot be observed, there is no way to be certain about how the economy would have performed if the legislation had not been enacted, and data on its actual performance add only limited information about ARRA’s impact.”

To each and every dumbchit who says, “But things only would have been worse had ARRA not been enacted”, recite this. They won’t get it, of course — cause they’re dumbchits — but they cannot say they weren’t ever told this.

ya2daup on May 27, 2010 at 11:23 AM

WisCon on May 27, 2010 at 10:31 AM

No they aren’t. They do a very good job with what they are given. They cannot help it if ABC et. al. decide to misuse their work.

Aquateen Hungerforce on May 27, 2010 at 11:25 AM

Keynesian economics is a big myth … FDR proved it didn’t work. What saved America’s economy was WWII. What saved America was FDR died.

tarpon on May 27, 2010 at 11:55 AM

WisCon on May 27, 2010 at 10:31 AM

No they aren’t. They do a very good job with what they are given. They cannot help it if ABC et. al. decide to misuse their work.

Aquateen Hungerforce on May 27, 2010 at 11:25 AM

But the true problem is that Congress made it very clear how easy it is to use the CBO to say what you want them to say based on what information is provided to them. They have made a mockery of this group by not providing all the facts to the CBO upfront so they can actually report properly. CBO’s fault, no. Unless Congress begins to provide all of the details to be scored, the CBO is a lame duck so to speak.

truetexan on May 27, 2010 at 12:04 PM

This is not a science; it is a CULT. Reality has never ended one of those, and it never will.

logis on May 27, 2010 at 10:53 AM

I politely disagree. It’s not a cult. It’s a means to an end.

And it matters not if the stimulus did directly lead to the preservation of eleventy billion jobs. It is a temporary fix. If I’m trapped underwater without oxygen, and an oxygen tank mysteriously appears, then yes, my life has been saved…for so long as the oxygen supply in my newly acquired tank lasts. Then I’m right back to drowning.

By the way, if it hasn’t already been noted, John Kerry thinks you’re stupid:
http://www.usnews.com/blogs/washington-whispers/2010/05/26/john-kerry-says-voter-anger-at-washington-is-hypocritical.html

anglee99 on May 27, 2010 at 12:44 PM