Congressional Budget Office Director Doug Elmendorf has posted the effect of the ARRA, the $800 some-odd billion dollar stimulus package, on the economy as calculated by his office. Their findings? That it:
- Raised the level of real (inflation-adjusted) gross domestic product (GDP) by between 1.7 percent and 4.2 percent,
- Lowered the unemployment rate by between 0.7 percentage points and 1.5 percentage points,
- Increased the number of people employed by between 1.2 million and 2.8 million, and
- Increased the number of full-time-equivalent (FTE) jobs by 1.8 million to 4.1 million compared with what those amounts would have been otherwise. (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.)
The cruel problem as Director Elmendorf points out is that their ability to make this determination is very, very limited:
Data on actual output and employment during the period since ARRA’s enactment are not as helpful in determining ARRA’s economic effects as might be supposed, because isolating those effects would require knowing what path the economy would have taken in the absence of the law. Because that path cannot be observed, there is no way to be certain about how the economy would have performed if the legislation had not been enacted, and data on its actual performance add only limited information about ARRA’s impact.
Said another way, their determination is made primarily by measuring inputs and using those to calculate the effect those inputs have on the economy based on calculations from previous economic downturns that measured inputs to determine their effects on the economy.
Or, in other words, the world may never know.
Here’s how Peter Suderman put it:
Douglas Elmendorf, the head of the Congressional Budget Office, has stated plainly that his team’s estimates do not measure real-world outputs (just inputs), that they do not serve as an independent check on its success or failure, and that if the stimulus had not created jobs, the CBO’s figures would not reflect that fact.
Here’s another question the world may never know the answer to: did the ARRA produce the greatest amount of growth that could have been produced with $800 some-odd billion?