Coming on the heals of debunking the Myth of the Surplus, deficit-deniers are back at it again with the sequel “Myth of the Stimulus”, touting a CBO report (May 26, 2010) claiming millions of jobs created—but does the report have any relevance to reality? We’ll quickly see it does not.
But first, the claim, as reported by ABC news.
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.
And of course, political talking points were immediately seized by Senate Democrats.
Critics of the #stimulus listen up - CBO estimates that it put 2.8 million ppl to work in 1st 3 months of 2010. http://cboblog.cbo.gov/?p=967
Anyone claiming the report has any basis in reality hasn’t read it. Of course, not reading legislation and reports has become the official pastime in Washington, but we digress.
You don’t need to look up the report, it actually claims “between 1.2 million and 2.8 million” jobs in first quarter of 2010 (the previous Democratic quote inaccurately only reported the upper number). But just like Myth of the Surplus, it’s not the numbers in the report, but how they obtained them. If you recall, Myth of the Surplus explained how political operatives claimed a surplus by citing CBO numbers, all while the national debt increased.
Those clinging to the absurd idea of the surplus (let’s call them deficit-deniers) now cite another CBO report claiming a Trillion dollar “Stimulus” created millions of jobs. The media and others gobbled this myth up, but failed to verify the absurd claims or do any verifying research at all. Just like the previous myth and deficit-deniers, the stimulus-promoters haven’t done their homework as once again the CBO report doesn’t pass the sniff-test, if you actually use some critical thinking and analyze the report.
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.
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 [already] 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.”
According to the CBO’s own director, the report isn’t worth the paper it’s printed on—if you want an accurate picture of reality. If you actually read the report, it admits it doesn’t rely on or use any real data, but rather predictive models—the same models used to promote the stimulus in the first place. Naturally, that makes the results worthless to anyone with an IQ above single digits.
If you actually read the report, it includes the following disclaimer:
…looking at recorded spending to date as well as 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 on the economy and using various mathematical models that represent the workings of the economy.
http://www.cbo.gov/ftpdocs/115xx/doc11525/05-25-ARRA.pdf (page 9 of PDF)
In other words, CBO didn’t perform actual counting or use any hard data, rather it’s an estimate of what they believe should happen (based on suspect Keynesian Economics), not what actually did happen by counting actual job creation. In fact, the report isn’t news itself—since it repeated the same analysis promoting the stimulus in the first place, it would be news if the report didn’t yield huge employment gains, since that’s what the guesstimates originally said.
Anyone touting this report as proof of any actual job gains hasn’t read it, or is attempting to deliberately deceive you. It’s that simple, as the report itself (as well as the CBO director) admits they didn’t use any actual real data.
Do your own homework, and always ask what the assumptions and methods are for any claim. In this case, CBO admits they’re not really determining any jobs created by an analysis of actual data, but repeating the earlier projections and assumptions of what the stimulus should do, if everyone lived on Fantasy Island (and assuming Keynesian Economics really works, which is suspect).
This myth isn’t really a truth-lie, for it doesn’t contain any truth at all; those blindly accepting it and believing mythical job creation figures should say hello to Tattoo and Mr. Roarke for us as we prefer to stay in reality and won’t be traveling with you to Fantasy Island.
After all, Oceania has always been at war with Eastasia.