Ramesh Ponnuru has an excellent piece over at Bloomberg.com
Media fact-check organizations have no such doubts. Factcheck.org says it’s “just false” to deny that the stimulus has created jobs. It cites the Congressional Budget Office’s estimate that the stimulus had saved or created millions of jobs. But the CBO, as its director has explained, hasn’t really checked the effect of the stimulus. It has merely reported what the results of additional federal spending and tax credits would be if you assume that spending and tax credits are stimulative.
In other words: If you assume that stimulus works, it must have worked. This circularity doesn’t bother PolitiFact, a group that seeks to elevate the tone of our political debates but usually lowers it. Relying on the CBO and other groups that use similar methods, it says people who deny the effectiveness of the stimulus have their “pants on fire.”
Last summer, Dylan Matthews reviewed the research on the stimulus for the Washington Post and dug up six studies that found a positive effect. Three of them were based on models that assume the stimulus worked. Three of them were supposedly empirical confirmations of this effect. These three all found that states (or counties) that got more stimulus money had stronger economic performances than places that received less.
But nobody denies that the federal government can shift the distribution of economic activity. If Congress were to give me $50 billion, I am sure car dealerships and liquor stores in my area would see an uptick in sales. That doesn’t mean the nation as a whole would come out ahead. (I am willing to go along with the experiment if Congress doubts this.)
Great stuff. One area I agree with Krugman is that those political “fact checkers” are not very reliable, especially when the issue is complex. It’s sad that the six studies showing fiscal stimulus works contain 3 that simply assume it works, and 3 that suffer from the fallacy of composition. That’s all they got?
Tyler Cowen has a good post today on the missing GDP mystery. I liked this observation:
In general we undermeasure the gdp gains of successful export nations, because their outputs tend to have lower percentages of rent-seeking expenditures and more real stuff of value.
I suppose this is why countries like Germany seem richer than you’d expect from their GDP/person numbers, adjusted for PPP. The classic example of this occurred in the old Soviet bloc, where countries like Romania claimed the fastest GDP growth rates in the world for significant periods of time. It also tells me that the Singapore/Hong Kong GDP numbers are legit, as both places have extremely high ratios of trade to GDP.
But the US jobs mystery remains, as both productive and non-productive GDP requires labor.