The CBO And Jobs

Oh-kaaaay...

A new CBO report claims that the Obama-Pelosi $787 billion Stimulus (Porkulus) Bill saved or created possibly 1.1 million jobs give or take 500,000 jobs either way.
It’s an exact science, you know.

The key thing to remember here is that the CBO always evaluates things based on the assumptions it is given. Here's what happened in the real world:

The US unemployment spiked from 7.6% to 10.2% this year under Obama… the highest rate in 26 years.

Chart from the Bureau of Labor Statistics- via Sweetness and Light
Obama promised his stimulus plan would create 3.7 million new jobs.
Instead America has lost 3.6 million jobs.

Here's an explanation of how those assumptions worked:

Econlog's Arnold Kling notes that Derek Thompson misinterpreted yesterday's CBO analysis of the stimulus's effect on employment, and says in two paragraphs what I said in 1,200 words:

Back in March, the CBO ran a simulation model of the economy, with and without the stimulus. The difference between the two simulations gives you the predicted increase in employment and GDP.

Recently, the CBO repeated the exercise. Lo and behold, the differences were the same. This says nothing about what happened in the real world. It tells you that the simulation model that they used did not change.

I added more detail, but the idea is the same: the CBO's assessment relies on certain models. If you believe these models, you should also believe that the stimulus generated 600,000 to 1.6 million jobs, just as the administration and CBO say. But if you have prior doubts about those models, there is no reason to start now listening to CBO present the same simulations again.

So, while the CBO's analysis is accurate, it doesn't reflect the real world. It would be like saying that 2 + 2 = 4 despite the fact that the first "2" is really "3".

It's Obamamath.

There's my two cents.