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.
Update
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?
Didn’t the CBO score the Republican alternative stimulas package much higher?
Where are all the dingbats that were asserting as fact that the stimulus created x millions of jobs? Hello? Where are you guys? Did that word “estimate” and the explanation of not being able to measure anything concretely scare you off?
Boneheads.
I think this question: “did the ARRA produce the greatest amount of growth that could have been produced with $800 some-odd billion?” Along with “what are the down the road costs of ARRA” are key.
No doubt this CBO report will result in a bunch of “tastes great / less filling” partisan debate. Fine. I think the opportunity cost and debt incurred in ARRA are much more important and interesting topics. Its hard for me to imagine this was money and effort well spent. Let’s stipulate that the benefits cited are real. In contrast to the costs to be incurred, as the old song goes “is that all there is?”
When this stimulus ends soon, will we have a better sense of what the stimulus may or may not have accomplished?
I’m not sure how to answer your question, Larry. The stimulus spending won’t end for nearly a decade. We’ll spend more next year than we spent last year. I don’t think that’s any way to run a railroad but that’s the way the ARRA was written.
Even then we won’t be able to determine what would have happened had the stimulus bill never been enacted.
No, what is unmeasurable today will almost surely remain unmeasurable in the future.