How Many Jobs Did the Stimulus Bill Create?
Floor Statement of Sen. Chuck Grassley
June 15, 2010
In recent weeks, a number of my colleagues have come to the floor to proclaim the success of the massive $862 billion stimulus bill Congress enacted in 2009.
Although the number of private sector jobs has increased by only about a half a million since 2009, they continue to insist the stimulus bill has created millions of new jobs.
How do they justify these claims?
The stimulus bill requires certain recipients of stimulus funds to report the number of jobs they have created or saved – or more accurately, they report the number of jobs funded with stimulus dollars. The stimulus bill also requires the Congressional Budget Office (CBO) to issue a quarterly report on these numbers.
CBO is careful to point out that the number of jobs being reported by stimulus recipients is not a comprehensive estimate of the economic impact of the stimulus bill. CBO says the actual numbers could be higher or lower.
According to CBO, “estimating the law’s overall effects on employment requires a more comprehensive analysis than the recipients’ reports provide.”
For this analysis, CBO relies on a computer model. In other words, CBO does not look at the actual jobs data; instead it looks at a model of the economy. CBO is very upfront about all of this.
CBO used a computer model to predict how many jobs the stimulus bill would create before it was enacted into law. Now that the stimulus bill is law, CBO is using a computer model to tell us it did just what they said it would do – create jobs. Why would CBO rely on a model instead of actual data?
According to CBO –
“Data on actual output and employment… are not as helpful in determining [the stimulus bill’s] economic effects…because isolating those effects would require knowing what path the economy would have taken in the absence of the law. Because that path cannot be observed, there is no way to be certain about how the economy would have performed if the legislation had not been enacted.”
In other words, CBO doesn’t know how much better (or worse) the economy would have been if the stimulus bill had not been enacted. That means CBO doesn’t how much better (or worse) the economy is now as a result of the stimulus bill.
So, basically CBO is saying trust us, or more specifically trust our model. But, if the model was wrong to begin with, then it is still wrong.
According to CBO, their model relies on historical relationships to determine estimated “multipliers” for each category of taxes and spending in the stimulus bill. The problem is there is no way to know whether these historical relationships remain constant overtime, or whether they change under different economic circumstances. In short, the jobs numbers attributed to the stimulus bill are based on assumptions that may or may not have any basis in reality.