Thursday, April 30, 2009
Hey Rocky, Watch me pull a number out of my hat!
In the press conference marking his first 100 days, President Obama said:
Actually, I thought this was easy. The administration has claimed that ARRA ("the stimulus bill") will "save or create" 3.3 million jobs in 2 years. So I thought perhaps what they were doing was taking the date of signing, Feb. 17, computing how much of two years had passed (71/730 ~= 9.7%) and ... well, that doesn't work, because on a pro-rated basis they would get to claim 321,000 jobs.
I thought then maybe he had specific numbers. I recall him saying that he was told Caterpillar would call back "some of" the 20,000 in layoffs it had originally called for. (UPDATE: Added the words some of, as stated in the transcript. I apologize if I implied he meant "all of" those jobs.) But that doesn't work out either, because Caterpillar is still laying off. Initial filings for unemployment insurance have risen through the first 100 days, though today's number is a hopeful step downward.
As most people have mentioned, the bill has a ramp-up in spending, so that much of the money happens in FY 2010. Maybe he's projecting less. But doesn't someone in the White House owe us an explanation of that number? Don't we get to see a projection here? Why 150k and not 200k or 300k? They've hired more economists than Allan Iverson hires posse, so someone has to have done this number. (Tried CEA, they've done one report. I know Prof. Romer is more productive than this!) If someone in the White House press corps should happen to read about this, please ask press secretary Gibbs to get us a determination of how this number was calculated. (UPDATE after video)
UPDATE: The following morning, apparently (and after this post is written), Prof. Romer gets up before the Joint Economic Committee and pulls the same number out, as Spencer notes in comments. (I guess I was supposed to write this knowing her testimony a priori.) She says:
This assumes, of course, that you buy the Great Multiplier Manifesto hook, line and sinker. And that you'd like to brag that you managed to "create or save" 103,000 jobs while not saving 1,314,000 others since Feb. 1. This latter number will be updated with the April job loss figures a week from tomorrow; that number could add another 500,000 to the total of jobs not created and not saved.
We began by passing a Recovery Act that has already saved or created over 150,000 jobs ......and I wanted to know, how do you know that? John Kartch (h/t: Gary) notes a comment on such calculations by Sen. Max Baucus (D-ID):
You created a situation where you cannot be wrong. If the economy loses 2 million jobs over the next few years, you can say yes, but it would've lost 5.5 million jobs. If we create a million jobs, you can say, well, it would have lost 2.5 million jobs. You've given yourself complete leverage where you cannot be wrong, because you can take any scenario and make yourself look correct.So where do they get away with a number like that?
Actually, I thought this was easy. The administration has claimed that ARRA ("the stimulus bill") will "save or create" 3.3 million jobs in 2 years. So I thought perhaps what they were doing was taking the date of signing, Feb. 17, computing how much of two years had passed (71/730 ~= 9.7%) and ... well, that doesn't work, because on a pro-rated basis they would get to claim 321,000 jobs.
I thought then maybe he had specific numbers. I recall him saying that he was told Caterpillar would call back "some of" the 20,000 in layoffs it had originally called for. (UPDATE: Added the words some of, as stated in the transcript. I apologize if I implied he meant "all of" those jobs.) But that doesn't work out either, because Caterpillar is still laying off. Initial filings for unemployment insurance have risen through the first 100 days, though today's number is a hopeful step downward.
As most people have mentioned, the bill has a ramp-up in spending, so that much of the money happens in FY 2010. Maybe he's projecting less. But doesn't someone in the White House owe us an explanation of that number? Don't we get to see a projection here? Why 150k and not 200k or 300k? They've hired more economists than Allan Iverson hires posse, so someone has to have done this number. (Tried CEA, they've done one report. I know Prof. Romer is more productive than this!) If someone in the White House press corps should happen to read about this, please ask press secretary Gibbs to get us a determination of how this number was calculated. (UPDATE after video)
UPDATE: The following morning, apparently (and after this post is written), Prof. Romer gets up before the Joint Economic Committee and pulls the same number out, as Spencer notes in comments. (I guess I was supposed to write this knowing her testimony a priori.) She says:
I have been told by the Office of Management and Budget that approximately $75 billion in spending under the ARRA has been obligated and almost $14 billion in outlays have already occurred. During the first 100 days in office, which the Administration marked yesterday, we estimate that the ARRA has already saved or created 150,000 jobs.The nearest footnote that explains what arse she pulled that number from is the Great Multiplier Manifesto, written by her and Biden economic adviser Jared Bernstein while the Obama team was still in transition. Here's the formula (p. 5):
We take an estimate of the amount of spending related to a component and apply the relevant multiplier to estimate the likely overall effect on GDP. The total effect on jobs is then estimated using the 1% of GDP equals 1 million jobs rule of thumb.So let's connect the knee bone to the shin bone. $14 billion is spent in current quarter (Feb. 17 to current, not a traditional quarter, but hey!), and first quarter multiplier is 1.05 (p. 13.) So impact on GDP is $14.7 billion. Current dollar GDP for 2009Q1 is $14,264.2 billion. Total change: 0.103%. Using the "rule of thumb" means 103,000 jobs. Not 150,000. The only way the other 47,000 jobs show up in a calculation is to use a long-run multiplier (the famed 1.57) that would give you 157,000 jobs. But that means the administration is counting jobs their models predict WILL SOMEDAY HAPPEN due to their spending now.
This assumes, of course, that you buy the Great Multiplier Manifesto hook, line and sinker. And that you'd like to brag that you managed to "create or save" 103,000 jobs while not saving 1,314,000 others since Feb. 1. This latter number will be updated with the April job loss figures a week from tomorrow; that number could add another 500,000 to the total of jobs not created and not saved.
Labels: economics
