Eight False Things The Public “Knows” Prior To Election Day

[Damuri_Ajashi]

@John_Mace

Agreed. But in this case, they did.

I disagree. The only objective way to say if something worked is to measure it against what it was supposed to do. And our models aren’t good enough to know what would have happened w/o the policy.

At best, I would say that we have to admit we don’t know whether the stimulus worked or not, because we don’t know what things would have been like w/o it. But since Obama (stupidly) gave us the metric, that’s the one we should use.

Does it bother you at all that the unemployment rate was already at or above 8% when the stimulus bill was signed into law?

[Damuri_Ajashi]

@Little_Nemo

I agree with John Mace. The Obama administration set a benchmark for what they would consider success for the stimulus program and they failed to reach it. Claiming that the program succeeded anyway is blatently moving the goalposts. Plenty of people on this board were all over the Bush administration when it did the same thing with the benchmark for success in Iraq. It’s only fair to hold the Obama administration to the same standard.

This isn’t saying the stimulus program was worthless or that it shouldn’t have been tried at all. But we have to acknowlege it did not live up to predictions and by that standard it was a failure.

There a big difference between saying “we are going to invade because there are WMDs” when there aren’t and saying we are going to engage in stimlulus spending otherwise unemployment could rise as high as 8% when unemployment was already at 8% when the bill was signed.

[Damuri_Ajashi]

@Little_Nemo

Here’s what the administration said:The actual unemployment rate is 9.6%.

So let’s consider a hypothetical. Let’s say the Republicans had won the vote over the stimulus package and it had not been enacted. And the unemployment rate was 9.6% now.

Do you think the Obama administration wouldn’t be calling the Republican plan a failure because of that rate? They’d be saying that the Republicans had failed even worse than they had predicted they would.

So if the Republican plan would have been a failure for having a 9.6% rate how can the Democrats claim their plan is a success for achieving that same rate?

Mostly because your assumption is incorrect. Without the stimulus, unemployment would be much much much higher. Obama did the bare minimum possible to avert disaster rather than what was necessary to fix the problem.

[Sam_Stone]

@Richard_Parker

I’m not even much of an economics buff, but even I know this isn’t true just from reading the stuff the President’s economists have written. Of course they think the size of the state’s share in the economy and the features of that state’s economy will affect the proportion of that state’s share of jobs created by economic stimulus. To think otherwise is to defy logic, to say nothing of economics. Your caricature basically reduces Christina Romer et al. to idiots, which however much you disagree with them, they are not.

You’ll notice that Christina Romer is no longer there. And she’s not talking. But she did author a paper with her husband this year that found that A) deficits are more destructive than they thought, and B) tax increases are more contractionary than they thought.

Also, there has been plenty of new research since the stimulus was passed, and a lot of it brings new information that suggest fiscal stimulus isn’t as effective as thought.

Third, there’s a huge difference between a stimulus as it exists on a clean piece of academic paper, and the one that exists after being filtered through the gaggle of idiots and shills that make up the U.S. government.

For example, the multiplier you supposedly get from a stimulus depends on the stimulus money making its way to otherwise-idle resources. In reality, the stimulus money went disproportionally to the districts of powerful politicians, not to the places where it would do the most good.

Also, the multiplier you get from the stimulus depends on it reaching the hands of idle resources, but a disproportionate amount of it went to salary increases for public employees.

There are a number of problems here. First, it isn’t true that it is impossible to measure jobs created or saved. For every chunk of money you hand out, you ask the receiver to document the jobs created or saved by it. It’s a crude measurement, largely because it doesn’t capture any of the stimulus effects of the spending (i.e., jobs indirectly created or saved by the additional economic activity spurred by the directly created or saved jobs). But it’s a baseline.

You can pull these reporting spreadsheets for each state from recovery.org, and see dollar-by-dollar what each recipient is saying about how many jobs their money created or saved.

First, the CBO specifically rejected those counts, saying they were wildly inaccurate. Which is why their latest report simply regurgitated the original general equilibrium models used to generate the original estimate. All they did was adjust them to account for the actual timing of the stimulus.

And there is not a universal consensus among economists that these models are correct or even appropriate. There is plenty of disagreement about this, which is why it would be nice to have confirming evidence, and why it’s so disingenuous of the Democrats to present this latest report AS evidence. It’s not. It’s a reiteration of the hypothesis.

Finally, ANY estimate that only counts jobs created, and doesn’t count jobs lost is useless. For example, let’s say a company bids on a road project that would employ 50 workers. Another company gets stimulus money, and pays their 50 employees with it and now bids on the same job. They get the job, and voila, 50 jobs ‘created’. In the meantime, the losing company has to let its 50 workers go. But that’s never counted.

The multiplier effects of the stimulus assume that such crowding-out effects do not happen, but in the real world they absolutely do.

Second, your original claim rests on the notion that it would be odd to see that the Stimulus had disproportionate effects on one state. But if the effects of the Stimulus are unmeasureable, then it doesn’t actually say anything about the Stimulus to suggest that one State has had disproportionate job growth.

No, but if the effects of the stimulus were as the models suggest, you would expect to see job creation changes roughly line up with where the stimulus money went. It doesn’t.

Third, and most importantly, AFAICT it isn’t true that Texas has over half of the jobs created since 2008 according the BLS. I think maybe you’re half-remembering some other statistic.

Actually, the number was from August 2009 to August 2010. In the U.S. as a whole over that period of time, the BLS measured net 214,000 jobs created. In Texas over that same period, they measured 119,000 jobs created.

So why is that different from the millions of jobs created ‘or saved’ under the stimulus? Who knows? The stimulus numbers are made up out of thin air. I guess they are saying that without the stimulus there would have been a million job losses instead of 119,000 created, but no one knows. We have no evidence. At all.

By the way, the CBO’s report is not a report of what their economists think happened. The CBO is constrained to use the assumptions provided to it. If a Republican went to the CBO and said, “Assuming the CATO Institute’s dynamic scoring of tax increases is correct, how much GDP output would be lost by the tax increase in bill X?” And the CBO would run the numbers based on those assumptions and give them an answer. But it wouldn’t be fact, and it wouldn’t be the best estimate of all economists, or a consensus of economists. It would merely be a specific set of assumptions with numbers applied.

Such reports can be useful for determining policy options, but they aren’t statements of fact.

[Sam_Stone]

@Damuri_Ajashi

Mostly because your assumption is incorrect. Without the stimulus, unemployment would be much much much higher. Obama did the bare minimum possible to avert disaster rather than what was necessary to fix the problem.

Except that there is no evidence that this is true. And there is evidence that it’s not. For example, the same Keynesians tried to convince Europe, Canada and Australia to implement larger stimuluses, and they claimed that there would be much economic damage if they didn’t. Well, they didn’t, and their economies are outperforming the U.S. economy.

Paul Krugman predicted disaster for Germany if it adopted austerity measures. They did, and it didn’t happen. Recently he predicted disaster for the UK if it went ahead with its austerity measures. But the last economic report out of the UK showed that the economy in the last quarter grew at twice the rate as expected, even though the Cameron government was elected specifically on the promise of implementing austerity.

Claiming that the stimulus worked but the economy was worse than was thought is just a wild guess. But a paper out last year applied the corrected numbers to the stimulus and found that it still had no effect.

[Little_Nemo]

@septimus

I’ve answered your question twice, even using a larger font in one case, thinking that might help. I’ll repeat the answer now: The U.S. will acquire that money in one of its usual ways: taxing, borrowing, or creating fiat money. Is there insolvency risk? Of course there is, as I emphasized earlier in a larger font. Does that have anything to do with our debate? Obviously not! I don’t think you’re a right-winger, but you seem to have been letting some of them confuse you.

I’m not even sure what you think we’re debating here.

We’ve been debating the same topic all along. Is the social security being invested? You’ve been claiming that it is. That the surplus money collected in 2010 is being invested.

But you’ve now conceded that the United States government will fund future payments via “one of its usual ways: taxing, borrowing, or creating fiat money.”

Why do you think that will be necessary? According to you, the money is already there waiting - it was set aside and invested back in 2010. Where did all that money from 2010 go?

And now I’m going to predict the future: You’re not going to able to explain this. But you’re going to claim your inability to explain it is my fault. Because when people point out how you’re wrong you have a history of claiming they’re confused.

You were wrong about the martingale system. And you’re wrong here. Not understanding how you’re wrong doesn’t make you right.

[Little_Nemo]

@Damuri_Ajashi

Mostly because your assumption is incorrect. Without the stimulus, unemployment would be much much much higher. Obama did the bare minimum possible to avert disaster rather than what was necessary to fix the problem.

That’s an unfalsifiable argument. No matter what the unemployment rate is, you can always argue that it could be much much much higher. Or, for that matter, much much much lower. Such logic says that we can’t judge any program as a success or failure - it’s all subjective.

[Sam_Stone]

As for the social security ‘trust fund’… The root problem is that the money collected and spent from SS contributions should have been shown as a liability in the budget. Instead, not only was it moved off-budget, but it was used to make the real deficit look better than it was.

Current practice example:

Real shortfall between spending an revenue: $200 billion
Money collected for Social Security: $100 billion
Reported ‘on budget’ deficit: $100 billion.

Correct practice:

Real shortfall between spending and revenue: $200 billion
Revenue collected that should be in the trust fund: $100 billion.
Reported deficit: $300 billion.

Had that been the case, the size of past deficits might have helped constrain government spending a bit more, and would have left more breathing room to raise spending to pay the shortfall when the time came. It wasn’t done this way purely for political reasons.

One of the reasons future budgets look so bad is that they are facing a double whammy: because there’s no longer a SS surplus, they can’t use that to artificially make the deficit look smaller than it is. And because there will soon be a shortfall, they have to take additional money out of general revenue to pay the shortfall.

[Mijin]

@Little_Nemo

That’s an unfalsifiable argument. No matter what the unemployment rate is, you can always argue that it could be much much much higher. Or, for that matter, much much much lower. Such logic says that we can’t judge any program as a success or failure - it’s all subjective.

Quite possibly. It’s similar to the Y2k bug:
Was the danger overblown? Or did we avert disaster with all the various precautions?
(As a programmer, I’d stump for the former, but I don’t actually know)

w.r.t. the fiscal stimulus, there are certainly plenty of economists that argue that the stimulus helped avert a far worse recession, and they have supporting models (cite). But it’s hard to answer “What if?” questions definitively.

[John_Mace]

@Sam_Stone

First, the CBO specifically rejected those counts, saying they were wildly inaccurate. Which is why their latest report simply regurgitated the original general equilibrium models used to generate the original estimate. All they did was adjust them to account for the actual timing of the stimulus.

I’ve seen this claim made elsewhere, and while I tend to accept it, is there any primary source documenting this? I notice that if you go to “recovery.gov” there is all kinds of information on how much money they spent and almost nothing on actual jobs created. Reminds me of politicians who claim how much they’ve done to improve X and give as evidence how much they spent on X.

So, that’s why I think it’s better to focus on the unemployment numbers. Those are actual measurements. If Obama says he’s going to create 3M jobs and keep the unemployment rate under 8%, and then claims he did create 3M jobs while the unemployment rate is over 9%, I just go :dubious:.

[gonzomax]

So he said he would keep unemployment under 8 percent. If we had 8.1 would he be lying. If he were 8.5 would that mean he failed? His policies saved a lot of jobs that would be lost. He also created a lot of jobs. I find those good things.
Did he keep it under 8. No, so what , he did a lot of good. He did these things over the protestations of the Repubs who fought and watered his programs down. They insisted on 1/3 rd of the stimulus going into a tax cut for big business. Tax cuts have proven over and over they don’t create jobs. That money would have helped create more jobs if the Repubs did not funnel it to the wealthy who don’t need it.
The Repubs were in charge when this mess was created. What gives them any credibility. They took a balanced budget, and almost zero unemployment and trashed it.

[Sam_Stone]

One more point about the stimulus: Even the CBO report says that over the long run, the stimulus will be a net negative to the U.S. economy (i think they point to -.3% GDP after ten years with the stimulus than without).

We’re talking 870 billion dollars here. At 3.5% annual interest, that’s a permanent hit to the U.S. budget of 30 billion dollars per year. That’s 30 billion dollars every year that could have been spent on research or infrastructure or left in the pockets of the American taxpayer.

The minute the last dollar of stimulus money is spent, it stops being a net benefit to the economy, and starts to be a drag on the economy. Everyone agrees with that. Therefore, the stimulus only makes sense if the recession is short enough that by the time the check for the stimulus is due the economy is recovering nicely and can afford the hit.

One of the arguments that the economists opposed to the stimulus made was that if the recession had an ‘L’ shaped recovery (in other words, it’s a contraction followed by a long period of low growth), then the stimulus risks a double-dip recession or at least adds a burden to a weak economy. The Obama administration responded by saying their models predicted a ‘V’ shaped recovery with the stimulus - the stimulus money would cause a rapid recovery and robust growth two years out and more.

Well, guess what? It’s an ‘L’ shaped recovery so far. And the stimulus money is going to be gone soon. After that, the stimulus is all negative. So for it to have been a good idea, it either had to avert total economic melt-down, or at least its positive effect had to be so strong (big multiplier) that it would outweigh the long-term negatives. That clearly didn’t happen.

Finally, the additional debt is going to hamstring the Fed. For example, let’s say that the velocity of money starts to pick up because of a recovering economy. In that case, the Fed’s main task is going to be to keep inflation in check. One of the big tools for doing that is to raise interest rates. But every point of interest rate raises the debt servicing cost of the stimulus by almost 10 billion dollars per year.

In 1981, the federal funds rate went up into double digits. If that happens again, the interest on the stimulus alone is going to exceed the annual cost of NASA, the Department of Education, and the Department of Energy combined. And the interest on the overall debt at a 10% interest rate would be 1.3 trillion dollars per year - double the U.S. military budget.

The other alternative is to let the inflation happen, and let it devalue the debt. The problem with that is that the U.S. has been buying up very short-term debt to take advantage of current low interest rates. If it becomes clear that the U.S. is devaluing its money, it won’t be able to roll over the debt without paying high interest rates. That could cause a debt crisis.

This is the corner the U.S. government has been painting itself into with its incredibly bad and irresponsible fiscal policy.

[John_Mace]

Regarding the split between government and private sector jobs, my Google fu is underwhelming. Or, there just isn’t any good info out there. I find plenty of articels from a year ago, and nothing recent. But the ones from a year ago, like this one from the NYT, don’t support the 90% private sector jobs claim.

Although President Obama initially said that 90 percent of the jobs created by the stimulus program would be in the private sector, the data suggests that well over half of the jobs claimed so far have been in the public sector.

[Sam_Stone]

@John_Mace

I’ve seen this claim made elsewhere, and while I tend to accept it, is there any primary source documenting this? I notice that if you go to “recovery.gov” there is all kinds of information on how much money they spent and almost nothing on actual jobs created. Reminds me of politicians who claim how much they’ve done to improve X and give as evidence how much they spent on X.

So, that’s why I think it’s better to focus on the unemployment numbers. Those are actual measurements. If Obama says he’s going to create 3M jobs and keep the unemployment rate under 8%, and then claims he did create 3M jobs while the unemployment rate is over 9%, I just go :dubious:.

Or you could use the BLS numbers which are actual surveys of jobs created overall, and which are incredibly dismal. Canada has created more net jobs in in three months than the U.S. did in the entire year, and we have 1/10 the population.

You can read the actual CBO report on the ARRA here: PDF.

From the Appendix:

In analyzing ARRA’s economic effects, CBO drew heavily on versions of the commercial forecasting models of two economic consulting firms, Macroeconomic Advisors and Global Insight, and on the FRB-US model used at the Federal Reserve Board. Those models assume that the economy has an underlying potential output determined by the size of the labor supply, the capital stock, and technology. They also assume that actual output can change relative to potential output because of shifts in aggregate demand for goods and services from households, businesses, and the government.

In other words, to test whether the Keynesian assumptions in the original stimulus were correct, we ran the same models, which assume that Keynesian principles are correct.

Because they emphasize the influence of aggregate demand on output in the short run, the macroeconometric forecasting models tend to predict greater economic effects from demand-enhancing policies such as ARRA than some other types of models do. Macroeconometric forecasting models of this sort are used widely, and they underlie most of the forecasts offered to the clients of economic consulting firms. In addition, the models that CBO uses generally produce results that are roughly in line with the consensus of private-sector forecasters, as compiled in the Blue Chip Economic Indicators.

However, some analysts criticize this sort of model for being based on historical relationships among aggregate economic variables, such as income and consumption, rather than being built up from clearly specified rules governing the behavior of households and businesses. In particular, some critics argue that models based on historical relationships will not provide accurate predictions in the face of new policies or new circumstances. Partly to address that concern, CBO presents a range of possible effects rather than a single number for each economic variable.

So, the CBO admits that the general equilibrium models produce higher effects from the stimulus than other models do. Their answer to that was to just increase the size of their error bars when re-running the models.

Some skeptics of the efficacy of stimulus policies have cited the results of an alternative class of models, which tend to imply more modest economic effects from such policies. In those models, people are assumed to make decisions about how much to work, buy, and save on the basis of current and expected future values of the wage rate, interest rates, taxes, and government purchases, among other things.

In the basic form of such models, stimulus policies tend to crowd out a significant amount of other economic activity, and multipliers tend to be less than 1—meaning that stimulative policies have less than a dollar-for-dollar impact on output.

Here they admit that there are other models which indicate the stimulus might not work at all.

Recent research has shown that relaxing some of those modeling assumptions can result in much higher multipliers. CBO has incorporated the results of that research into its view of the effects of government policies. However, the research results appear to be too dependent on particular assumptions for CBO to rely on them heavily.

Here they admit that they relaxed the rules and assumptions to generate higher multipliers, but vaguely also say tha the research appears flawed, so they didn’t rely on it ‘too heavily’.

The director of the CBO was interviewed about the stimulus [urlhttp://www.c-span.org/Watch/Media/2010/03/08/HP/A/30436/CBO+Director+Elmendorf+on+Stimulus+Law+and+the+Economy.aspx]here/url].

One illuminating question asked:

Questioner: “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, right?”

Doug Elmendorf: “That’s right. That’s right.”

[Damuri_Ajashi]

@Little_Nemo

Obviously the answer is yes.

To once again use my repeated example, it’s the difference between me giving you a check for $5000 and you giving yourself a check for $5000. If Canada owes the United States a billion dollars, that’s a genuine asset. If the United States owes the United States a billion dollars, then it isn’t an asset.

Here’s the difference. Congress at any time can decide they don’t want to fund social security anymore. They CANNOT decide that they will not pay off the bonds in the social security trust fund. A US federal obligation is the most certain investment in the world, it is certainly more certain than a canuck bond.

[Little_Nemo]

You’re just not seeing the problem. Say I have a hundred thousand dollars in the bank. Every morning I write myself a check for a hundred thousand dollars and every afternoon I deposit that check into my account. Obviously I’ll never run out of money doing this.

How many days will it take me to become a millionaire by doing this?

Presumedly many of you feel that if I deposit a $100,000 check into my account every day, I’ll be a millionaire in ten days.

[Damuri_Ajashi]

@Sam_Stone

Also, the multiplier you get from the stimulus depends on it reaching the hands of idle resources, but a disproportionate amount of it went to salary increases for public employees.

That is entirely incorrect and if this was another forum I would say you are either lying or stupid. There are some jurisdictions where teachers faced with budget cuts decided to take pay cuts rather than have colleagues fired while other fired teachers. SOME of the stimulus was used in some districts to reinstated fired teachers and in other districts to reinstate pay cuts but it is entirely inaccurate to say that a “disproportionate” amount of the stimulus money went to salary increases for public employees.

First, the CBO specifically rejected those counts, saying they were wildly inaccurate.

Cite for “wildly inaccurate” please.

They may have said they weren’t reliable but in the end they agreed that the stimulus saved jobs. Why is it that the CBO is partisan when it comes up with numbers that support the administration and impartial when it comes up with numbers that support the opposition.

And there is not a universal consensus among economists that these models are correct or even appropriate. There is plenty of disagreement about this, which is why it would be nice to have confirming evidence, and why it’s so disingenuous of the Democrats to present this latest report AS evidence. It’s not. It’s a reiteration of the hypothesis.

To the extent there is any sort of consensus, the CBO applies it. You are just saying you prefer some less subscribed to methodology than the most prevalent methodology. Or do you have a cite that the CBO uses some minority view?

Finally, ANY estimate that only counts jobs created, and doesn’t count jobs lost is useless. For example, let’s say a company bids on a road project that would employ 50 workers. Another company gets stimulus money, and pays their 50 employees with it and now bids on the same job. They get the job, and voila, 50 jobs ‘created’. In the meantime, the losing company has to let its 50 workers go. But that’s never counted.

]

Ummm, without that road project those guys at the first company would have been let go anyways, no?

The multiplier effects of the stimulus assume that such crowding-out effects do not happen, but in the real world they absolutely do.

Maybe they do but your example is not an example of crowding out. Crowding out is usually when federal spending consumes resources that would have otherwise been used for other purposes. To use your example. If there were 50,000 that were going to repave their driveway but because of the stimulus, the folks that would have repaved those driveways were instead employed paving new highways, then I would agree with you that there was crowding out, and the CBo takes this sort of thing into account. Believe it or not, the CBO employs economists who took econ 101 and 102.

No, but if the effects of the stimulus were as the models suggest, you would expect to see job creation changes roughly line up with where the stimulus money went. It doesn’t.

Are you under the impression that the stimulus accounted for ALL the economic activity in the country last year?

Actually, the number was from August 2009 to August 2010. In the U.S. as a whole over that period of time, the BLS measured net 214,000 jobs created. In Texas over that same period, they measured 119,000 jobs created.

You know what netting effect is right?

By the way, the CBO’s report is not a report of what their economists think happened. The CBO is constrained to use the assumptions provided to it.

Here are the assumptions the cbo used. Which of these assumptions do you think are outside the prevalent view of economists? Just because they didn’t use supply side economic assumptions doesn’t make their assumptions invalid.

http://www.cbo.gov/ftpdocs/102xx/doc10297/AppendixA.9.2.shtml

Such reports can be useful for determining policy options, but they aren’t statements of fact.

When have we ever had a report like this that either side can say was a statement of fact. Its ALWAYS best guess analysis, economics isn’t a hard science or a math, its as good as we can do with what we got.

[Damuri_Ajashi]

@Sam_Stone

Except that there is no evidence that this is true. And there is evidence that it’s not. For example, the same Keynesians tried to convince Europe, Canada and Australia to implement larger stimuluses, and they claimed that there would be much economic damage if they didn’t. Well, they didn’t, and their economies are outperforming the U.S. economy.

Paul Krugman predicted disaster for Germany if it adopted austerity measures. They did, and it didn’t happen. Recently he predicted disaster for the UK if it went ahead with its austerity measures. But the last economic report out of the UK showed that the economy in the last quarter grew at twice the rate as expected, even though the Cameron government was elected specifically on the promise of implementing austerity.

Economy of the European Union

http://www.tradingeconomics.com/Economics/GDP-Growth.aspx?Symbol=EUR

Lithuania tops EU in GDP growth in quarter - UPI.com

http://www.tradingeconomics.com/Economics/GDP-Growth.aspx?Symbol=USD

GDP Growth & Recessions

EU economic growth in 2009, -4.1%
US economic growth in 2009, -2.6%

In 2010 the EU is growing about 1 or 2%.
In 2010 we are on a 2-3% pace.

Is there something wrong with my information or yours? If the EU is outperforming us, then its not by a lot, and certainly not by as much as you seem to imply.

Claiming that the stimulus worked but the economy was worse than was thought is just a wild guess. But a paper out last year applied the corrected numbers to the stimulus and found that it still had no effect

Ah the correct numbers, can you cite these correct number?

[Damuri_Ajashi]

@Sam_Stone

As for the social security ‘trust fund’… The root problem is that the money collected and spent from SS contributions should have been shown as a liability in the budget.

I kinda sorta agree. I think the root problem was when LBJ pulled social security into the general budget in order to make the Vietnam war seem cheaper than it was. With that said, treasuries are still assets in anyone’s hands.

[Damuri_Ajashi]

@Little_Nemo

That’s an unfalsifiable argument. No matter what the unemployment rate is, you can always argue that it could be much much much higher. Or, for that matter, much much much lower. Such logic says that we can’t judge any program as a success or failure - it’s all subjective.

OK, what is your falsifiable hypothesis? And between your hypothesis and mine, which one do you think the majority of economists subscribe to?