There’s another story I’d meant to weigh in on yesterday: Joe Biden’s comments about the effects of the stimulus. Fortunately, the Associate Press has done much of the heavy lifting for me:
WASHINGTON (AP) — In his first quarterly report on the nation’s stimulus package, Vice President Joe Biden uses anecdotes to paint a glowing picture of an economy on the rebound. In reality, the picture is incomplete and the colors far more muted.
It is not disputed that Washington is spending historic amounts of money at a rate far faster than normal. Workers are getting tax breaks, Washington is picking up a greater share of state Medicaid costs and road construction projects are beginning.
Even Recovery.gov, the Web site that has yet to live up to its billing as a one-stop way to track every penny, offers more information than typical government programs, and faster.
But the effect of that spending is less clear. Many of the claims the White House is making are based on anecdotes selected to fit the Obama administration’s message. For instance, the report cites a newspaper article about workers being rehired at a factory in Chicago. That account is true, but is no more an accurate snapshot of the nation’s economy than a story, not cited in the report, about a Roanoke, Va., railcar factory closing.
There’s one point I wanted to emphasize especially:
THE WHITE HOUSE SAID: The stimulus has created or saved 150,000 jobs.
THE FACTS: Since February, the nation has lost more than 1.3 million jobs, according to the Department of Labor. To make the case that the country created jobs over that same stretch, the White House has put forward a benchmark of jobs created “or saved.” The argument is that the job numbers would have been even worse had it not been for the stimulus, and the difference between those numbers is a net positive.
To visualize that disconnect, consider this: The administration has promised to create or save 600,000 more jobs in the next 100 days. Even if the nation loses another 5 million jobs during that span (a highly unlikely prospect) the White House could still claim success.
There are few hard numbers when it comes to tracking stimulus jobs. The Obama administration numbers are based on estimates by the White House Council of Economic Advisers, based largely on a formula Obama’s transition team put forward. It estimates the effect of tax breaks, government spending and social programs on job growth.
We don’t know how many jobs have been created or saved by the stimulus. It may be 150,000 as VP Biden claims. It may be more. It may be none. The stimulus may have cost jobs. On net there has certainly been a loss of jobs.
Merely making the claim exhibits a total lack of understanding of how econometric models are created and how they should be used. The actual results drive the model, not the other way around. Models are helpful for devising policy but they are only as good as the data that underlies the model. They are useless for determining outcomes.
If we want to know what effects the stimulus package has had on jobs, we must measure the outcomes and use those outcomes to improve our econometric models. Claiming outcomes based on the models is absurd.
From the VP’s Report: “Serious Materials, Company Using Recovery Funds To Rehire Some Of The More Than 200 Laid Off Workers”
How many? According to the newspaper article linked in the VP’s report: “about a dozen” of the more than 300 workers laid off in December following the window company’s bankruptcy. (Chi. Trib. 4/27/09)
How does government claim responsibility? The buyer of the business “expects federal funding and tax breaks for weatherization to dramatically boost sales for its high-efficiency windows and glass.”
Not only does the VP report exaggerate the appearance of the number of jobs created, it begs the question of what is a stimulus? What if the window company had indicated that it was focusing its business on high-efficiency windows based upon its assessment of likely future regulatory and taxation trends related to energy? Is a carbon tax, a stimulus?
The other thing I like about the Republic Windows article in the Chicago Tribune is that about a dozen employees were re-hired and then almost a dozen politicians came to the plant one day to take credit: Biden, Daley, Durbin, Burris, Madigan, Quigley, and Halvorson.