Free Markets, Free People
When you accuse someone of stupidity, it’s probably wise to avoid saying something stupid yourself while doing so. Sadly, E.J. Dionne fails to avoid that trap.
Our discussion of the economic stimulus is another symptom of political irrationality. It’s entirely true that the $787 billion recovery package passed last year was not big enough to keep unemployment from rising to over 9 percent.
But this is not actually an argument against the stimulus. On the contrary, studies showing that the stimulus created or saved up to 3 million jobs are very hard to refute. It’s much easier to pretend that all this money was wasted, although the evidence is overwhelming that we should have stimulated more.
Very hard to refute? That’s nonsense on stilts. Mr. Dionne may be so smart that rays of light emanate from his brow, but the paragraph above is an extraordinarily foolish position.
First, any statement of any jobs “created or saved” requires that we perform the impossible task of modeling how the economy would have performed in an alternate universe where a different policy mix was applied. We literally have no idea–nor any way to construct a testable hypothesis–that models how the economy would have reacted in the absence of the stimulus. Even the Congressional Budget Office, while rather supinely delivering a report that ostensibly supported the administrations claims about job creation, was careful to note:
…it is impossible to determine how many of the reported jobs would have existed in the absence of the stimulus package.
Second, the methodology was extremely suspect. In making its predictions of post-stimulus recovery, the administration simply plugged in an assumption about the multiplier effect of government spending. They assumed that X amount in spending would result in Y% increase in aggregate demand, resulting in Z jobs. What the CBO did in checking up on that prediction, was to plug essentially the same assumptions into their model, which, unsurprisingly, “confirmed” the predictions. Even the CBO seemed a bit embarrassed about that.
But the CBO, to its credit, has been fairly forthcoming about its methods and their limitations. In response to a question at a speech earlier this month, CBO director Doug Elmendorf laid out the CBO’s methodology pretty clearly, describing the his office’s frequent, legally-required stimulus reports as “repeating the same exercises we [aleady] did rather than an independent check on it.” CBO tweaks its models on the input side, he says—adjusting, for example, how much money the government has spent. But the results the CBO reports—like the job creation figures—are simply a function of the inputs it records, not real-world counts.
Following up, the questioner asks for clarification: “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?” Elmendorf’s response? “That’s right. That’s right.”
In other words, the CBO’s regular, legally-mandated reports, are estimates based on an economic model that doesn’t actually take inputs from the real world. They simply take the same estimates the administration used to create their predictions, then apply them to the monthly spending report, coming up with a number of jobs “created or saved” that is, unspurprisingly, exactly what the administration predicted.
Please note: this has no actual relationship to the number of real-world jobs that exist. The only thing the CBO reports prove–by its own admission–is that it is possible to replicate the administration’s predictions by duplicating the assumptions.
So, not only is it untrue, as Mr Dionne asserts, that “studies showing that the stimulus created or saved up to 3 million jobs are very hard to refute,” the CBO director explicitly refutes that notion by agreeing that “[i]f the stimulus bill did not do what it was originally forecast to do, then that would not have been detected by the subsequent analysis.”
But, let us say, arguendo, that Mr. Dionne is right, and the $787 billion did, in fact, create 3 million new jobs. The price tag then, comes to $262,333.33 for each job created. That seems like a relatively steep price.
Happily, we know more or less precisely how many people are employed in the country, and how the size of the labor force has changed. We know this, because the Bureau of Labor Statistics releases those figures on a monthly basis, and they are publicly available at the BLS web site. If we assume March 2009 to be the first month of the stimulus, we see that there were a total of 140,854,000 Americans over the age of 16 employed, including farm employment. As of Jun, 2010, there were 139,119,000 Americans working. That tells me that there are 1,735,000 fewer Americans working today, than there were when the stimulus was passed. If we exclude agriculture, and look at only non-farm payrolls, we see that there were 132,070,000 people employed in March, 2009, vice 130,470,00 in June, 2010. Again, that’s a net loss of 1,600,000 payroll jobs.
I’m not seeing any net job creation there.
In at least one sense, though, Mr. Dionne is quite right. Since the administration’s claims of 3 million jobs “created or saved” is empirically disprovable, they can tout them as much as they’d like, even in the face of 1.6 million jobs actually disappearing under the stimulus. After all, they can always say, “There would have been 3 million fewer jobs if we hadn’t acted. And if you don’t believe me, prove me wrong!” It is, after all, so comforting to be able to take refuge in an unfalsifiable hypothesis.
The situation in California is critical with government there facing a 19 billion dollar shortfall and the budget yet to be passed. It pits an admittedly "moderate" Republican governor against a Democratically dominated legislature and their differences on how to close that huge budgetary hole.
The lack of a budget is forcing furloughs and the possibility of the state again issuing IOUs instead of payments to vendors, etc.
Until the governor and legislature negotiate that budget, not much will change. And the fight is classic:
Schwarzenegger has proposed slashing spending to balance the state’s books, an approach rejected by Democratic lawmakers. Their leaders in the state Senate and Assembly are trying to draft a joint plan likely to include proposals for tax increases to rival the governor’s budget plan.
There it is. Where the governor sees government as having to yeild and reduce itself, the legislature views government – at the size and scope it now occupies – to be a nonnegotiable necessity and entitled to more taxpayer cash to preserve it as is.
Funny that the "conservative" position in this fight – i.e. the attempt to maintain the status quo – is that of the "progressive" party in California.
However, the cut spending/more taxes fight is, in a nutshell, the difference between the two parties right now. I used to say there isn’t a dime’s worth of difference between the two (and on many issues that’s still true) but in terms of how to balance a budget, the “reduce government/ reduce spending” approach seems to now be solely owned by the GOP.
Whether or not they’ll actually do that should they again find themselves in the position of power to do so is obviously another question entirely.
In the case of the Democratic party – they’re now a wholly owned subsidiary of government unions, and their pandering to these unions is both short-sighted and destructive. The party that used to be able to claim the mantle of the working man’s party is now almost exclusively the government union worker’s party. And of course that means keeping government large and well funded.
It’s going to be interesting to see how this fight comes out – but even with Schwarzenegger representing the GOP side of things, it is clear which side is the taxpayer’s friend.
The DNCC has issued a "what, me worry?" memo saying that it is just impossible for the GOP to take the House in November. Per the DNCC, it won’t happen. And here’s why:
Republicans will need to win 39 seats to take back the House. Democrats will win at least four Republican seats (the best opportunities include: LA-02, HI-01, IL-10, DE-AL, FL-25). As a result, the real number of seats Republicans will have to pick up to win a majority is at least 43. To win 43 seats, the NRCC would need to put 70 to 80 seats in play. The NRCC have simply not put that many Republicans seats in play and do not have the resources or caliber of candidates to do so.
As Nate Silver at FiveThirtyEight asks, so if they put 69 (or 68 or 65?) seats in play, no chance of winning?
It’s nonsense on a stick, but regardless of how false their reasoning is, it’s a memo meant to bolster the moral of the troops facing a wicked election season in November. This is what many would call "whistling past the graveyard".
Point two in this ghastly bit of political miscalculation:
This cycle, there are only 20 Democratic open seats, including several that are in safe districts. If Republicans have a great election night, they would still only win 50 percent of the Democratic open seats. Conservatively, Republicans would then need to beat 35 Democratic incumbents to win the House – which is simply not possible given the Republicans resources deficit.
Did you notice the unfounded assumption? The GOP, even if everything goes perfectly for them, will only win "50 percent of the Democratic open seats". Of course that’s not at all clear at this point, but again, the specious reasoning in the memo isn’t meant to be correct, necessarily, as much as it is meant to calm fears.
And the DNC has decided that the Tea Party is the wild card on the GOP side and that actually works for them:
The Tea Party has presented three problems for Republicans. The most glaring problem is where the Tea Party candidate has defeated the moderate (and more electable) Republican candidate. Second, Republican candidates are being forced to take unpopular extreme positions to satisfy the ideological base to avoid defeat in their primaries. Third, we are seeing numerous Tea Party candidates run as third party candidates which is splitting the Republican vote…
Of those three points, only the last is valid. And in the races where that occurs it may indeed have an effect. As for the rest , moderate may not be the winning pick as the pendulum swings back the other way, and the positions the candidates are “forced” to take may only be seen as “extreme” and “unpopular” by Democrats, who aren’t going to vote for GOP candidates anyway.
This memo has Nancy Pelosi – who we all know is a math whiz – written all over it. She took great exception to Robert Gibbs saying a week or so ago it was possible that the Democrats may lose the House in November. This is her wacky reasoning to a tee. As Nate Silver says, the memo is full of “arbitrary math”. I’d add it is also full of false premises and conclusions.
But hey, if it calms the fears of the Democratic House members in jeopardy, I guess Pelosi, et. al. will be satisfied until Wednesday morning after the first Tuesday in November, that they’ve successfully slayed that dragon.
A very interesting sentence in the judge’s injunction against the Arizona immigration law caught my eye yesterday. In her ruling, which voided much of the law, Judge Susan Bolton said:
“Preserving the status quo through a preliminary injunction is less harmful than allowing state laws that are likely pre-empted by federal law to be enforced,” she said.
Of course the real status quo is federal non-enforcement of immigration laws – thereby driving the state of Arizona and other states to take matters into their own hands.
That’s not the status quo Judge Bolton is talking about, but it is the reality of immigration enforcement in this country.
This obviously isn’t the end of the road for the law, but I’d guess it’s on life support as the appeals process goes forward. Bolton’s ruling is likely to reflect how the other levels of the federal judiciary will rule on the law.
I have to admit to being a bit surprised that she ruled against law enforcement checking immigration status while processing someone for a different reason and left intact the portion of the law making it a crime to stop a vehicle in traffic or block traffic to hire someone off the street. However she did block a provision that barred illegal immigrants from soliciting work in public places.
On the political side of things, AZ’s Democratic Attorney General, a possible candidate for governor, thinks he has a winner:
Terry Goddard, the Arizona attorney general who opposed the law and is a possible Democratic opponent to Ms. Brewer, was quick to condemn her for signing it. “Jan Brewer played politics with immigration, and she lost,” he said in a statement.
Brewer can only hope he keeps saying that until the election, because I’d guess – as much of a hot button as this is in AZ and because of the overwhelming support of the AZ voters – it’s really a loser for Goddard and the Democrats.
Even John McCain and Jon Kyle weighed in on the ruling:
“Instead of wasting taxpayer resources filing a lawsuit against Arizona and complaining that the law would be burdensome,” Mr. McCain said in a joint statement with Senator Jon Kyl, Republican of Arizona, “the Obama administration should have focused its efforts on working with Congress to provide the necessary resources to support the state in its efforts to act where the federal government has failed to take responsibility.”
But of course, the failure of the administration to take responsibility is the ‘status quo’, and it appears, unfortunately, that it will be “preserved”.