The Truth Behind “Jobs Saved or Created”

A very revealing speech by CBO Director Douglas Elmendorf: (the video is not embeddable, unfortunately).

Here’s a rough transcript starting around 2:08:55-

Question: I’ll be brief. You mentioned that with the AARA as it was moving through Congress, you provided projections based on a set of multipliers and econometric models and then later, when evaluating the effects you used multipliers and econometric models and that gives the impression of assuming what one’s trying to prove in terms of measuring the effects. So, a two part question: first, is that treatment required by the rules Congress sets for the CBO; and second, how would that be different if you compared the initial projections—both baseline and with the stimulus bill—versus actual experience?

Elmendorf: So, our method of analysis of that is not required by Congress. We’ve tried to be very clear on our reports on that that we don’t one can learn much by watching the particular components of GDP over the last few quarters about the effects of the stimulus. We think the best evidence about the effects of past policies comes from more detailed studies done often several years later: the behavior of particular households that got tax rebates sooner or later or whatever. We don’t think you can learn much from that so we fall back on repeating similar analysis that we’ve done before and we try to be very explicit about that that is, essentially, repeating the same exercise we did rather than an independent check on it. The part that is the check is we watch how the money has flowed out of the government budget—we can update that. We’re reading new evidence—if we thought we saw evidence that substantially shifted the body of work in this area then we would shift our views but we haven’t seen that at this point.

Question: If the stimulus bill did not do what it was originally forecast to do, then it would not have been detected by the subsequent analysis, is that correct?

Elmendorf: That’s right. That’s right. In terms of what we would have found otherwise—I don’t remember each of our forecasts—certainly by last March our economic forecast took on board a very large decline in employment, a run-up in the unemployment rate, weak GDP growth in the recovery of the second half of last year. Our January forecast—last January’s forecast—did not have that. We marked down the forecast considerably from January to March. Our first estimates of the effects of the stimulus package, I think, were coming out in between those benchmarks so it’s hard for me to go back and disentangle those pieces entirely.

So what about all the liberal brouhaha over the “independent, nonpartisan report by the CBO”?

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