Louis Woodhill writes on Real Clear Markets how the CBO’s estimated impact of the stimulus is a fantasy.
CBO director Doug Elmendorf laid out the CBO’s methodology pretty clearly, describing his office’s frequent, legally-required stimulus reports as “repeating the same exercises we [already] 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.
To simplify, lets say the CBO model predicts that for every $1 million spent, 4 jobs are created or saved (the model itself is more complex than this, but yields a similar result).
That is, $800 billion = 2 million jobs or $600 billion = 1.5 million jobs.
Prior to the stimulus being enacted, the CBO estimates were based on how much money was expected to have been spent. The updates plug how much money was actually spent into the model.
Some will defend the model as sound, but it does not represent a measurement of the actual impact of the stimulus.