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Old Hat

May 26, 2010

As though we haven’t seen this before: the CBO has estimated that ARRA (the stimulus bill) put 1.2 million to 2.8 million to work in the first quarter, boosted GDP between 1.7% and 4.2%, and reduced the unemployment rate by between 1.7% and 4.2%.  Around this point, I’d probably say something along the lines of “the CBO uses a model for the stimulus that assumes that a certain amount of government spending produces a certain amount of government activity, and therefore its results are not actually based on real data”.  Instead, I’ll let a couple of other guys do it for me.  Stephen Spruiell:

Allow me to make a bold prediction: The CBO’s next quarterly report on the stimulus will come to roughly the same conclusions, regardless of what we actually observe with regard to GDP, the unemployment rate, or the number of people employed. Let me be even bolder: All of the CBO’s quarterly reports from now until the law’s expiration will reach the same conclusions, because the CBO’s models beg the question: They assume that certain inputs in the form of government spending have certain predictable effects on GDP and employment that are in line with the Keynesian view that fiscal stimulus creates jobs. Every quarter, the CBO just re-runs its models, regardless of what we are observing in the real world. The agency is repeating itself.

Daniel J. Mitchell:

The CBO’s most recent ”calculations” are just another version of the same economic alchemy. But don’t believe me. Buried at the end of the report is this passage, where CBO basically admits that its new “research” simply plugged new spending numbers into its Keynesian formula. This sounds absurd, and it is, but don’t forget that these are the same geniuses that predicted that a giant new health care entitlement would reduce long-run budget deficits.

Indeed.  Aside from the numbers game, though, there is a better question.  Frum:

But the question about the stimulus was never: Can $800 billion of government money buy ANYTHING? The question always was – was this stimulus intelligently designed? Did it generate the most activity at lowest possible cost? Would a payroll tax holiday have generated more jobs at less cost? And – above all – would the flow of stimulus dollars end when the recession ended?

Those are the questions CBO is NOT answering today, and on those measures the stimulus is still failing.

To those questions, I would respond with a resounding “no”.  I’ve gathered that most conservatives believe that, sure, the stimulus did provide something, but, overall, the ARRA was just a gigantic waste of money, demagoguery about the stimulus not having created “one new job” aside.  And, as Frum says, there’s not been any discussion of the merits of that belief, from CBO or anybody else.  I guess it’s easier to debate the lunatics and demagogues than the people who are actually interested in a policy debate.

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