ABC News reports that the Congressional Budget Office this week released its latest report on the effects of the Recovery Act and found that it “raised the GDP, lowered unemployment, and increased the number of people with jobs.” According to the report, CBO estimates that the Recovery Act’s policies in the third quarter of the calendar year 2010 had the following effects (emphasis added):But I know, I know, CBO numbers don't count unless there's a Republican in the White House because it might produce figures that don't support the Republican narrative of reality. The reality is however that the stimulus is wearing off and winding down as we head into 2011, and the GOP is more than happy to make sure nothing further is done and to blame Obama once the economy gets worse next year (as it most certainly will.)
– They raised real (inflation-adjusted) gross domestic product (GDP) by between 1.4 percent and 4.1 percent,– Lowered the unemployment rate by between 0.8 percentage points and 2.0 percentage points,– Increased the number of people employed by between 1.4 million and 3.6 million, and,– Increased the number of full-time-equivalent jobs by 2.0 million to 5.2 million compared with what would have occurred otherwise (see Table 1). (Increases in FTE jobs include shifts from part-time to full-time work or overtime and are thus generally larger than increases in the number of employed workers).
They're counting on you buying the argument that we can't have any additional water to put out the fire now because it might hurt crops later.
Posts
6 comments:
The report isn't quite as glowing as you might want to believe from the ABC news article.
For instance, let's look at the report's statement about the job creation: "During the third quarter of 2010, recipients reported, ARRA funded more than 670,000 full-time-equivalent (FTE) jobs.2 Those reports, however, do not provide a comprehensive estimate of the law’s impact on U.S. employment, which could be higher or lower than the number of FTE jobs reported, for several reasons (in addition to any issues concerning the quality of the reports’ data). First, some of the jobs included in the reports might have existed even without the stimulus package, with employees working on the same activities or other activities. Second, the reports cover employers that received ARRA funding directly and those employers’ immediate subcontractors (the so-called primary and secondary recipients of ARRA funding) but not lower level subcontractors. Third, the reports do not attempt to measure the number of jobs that were created or retained indirectly as a result of recipients’ increased income, and the increased income of their employees, which could boost demand for other products and services as they spent their paychecks. Fourth, the recipients’ reports cover only certain ARRA appropriations, which encompass about one-fifth of the total either spent by the government or conveyed through tax reductions in ARRA; the reports do not measure the effects of other provisions of the stimulus package, such as tax cuts and transfer payments (including unemployment insurance payments) to individual people."
In other words: "We don't actually have a way to prove that the stimulus created any of these jobs, nor can we actually track what the impact of the money was if it did create jobs. We're just taking credit, without presenting proof that we actually did anything."
Also, FTEs are not full-time employees. Ten people working four hours a week are 1 FTE. There's also nothing indicating that they looked to see if the FTEs did/will remain employed once the stimulus money ends.
"Estimating the law’s overall effects on employment requires a more comprehensive analysis than can be achieved by using the recipients’ reports. Therefore, looking at recorded spending to date along with estimates of the other effects of ARRA on spending and revenues, CBO has estimated the law’s impact on employment and economic output using evidence about the effects of previous similar policies and drawing on various mathematical models that represent the workings of the economy."
Again: "We can't actually verify anything based on the reports we required. So we guessed. But we used mathematical models for our guesses."
It's the best educated guess from the people whose job it is to make them, given the data they have to work with.
And yes, I'm the first person to admit macroeconomics is at best a field designed to give people who specialize in mathematical modeling something productive to do between sessions of phrenology, palmistry, and rolling the bones.
It's a conclusion of a best guess. Would things have been different (better/worse) without the money?
That's a best guess field as well.
I actually dispute the idea that this report is the best educated guess from the people whose job it is to make them They didn't use the data. They were quite explicit about the fact that the data was actually meaningless, and could not be used to make any of the claims they made. The only actual data the reports provided was that "...671,607 full-time-equivalent jobs were funded by ARRA during the third quarter."
That's it. Everywhere else in the report they say things like "Estimating the law’s overall effects on employment requires a more comprehensive analysis than can be achieved by using the recipients’ reports" and "Although CBO has examined data on output and employment during the period since ARRA’s enactment, those data are not as helpful in determining ARRA’s economic effects as might be supposed because isolating the effects would require knowing what path the economy would have taken in the absence of the law. Because that path cannot be observed, the new data add only limited information about ARRA’s impact," and "Estimating the law’s overall effects on employment requires a more comprehensive analysis than can be achieved by using the recipients’ reports."
That's not a best guess based on the available data. That's an admission that the data was unusable, and so they faked it.
Now, ARRA was projected to have a net deficit increase of $399 billion in 2010. This report covers 3 months of the year, or about $99.75 billion of that net deficit increase.
They're telling us that what they can tell us for certain is that, with that massive expenditure of money, they created 671,607 FTE jobs. That works out to a deficit increase of about $148,500 per job.
Based on the massive cash (well, credit) payments involved in ARRA, we deserve more accountability than this joke of a report. We should demand actual data showing an actual causal effect between ARRA and any improvements in real GDP or unemployment. We should not accept the post hoc ergo propter hoc claim that since the money was spent, and some improvement happened, the first caused the second.
Macroeconomics is a field that depends on elaborate mathematical modeling and goat entrails and the flight of swallows, it can usually explain why it interprets the swallows the way it does and why those particular entrails from that particular goat were consulted. The CBO fails to do even that much. Instead, they really just tell us "all of the reports we requested don't actually tell us anything we can use so we're just going to make it up, secure in the knowledge that many of us will be in retirement before a Congressional committee questions the failures of ARRA."
"Because, man! Somewhere, in one of these...memories is the evidence!"
--Kevin Flynn
So what's the CBO's problem with the data? Is it just completely immeasurable? Do they have the wrong data? Did they not ask for anything applicable and they're just extrapolating from what they do have?
Do the businesses they are polling not have the data either?
Or is this just a model of a model of a model and we're out here in dragon country? It seems that you think the latter, in which case what the hell does the CBO do all day besides play Farmville?
...in which case what the hell does the CBO do all day besides play Farmville?
If they did, they would probably have a better idea of how the world actually works.
Or is this just a model of a model of a model and we're out here in dragon country? It seems that you think the latter, in which case what the hell does the CBO do all day besides play Farmville?
Actually, some additional research leads me to conclude that I've been a little unfair to the CBO. Everything I've seen seems to indicate that ARRA itself set the reporting requirements, and now the CBO is left trying to make sense out of a bunch of data points that don't actually tell them anything they need to know.
So, no, I can't really say that the CBO was playing Farmville all day. The legislators were.
Post a Comment