Menzie Chinn invokes the CBO “estimates” to argue against those who say the stimulus didn’t work. Did the stimulus help turn the economy around and create jobs? I’m skeptical on logical grounds but I confess that I do not have strong empirical evidence on my side.
But those who defend the stimulus have no empirical support either. The CBO “estimates” are not an analysis of what the stimulus actually did but rather what some predicted it would do. They have done NO independent non-partisan analysis of what actually happened.
Here is all you need to know about what the CBO actually did that Chinn and others cite:
CBO’s current estimates differ only slightly from those CBO prepared in March 2009. At that time, CBO projected that in the third quarter of 2009, U.S. employment would be higher by 600,000 to 1.5 million people with ARRA than it would be without the law, and real GDP would be 1.1 percent to 3.0 percent higher. CBO’s new estimates reflect small revisions to earlier projections of the timing and magnitude of changes to spending and revenues under ARRA.
CBO has also examined incoming data on output and employment during the period since ARRA’s enactment. However, those data are not as helpful in determining ARRA’s economic effects as might be supposed, because isolating the effects would require knowing what path the economy would have taken in the absence of the law. Because that path cannot be observed, the new data add only limited information about ARRA’s impact.
And the best part:
Economic output and employment in the spring and summer of 2009 were lower than CBO had projected at the beginning of the year. But in CBO’s judgment, that outcome reflects greater-than-projected weakness in the underlying economy rather than lower-than-expected effects of ARRA.
As I wrote here, that is one interpretation. The other is that the model doesn’t work very well.