Obama Lays a Goose Egg

"The U.S. economy added no [net] new jobs in August--the worst showing in a year--as employers cut back hiring and trimmed work hours of existing employees," the Los Angeles Times reports. "The nation's unemployment rate in August stayed at 9.1%, as more people reported that they found part-time work, many of them because that's all that was available."

Next week President Obama will speak to a joint session of Congress. As we noted yesterday, the president reportedly will ask Congress to pass a new "stimulus," though he won't call it that, because the last stimulus didn't--oh, wait. "One More Time: The Stimulus Worked."

That's the headline of a piece by Jonathan Cohn of The New Republic. "Republicans and their allies keep saying the Recovery Act"--the official name for the so-called stimulus--"didn't work," Cohn accurately observes. But the "experts," he tells us, know better. '

The Washington Examiner's Tim Carney points us to the answer in the CBO report: "The Congressional Budget Office (CBO) based its estimates of the economic effects of the American Recovery and Reinvestment Act of 2009 (ARRA) on information from various sources: macroeconometric forecasting models, general-equilibrium models, and direct extrapolations of past data."

Can we have that in English, please? Yes we can, courtesy of Reason's Peter Suderman:

The reports aren't based on a detailed measurement of real-world output. Instead, they're based on measuring the input (how much money was spent), and then using models to project how big the multiplier effect has been. Measuring spending and modeling output means that you can believe the CBO when it says that the stimulus turned out to be more costly than expected, but you should remain wary about any claims made using the "real-world effects" side.

Indeed, CBO director Doug Elmendorf has explicitly made this point, agreeing at a speech earlier this year that that [sic] "if the stimulus bill did not do what it was originally forecast to do, then that would not have been detected by the subsequent analysis."

So if in reality no jobs had been created, or only 10 jobs had been created, then the CBO's reports would not reflect those numbers. It's using the models that projected the stimulus would create lots of jobs to report that the stimulus did create lots of jobs.

To put it more concisely, the CBO is merely asserting a tautology: If the stimulus worked, then the stimulus worked. Cohn mistakes this for empirical evidence that the stimulus worked. And if the reports of Obama's plans are accurate, the president will call for more so-called stimulus on the strength of this so-called evidence.

If the stimulus worked then the stimulus worked.

This article is from a few days ago but I thought it was relevant given BHO's upcoming speech.

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