{"id":359418,"date":"2010-02-24T18:34:13","date_gmt":"2010-02-24T23:34:13","guid":{"rendered":"http:\/\/www.szone.us\/f95\/cbo-report-pre-ordained-show-stimulus-succeeded-39949\/"},"modified":"2010-02-24T18:34:13","modified_gmt":"2010-02-24T23:34:13","slug":"cbo-report-was-pre-ordained-to-show-the-stimulus-succeeded","status":"publish","type":"post","link":"https:\/\/mereja.media\/index\/359418","title":{"rendered":"CBO Report Was Pre-Ordained to Show the Stimulus Succeeded"},"content":{"rendered":"<div>On 02.24.10 01:30 PM posted by Brian Riedl<\/p>\n<p>\n&lt;ahref=&quot;http:\/\/blog.heritage.org\/wp-content\/uploads\/2009\/07\/congressional_budget_office.gif&quot;&gt;<img decoding=\"async\" src=\"http:\/\/blog.heritage.org\/wp-content\/uploads\/2009\/07\/congressional_budget_office.gif\" border=\"0\" alt=\"\" \/>&lt;\/p&gt;The Congressional Budget Office (CBO) has  produced a new&lt;atitle=&quot;http:\/\/www.cbo.gov\/ftpdocs\/110xx\/doc11044\/02-23-ARRA.pdf&quot; href=&quot;http:\/\/www.cbo.gov\/ftpdocs\/110xx\/doc11044\/02-23-ARRA.pdf&quot;&gt; report estimating that the $862 billion stimulus has thus far saved or created 1.5  million jobs.<\/p>\n<p>Yet the CBO\u0092s calculations are not based on  actually observing the economy\u0092s recent performance. Rather, they used an  economic model that was programmed to assume that stimulus spending  automatically creates jobs\u0097thus guaranteeing their  result.<\/p>\n<p>Logicians call this the begging-the-question  fallacy. Mathematicians call it assuming what you are trying to prove.&lt;spanid=&quot;more-27311&quot;&gt;&lt;\/span&gt;<\/p>\n<p>The CBO model started by automatically assuming that  government spending increases GDP by pre-set multipliers, such as:<\/p>\n<ul>\n<li>Every $1 of  government spending that directly purchases goods and services ultimately raises  the GDP by $1.75;<\/li>\n<li>Every $1 of  government spending sent to state and local governments for infrastructure  ultimately raises GDP by $1.75;<\/li>\n<li>Every $1 of  government spending sent to state and local governments for non-infrastructure  spending ultimately raises GDP by $1.25; and<\/li>\n<li>Every $1 of  government spending sent to an individual as a transfer payment ultimately  raises GDP by $1.45.<\/li>\n<\/ul>\n<p>(note that all CBO figures in this post  represent the midpoint between their high and low  estimates)<\/p>\n<p>Then CBO plugged the stimulus provisions  into the multipliers above, came up with a total increase in gross domestic  product (GDP) of 2.6 percent, and then converted that added GDP into 1.5 million  jobs.<\/p>\n<p>The problem here is obvious. Once CBO  decided to assume that every dollar of government spending increased GDP by the  multipliers above, its conclusion that the stimulus saved jobs was pre-ordained.  The economy could have lost 10 million jobs and the model still would have said  that without the stimulus it would have lost 11.5 million jobs.<\/p>\n<p>The debate over the efficacy of Keynesian  stimulus is essentially a debate over the correct multipliers. Some believe the  multipliers are &lt;atitle=&quot;http:\/\/www.economy.com\/mark-zandi\/documents\/Senate_Budget_Committee_11_19_08.pdf&quot; href=&quot;http:\/\/www.economy.com\/mark-zandi\/documents\/Senate_Budget_Committee_11_19_08.pdf&quot;&gt;high,  others believe they are as low as &lt;atitle=&quot;http:\/\/www.heritage.org\/Research\/Economy\/bg2354.cfm&quot; href=&quot;http:\/\/www.heritage.org\/Research\/Economy\/bg2354.cfm&quot;&gt;zero (or even  negative). Testing the stimulus requires testing the multipliers. Yet by simply  assuming large multipliers, CBO effectively pre-ordained its conclusion that the  stimulus worked, regardless of what actually happened in the  economy.<\/p>\n<p>&lt;ahref=&quot;http:\/\/corner.nationalreview.com\/post\/?q=ZWVjZTI0Yzg5MTg2YjQ3NDEyYzQ3OTNmNWQ2N2EzN2Y=&quot;&gt;C  ross-posted at National Review&#8217;s The Corner.<\/p>\n<p><a href=\"http:\/\/blog.heritage.org\/2010\/02\/24\/cbo-report-was-pre-ordained-to-show-the-stimulus-succeeded\/\" >http:\/\/blog.heritage.org\/2010\/02\/24\/&#8230;lus-succeeded\/<\/a><\/div>\n","protected":false},"excerpt":{"rendered":"<p>On 02.24.10 01:30 PM posted by Brian Riedl &lt;ahref=&quot;http:\/\/blog.heritage.org\/wp-content\/uploads\/2009\/07\/congressional_budget_office.gif&quot;&gt;&lt;\/p&gt;The Congressional Budget Office (CBO) has produced a new&lt;atitle=&quot;http:\/\/www.cbo.gov\/ftpdocs\/110xx\/doc11044\/02-23-ARRA.pdf&quot; href=&quot;http:\/\/www.cbo.gov\/ftpdocs\/110xx\/doc11044\/02-23-ARRA.pdf&quot;&gt; report estimating that the $862 billion stimulus has thus far saved or created 1.5 million jobs. Yet the CBO\u0092s calculations are not based on actually observing the economy\u0092s recent performance. Rather, they used an economic model that [&hellip;]<\/p>\n","protected":false},"author":4292,"featured_media":0,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[7],"tags":[],"class_list":["post-359418","post","type-post","status-publish","format-standard","hentry","category-news"],"_links":{"self":[{"href":"https:\/\/mereja.media\/index\/wp-json\/wp\/v2\/posts\/359418","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/mereja.media\/index\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/mereja.media\/index\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/mereja.media\/index\/wp-json\/wp\/v2\/users\/4292"}],"replies":[{"embeddable":true,"href":"https:\/\/mereja.media\/index\/wp-json\/wp\/v2\/comments?post=359418"}],"version-history":[{"count":0,"href":"https:\/\/mereja.media\/index\/wp-json\/wp\/v2\/posts\/359418\/revisions"}],"wp:attachment":[{"href":"https:\/\/mereja.media\/index\/wp-json\/wp\/v2\/media?parent=359418"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/mereja.media\/index\/wp-json\/wp\/v2\/categories?post=359418"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/mereja.media\/index\/wp-json\/wp\/v2\/tags?post=359418"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}