Stimulus Accounting Still Meaningless

Via Hit and Run, this can't be said too many times

according to the CBO’s top official, the figures in this report and previous mandatory stimulus don’t actually tell us whether or not the stimulus created jobs. That’s because, as  I’venotedsomanytimesbefore, the reports rerun slightly updated versions of the same models of that were used to estimate that the stimulus would create jobs prior to the law’s passage. And lo and behold, if you create a model that predicts the law will create jobs, and then you rerun a mild variation of that model a few years later using updated figures about what money was actually spent, it still reports that the stimulus created jobs. But there’s no counting here, no real-world attempt to assess the reality of the stimulus—just a model that assumes that stimulus spending will create jobs and therefore reports that stimulus spending has in fact created jobs. As CBO director Douglas Elmendorf confirmed on the record last year in response to a question, “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.”

Further, the fact that we can count individual jobs in stimulus programs (of which there are all too few, which is why the Administration doesn't do this), we still have to take into account an offset effect.  The trillion dollars came from somewhere, and in effect were diverted from private to public hands.  To justify the stimulus, one needs to be able to argue that the public use of these funds created more jobs than the private use of these funds.  Good luck with that.


  1. miltonf:

    Nice post. What most efforts to measure the economics of these sort of initiatives often miss( or don't understand) is the opportunity cost- the benefits that would have accrued had the money been spent elsewhere. It's a classic fallacy like breaking windows will help stimulate the economy because we'll need to pay for repairs. It ignores what useful purpose the funds might have been put to had they not been required to repair the window.

  2. Uncle Bill:

    A point Suderman has made before, that almost no one else seems to grasp. I wish more people understood this.

    By the way, I bet Suderman and his McSpouse have some interesting dinner table conversations.

  3. Terri:

    I read from the top down and note that this quote also deals with "modelling".

    "They [skeptics] mostly look at observation papers and ignore modelling ones, as they believe by default models are wrong!"

  4. IGotBupkis, Official Lefty Accounting Magician:

    >>> Good luck with that.

    (waves hands) There! Done!

    Are you happy now, you stimulus-denier, you?