daveman
Diamond Member
CBO Admits their Stimulus Jobs Count Ignored the Economy
Now, who wants to claim CBO reports are accurate?
CBO Confirms Its Methodology
In a recent speech to the National Association of Business Economics, CBO Director Doug Elmendorf confirmed this by stating:
[W]e don't think one can learn much from watching the evolution of particular components of GDP [gross domestic product] over the last few quarters about the effects of the stimulus so we fall back on repeating the sort of analysis we did before. And we tried to be very explicit about it that it is essentially repeating the same exercise we did rather than an independent check on it.[1]
When asked if this means that any actual underperformance of the stimulus would fail to show up in the CBO's stimulus jobs count, Elmendorf replied "That's right." This means the 1.5 million jobs saved estimate was pre-determined.
Of course, the stimulus was originally promised to create (not just save) more than 3 million jobs.[2] Instead, the economy has since lost more than 3 million additional net jobs.
The abject failure of the stimulus policies recommended by Keynesian economic models should induce some fundamental re-analysis of these models' assumptions. Instead, the CBO is re-releasing the same jobs analysis--with the same economic assumptions--that they had used a year ago.
The "Begging the Question" Fallacy
The CBO's conclusion that the stimulus created jobs is based on an economic model that began with the premise that all stimulus bills create jobs. In other words, the conclusion is already assumed as a premise. Logicians call this the fallacy of begging the question. Mathematicians call it assuming what you are trying to prove.
More specifically, the CBO's model started by automatically assuming that government spending increases GDP by pre-set multipliers, such as:
The problem here is obvious. Once the CBO decided to assume that every dollar of government spending increased GDP by the multipliers above, its conclusion that the stimulus saved jobs was pre-ordained. The economy could have lost 30 million jobs, and the model would have said that the economy would otherwise have lost 31.5 million jobs without the stimulus. An asteroid could have hit the United States, wiping out everyone outside of Washington, D.C., and (as long as Washington still spent the stimulus money) the CBO's economic model would have produced the same stimulus jobs data. There is no adjustment made to reflect what actually happened in the economy after the stimulus was enacted.
In a recent speech to the National Association of Business Economics, CBO Director Doug Elmendorf confirmed this by stating:
[W]e don't think one can learn much from watching the evolution of particular components of GDP [gross domestic product] over the last few quarters about the effects of the stimulus so we fall back on repeating the sort of analysis we did before. And we tried to be very explicit about it that it is essentially repeating the same exercise we did rather than an independent check on it.[1]
When asked if this means that any actual underperformance of the stimulus would fail to show up in the CBO's stimulus jobs count, Elmendorf replied "That's right." This means the 1.5 million jobs saved estimate was pre-determined.
Of course, the stimulus was originally promised to create (not just save) more than 3 million jobs.[2] Instead, the economy has since lost more than 3 million additional net jobs.
The abject failure of the stimulus policies recommended by Keynesian economic models should induce some fundamental re-analysis of these models' assumptions. Instead, the CBO is re-releasing the same jobs analysis--with the same economic assumptions--that they had used a year ago.
The "Begging the Question" Fallacy
The CBO's conclusion that the stimulus created jobs is based on an economic model that began with the premise that all stimulus bills create jobs. In other words, the conclusion is already assumed as a premise. Logicians call this the fallacy of begging the question. Mathematicians call it assuming what you are trying to prove.
More specifically, the CBO's model started by automatically assuming that government spending increases GDP by pre-set multipliers, such as:
Every $1 of government spending that directly purchases goods and services ultimately raises the GDP by $1.75;
Every $1 of government spending sent to state and local governments for infrastructure ultimately raises GDP by $1.75;
Every $1 of government spending sent to state and local governments for non-infrastructure spending ultimately raises GDP by $1.25; and
Every $1 of government spending sent to an individual as a transfer payment ultimately raises GDP by $1.45.[3]
(Note that all CBO figures in this paper represent the midpoint between their high and low estimates.)
Then the CBO plugged the stimulus provisions into the multipliers above, came up with a total increase in GDP of 2.6 percent, and then converted that additional GDP into 1.5 million jobs.Every $1 of government spending sent to state and local governments for infrastructure ultimately raises GDP by $1.75;
Every $1 of government spending sent to state and local governments for non-infrastructure spending ultimately raises GDP by $1.25; and
Every $1 of government spending sent to an individual as a transfer payment ultimately raises GDP by $1.45.[3]
(Note that all CBO figures in this paper represent the midpoint between their high and low estimates.)
The problem here is obvious. Once the CBO decided to assume that every dollar of government spending increased GDP by the multipliers above, its conclusion that the stimulus saved jobs was pre-ordained. The economy could have lost 30 million jobs, and the model would have said that the economy would otherwise have lost 31.5 million jobs without the stimulus. An asteroid could have hit the United States, wiping out everyone outside of Washington, D.C., and (as long as Washington still spent the stimulus money) the CBO's economic model would have produced the same stimulus jobs data. There is no adjustment made to reflect what actually happened in the economy after the stimulus was enacted.
Now, who wants to claim CBO reports are accurate?