Private Forecasters Support Claim That Stimulus Worked

Back when the stimulus bill was passed, I have to say that I was opposed to it. When the White House claimed it was working, I pretty much scoffed. So I have to admit that I was taken aback to read this article, which indicates that professional economic forecasters support the claim that the stimulus has made the economy better off than it would have been otherwise.

The legislation, a variety of economists say, is helping an economy in free fall a year ago to grow again and shed fewer jobs than it otherwise would. Mr. Obama’s promise to “save or create” about 3.5 million jobs by the end of 2010 is roughly on track, though far more jobs are being saved than created, especially among states and cities using their money to avoid cutting teachers, police officers and other workers.

“It was worth doing — it’s made a difference,” said Nigel Gault, chief economist at IHS Global Insight, a financial forecasting and analysis group based in Lexington, Mass.

Mr. Gault added: “I don’t think it’s right to look at it by saying, ‘Well, the economy is still doing extremely badly, therefore the stimulus didn’t work.’ I’m afraid the answer is, yes, we did badly but we would have done even worse without the stimulus.”

Here are some charts from three major economic forecasters:

Courtesy New York Times

I admit that I am a little flabbergasted by this. As both Matthew Yglesias and Brad Delong point out, these are companies who have every incentive to do accurate forecasting for “people who are trying to exploit macroeconomic information in order to make money.”

I haven’t had an opportunity to review the data underlying the charts or analysis, so I don’t know how much of this I agree with. That said, I thought the data presented here so far was important enough to call attention to.

FILED UNDER: Economics and Business, US Politics,
Alex Knapp
About Alex Knapp
Alex Knapp is Associate Editor at Forbes for science and games. He was a longtime blogger elsewhere before joining the OTB team in June 2005 and contributed some 700 posts through January 2013. Follow him on Twitter @TheAlexKnapp.

Comments

  1. Wayne says:

    I can draw graphs to. You got to love fortune tellers.

    Seriously though, one would have to look at the groups or persons record on predicting the future, their political background and agenda. Forecasting the past is lame and is a shenanigan.

  2. Zelsdorf Ragshaft III says:

    Interesting. Comparing speculation with fact. That is similar to saving jobs. There just is no way to tell what would have happened if the governement had not spent that money. One thing is sure. We would not be in debt as far as we are now.

  3. Alex Knapp says:

    One thing is sure. We would not be in debt as far as we are now.

    I’m not sure that’s true. If it is accurate that jobs were saved, it’s possible that had those jobs been lost, the resulting loss in tax revenue might have given us the same levels of debt.

  4. mannning says:

    Well, maybe so. But, the real comparison would be between the actual stimulus and a stimulus much better tuned to the economy, which we didn’t get. Not that anyone could construct such a comparison with credibility. This smacks of a cover job.

  5. Lots of discussion about theoretical benefits, and little discussion of actual costs. Any discussion that takes “saved” jobs seriously — especially focusing only on public sector jobs over private sector jobs — is pure, unadulterated spin. Believe it if you are so inclined.

    Hmm…, were they working from the GDP that was just revised downward for the last quarter? but hey, way to compress those graphs horizontally to make them look good.

  6. Franklin says:

    but hey, way to compress those graphs horizontally to make them look good.

    Wow, I can’t get enough of your whining today. Tell us, oh wise one, what is the correct horizontal scale for those graphs?

  7. Forgive me Franklin, obviously the Stimulus worked, which is why there’s a Job Summit at the White House on the horizon and a furious rush to get a new “Jobs Bill” going in Congress.

    Oh, but of course that’s because of the huge mess the last guy left right? Another unquantifiable fantastic metric that fits in perfectly with jobs created or saved.

  8. steve says:

    IOW, if we do not like the results, we will just disbelieve anything. About 1/3 of the stimulus was tax cuts and a big chunk went to the states. A bunch went to unemployment if IIRC. Yes, it was not perfect, but it is what you expect when only one party is participating.

    The large majority of the increase in deficits is from the revenue side. Be warned, the following link has actual numbers again, well mostly easy to read pretty pie charts, so it will be suspect.

    http://baselinescenario.com/2009/11/23/government-debt-obama-budgets/

    Steve

  9. POP!

    The sound of Steve Verdon’s head exploding.

  10. Drew says:

    For an interesting read, go check out the presentation by Nomura economist Richard Koo at Zerohedge. “Lessons from Japan.”

    If you buy it, the very last thing you would do as a government policy is consider any notion that would be counterproductive to the business or personal environment and reduce demand, or delay the balance sheet de-leveraging. Things like higher taxes, higher employment costs (health care bill), more regulations (cap and trade) etc.

    However, this administration is so wedded to ideology that it is at cross purposes, pumping fluids into the body’s left arm while draining the right arm.

    Its crazy.

  11. odograph says:

    However, this administration is so wedded to ideology that it is at cross purposes, pumping fluids into the body’s left arm while draining the right arm.

    Then why didn’t they pass an ideologically pure stimulus? Why tax cuts?

  12. the Q says:

    Hey conservatives, where were you when the Bush tax cuts were “hailed” as pulling us out of the dot com recession by saying without those cuts, the recession would have worsened?

    I guess it all depends on (to quote Wayne), “the groups or persons record on predicting the future, their political background and agenda.

    Yeah, these were the same ones who said good job Brownie, Iraq would be a cakewalk, and there is no need to regulate financial institutions.

  13. Steve Verdon says:

    Michael,

    Does it hurt to be that stupid? It should.

    I’m still skeptical of the jobs claims though. I’d like to know where they got the data. I hope they aren’t relying on this story.

  14. Aww, Steve, and here I was being kind to you. I had a choice of sound effects:

    KA-BOOOM!
    BANG!
    POW!
    POP!
    POOF!
    Pffft!
    Pssss . . .

    And from that list I clearly chose one of the less insulting ones. And yet you’re angry.

    You know, I try to be nice . . .

  15. Wayne says:

    Q who said Iraq would be a cakewalk, and there is no need to regulate financial institutions?

    If you want to get into those areas that is fine by me. Bush administration predicted tax cuts, particularly long term ones would stimulate the economy. It happened. The recession ended in November 2001 and we had a strong economic growth until 2007 a year after the Dems took control of congress. This was done even with dealing with the 911 attack and two wars following.

    Obama predictions were way off and the economic future still isn’t looking good. Bush wins the prediction context.

    It is hard to determine why exactly something in the economy did or did not happen. However I am more incline to believe the people who have a good track record of predicting the future as to why something happen in the past. Those who have a bad record predicting the future are most likely pulling theories out of there ass when using hindsight. I am not saying we shouldn’t examine the past but should take into account who is speaking.

    One of the major problems with our latest financial institutions problems was government oversight and forcing banks into unsound investment practices.

  16. Drew says:

    Our typical economic bozos, odo and Michael, making pig noises. Great.

    For those not so attuned, the Koo argument is that this, like Japan, is a “balance sheet” recession. That is, the asset blow offs have left the commensurate debts that have piled up to be worked down through private saving. And until then, private consumption will lag. A liquidity trap. Hence, the argument goes, only the government is left to borrow and spend to ignite consumption demand until the private sector balance sheets are delevered.

    As a corrolary, no government in its right mind would therefore do anything to dampen private demand – like the things I cited. Its 100% counter to the perceived problem and prescription……….unless your ideology wrt social policy dictated you take on demand dampening policies despite the fact they were counter to your fiscal policy stance. As I noted.

    That’s the answer to your dumb and diversionary question, odo.

    I think that the economic literature is fairly robust right now on spending vs tax multipliers. Obama advisor Christine Romer’s work included. It has been discussed at length over at Schuler’s place. Mankiw routinely offers articles.

    odo, I think the question falls to you, why the tax vs spending weighting? It flies in the face. Ms. Romer seems to have Kool-Aid on her lips…………..lime, orange, cherry????

  17. Ah, the Society Of Blog Comment Economists.

    So far, if I recall correctly, they’ve predicted . . . um, well nothing that’s actually happened.

    But why should that stop them? That doesn’t mean they’re not still smarter than all those pointy-headed Washington and New York economists with their ridiculous Nobel prizes, their Fed chairmanships and their full professorships. Or the three firms referenced above. Or for that matter that absurd bunch of twits (investors) who together form the stock market.

    If you want the facts? You gotta go to the SOBCOMECON. Many of whom have BA’s in economics. And if they don’t then they’ve still read several books on the subject.

  18. the Q says:

    Wayne,

    You ask me, “who said Iraq would be a cakewalk”

    Lets see perhaps these quotes will help your selective memory:

    Ken Adelman, Pentagon Defense Policy Board. 2/2002 – “Liberating Iraq would be a cakewalk.”

    Dick Cheney,VP, 3/2003 – “I think it’ll go relatively quickly, …Weeks rather than months.”

    Dick Cheney, 8/2002 – “Simply stated, there is no doubt that Saddam Hussein now has weapons of mass destruction.”

    Wayne, need I go on? How could you ask such an elementary question about the predictions that Iraq would be a cakewalk/easy victory. Do you not have a brain with a memory attached?

    Sorry for the venom, but us liberals seemingly have to reteach history over and over and friggin’ over again to conservatives till you finally see reality (and even then you refuse to, even when confronted with quotes above). Were you not alive when the cakewalk predictions were made by the NeoCons – obviously not judging by your query.

    My problem with conservatives such as yourself is that they turn off their brain and only see what they want to see without any regard to reality. They put blind faith that conservative policies can’t possibly be wrong.

    Its like talking to 3 year olds…you have to tell them a billion times for something to sink in and they finally learn their lesson.

    Its incomprehensible to me that you would make me prove my point by asking “who said it would be a cakewalk”.

    Well the whole freaking Administration did for chrissakes.

    So when you assert, “Those who have a bad record predicting the future are most likely pulling theories out of there ass when using hindsight.”
    Based on obvious reality, I guess you are describing yourself and all your fellow zealot conservatives.

    Why even go on to critique your screed of tax cuts propelling the economy? I guess the concomitant $2 trillion deficits accrued during Bush’s admin. are Jummy Carters fault.

    I guess you forgot the $700 billion surplus Clinton left for you idiots to squander after RAISING taxes in 1994, after not one single republican voted for his omnibus act of 1993. Remember these quotes from Republicans of doom and gloom and chaos when Clinton’s policies take effect and the tax increases on the fragile and precious rich:

    Sen. Richard Selby “these tax increases are a road to financial disaster.”

    John Kasich – “This plan will not work. If it was to work, then I’d have to become a Democrat.”

    Rep. Newt Gingrich (R-GA), GOP Press Conference, House TV Gallery, 8/5/93: “I believe this will lead to a recession next year. This is the Democrat machine’s recession, and each one of them will be held personally accountable.

    Rep. Christopher Cox (R-CA), 5/27/93:

    “This is really the Dr. Kevorkian plan for our economy.

    Rep. Dick Armey, CNN, 2/18/93:

    “I will tell you, this program will not give you deficit reduction. It will be a disaster for the performance of the economy.”

    Sorry, I can’t go on…its too frustrating dealing with the mass ignorance of the right. I have no respect for conservatives trotting out the same BS now as they did then and repeating the same bullshit shibboleths of tax cuts good, liberals bad. What does it take for you people to admit that you were wrong about the fact that taxing the rich didn’t cause a melt down of the economy?

    To quote you again, “Those who have a bad record predicting the future are most likely pulling theories out of there ass when using hindsight.”
    Yes, you are right, thats why I can’t take your comments seriously since they are full of sh%t.

    So, please you had 8 years to fu*k up this place, give Barack a chance and quit with your ignorant rants.

    I apologize, but its no wonder America is on the verge of breakdown because so many deluded republicans can’t seem to get the fact that they almost burned the friggin house down with their ridiculous failed policies. Yeah, yeah it was that all powerful, all knowing, all wonderful wizard
    Barney Frank who caused Wall Street to melt down right? (Forget the fact that this all powerful minority member at the time couldn’t stop the Iraq conflict or get gay marriage passed, but by golly gee wiz he could single handedly make banks give shitty loans to dark skinned people thereby causing AIG to loose hundreds of billions and cause Lehman, Smith Barney et al to go out of business.

    In fact we should send our all powerful Barney frank to destroy Iran’s missiles, kill the taliban, cure cancer, destroy china and russia and cause moonbeams to come streaming out of your ass.

    Ok, thanks for letting me vent. Apologies to all.

  19. anjin-san says:

    and we had a strong economic growth until 2007

    and we had a really, really, really, really, really big credit binge until 2007.

    Fixed that for you.

  20. Drew says:

    Its fascinating to watch the Reynolds of the world who do nothing but snark, and never say anything concrete.

    Readers of this blog, and Schulers’s, will know that since the campaign I have been steadfast in saying that Obama’s policies would be inneffective and wrongheaded. And so they are proving. I called out the ridiculous Obama notion that 8% unemployment would be the top. I’ve called an 11% unemployment rate. I stand by it. It didn’t take that much insight. I’ve called out specific Obama initiatives.

    But Mr. Reynolds continues to beat his meat and just spew drivel.

    Michael, if you’d really like to join the debate, make a few quantitative predictions: you know, unemployment rate, stock market, spell out real policy initiatives and their effects…….

    Or, and is more likely and your want, continue to assume the kneepads position…..

  21. steve says:

    “And so they are proving. I called out the ridiculous Obama notion that 8% unemployment would be the top.”

    This is the truest part of what you say. I never thought 8% was a realistic top considering how bad the numbers looked. I have often thought that this was a bit of the president as chief cheerleader in action, trying to avoid the Carter malaise label. Who knows.

    I have read dozens of articles on Japan’s issues. Thanks for the Koo one as I missed his. There is a lot of disagreement on how much we parallel Japan. I think one of the problems with the analyses is that we tend to look at numbers only and have relatively little appreciation for how different their culture is from ours.

    None of the tax increases are due to start soon. I think the second order effects of wider spread health care will probably outweigh the costs and there are attempts in the bills to begin controlling costs. I agree that cap and trade can wait. I would prefer a straight carbon tax TBH.

    Steve

  22. Drew:

    It’s of course much more fun to bait humorless, self-important gasbags.

    But if you like, here are my economic predictions:

    1) We will continue to see evidence in the next few years that economics is a descriptive but not a predictive science. Just like we’ve seen since forever.

    2) Despite the overwhelming evidence that economic predictions — Left, Right and Center — are little more than guesses, people will continue to pretend otherwise.

    3) People who insist on making economic predictions will continue to distort those predictions to fit an ideological position, and that will continue to be antithetical to the very notion of economics as a science.

    4) When the people mentioned in (3) above manage to hit anything near a bull’s eye they will claim it as a perfect bull’s eye, and claim that it validates their ideological stance.

    5) When those same people miss so wildly that they can’t quite claim to have been accurate, they will invent an excuse that will of course be a subset of their ideological predilections.

    6) Complex human behaviors will continue to defy modeling. Because a) humans is funny creechurs that does wild-ass things, and b) the kind of philosophically simple-minded ninny who thinks he can predict complex human behaviors is the exact sort of ninny who believes in an ideology — an ideology that so distorts his perspective that he abandons any claim to scientific objectivity and thereby demonstrates part (a) above.

  23. odograph says:

    What’s your gig, Drew? Be insulting when you can’t be rational?

    Your strange and emotional screed does have some points I’d agree with. That’s not surprising since it has nothing to do with the one thin comment I made in this thread.

    I asked you why, if this administration was ideologically driven, they didn’t pass an ideological stimulus? Why a compromise?

    And it was certainly a compromise. It wasn’t Krugman’s simulus (which would have been pretty pure from that perspective).

  24. odograph says:

    Actually, re-reading I’m not sure I should be that generous. Some of those sentences are pretty crazy, mixing suspicion, correlation, and causation.

    This is a debt crisis. On that you and I agree. It was a “total debt” crisis, with public and private borrowing both spiking to unsustainable levels. At some point everyone will certainly have to deleverage, and markets for asset prices will have to clear. I think we agree on all that.

    Superimposed on this is an emotional cycle that you talk less about. Manias precede booms. It’ can’t be all manias, all the time.

    Regardless, we had a genuine panic.

    As a moderate I’m not sure (that is I don’t have an ideological answer gripping my mind) whether we really can deleverage everywhere at the panic point. There are feedback loops involved. I’ve certainly observed the ideological with their canned answers. Neither side makes a convincing rational argument. Well, not to the other side, or even the middle.

    My temptation, probably like a lot of moderate people, is to split the difference.

    And it is important to remember, no matter what the ideologues natter, that this stimulus was pretty close to such a split.

    It wasn’t Krugman’s stimulus, it wasn’t Mankiw’s stimulus … it was roughly in the middle.

    (BTW, in a way TARP was a bigger tragedy, because it isn’t that kind of split. It doesn’t go half way. I just hosed Wall Street completely down with federal funds.)

  25. odograph says:
  26. Steve Verdon says:

    and we had a really, really, really, really, really big credit binge until 2007.

    Yes, and during the Clinton years it was solid economic performance right? Oh wait, that was a bubble too. A bubble economy that lead to the surpluses, but lets ignore that little fact.

    Score on the Partisan Hackery Index: 6.5

    Its fascinating to watch the Reynolds of the world who do nothing but snark, and never say anything concrete.

    Actually they also lie.

    What’s your gig, Drew? Be insulting when you can’t be rational?

    No, that is Micheal’s job.

    This is a debt crisis. On that you and I agree. It was a “total debt” crisis, with public and private borrowing both spiking to unsustainable levels. At some point everyone will certainly have to deleverage, and markets for asset prices will have to clear. I think we agree on all that.

    Okay, so the current crisis is a debt crisis caused by sudden upward surges in private and public debt. So….the solution is…wait for it…to run up the public debt to over 100% of GDP? Have we got that right? Could we say that a similar treatment but with alcoholics would be to encourage them to drink so much they pass out that way they aren’t drinking anymore?

    As a moderate I’m not sure (that is I don’t have an ideological answer gripping my mind) whether we really can deleverage everywhere at the panic point. There are feedback loops involved. I’ve certainly observed the ideological with their canned answers. Neither side makes a convincing rational argument. Well, not to the other side, or even the middle.

    Its stuff like this that just keep reinforcing my belief that you have possession of a fair amount of information, but you seem incapable of putting it all together. For example, you know I’m quite libertarian in my views. Yet I’ve come out and said time and again we need health care reform. I’ve come out in favor of moving to systems similar to some of the European systems. I’ve put forward a stimulus plan. I’m quite willing to not adhere to the ideological position dogmatically, but people like you, Micheal Reynolds, Bernard Finel, and Our Paul keep pretending otherwise. Are you stupid, dishonest, both, something else. I’ll let you guys pick your poison here.

    My temptation, probably like a lot of moderate people, is to split the difference.

    You do understand the fallacy of the middile position right. Just because it is the middle position does not automatically make it the correct position.

  27. . . . but people like you, Micheal Reynolds, Bernard Finel, and Our Paul keep pretending otherwise

    .

    Hey, I thought I was your only bete noire. I thought we had something special.

  28. odograph says:

    Xlint mountain bike ride, “a good time was had by all(*)”

    This is a debt crisis. On that you and I agree. It was a “total debt” crisis, with public and private borrowing both spiking to unsustainable levels. At some point everyone will certainly have to deleverage, and markets for asset prices will have to clear. I think we agree on all that.

    Okay, so the current crisis is a debt crisis caused by sudden upward surges in private and public debt. So….the solution is…wait for it…to run up the public debt to over 100% of GDP? Have we got that right? Could we say that a similar treatment but with alcoholics would be to encourage them to drink so much they pass out that way they aren’t drinking anymore?

    There are two ways spending and deficits can expand in a crisis. You know this. There are automatic factors, increased outlays for unemployment, social services, the safety net. The other is conscious stimulus spending.

    I’m not sure the “drunk” analogy really works in either case, other than as a “feel good” story for the critic. People who lose jobs and need extended unemployment are not necessarily drunks. Neither are people hired to build or repair bridges.

    As a moderate I’m not sure (that is I don’t have an ideological answer gripping my mind) whether we really can deleverage everywhere at the panic point. There are feedback loops involved. I’ve certainly observed the ideological with their canned answers. Neither side makes a convincing rational argument. Well, not to the other side, or even the middle.

    Its stuff like this that just keep reinforcing my belief that you have possession of a fair amount of information, but you seem incapable of putting it all together. For example, you know I’m quite libertarian in my views. Yet I’ve come out and said time and again we need health care reform. I’ve come out in favor of moving to systems similar to some of the European systems. I’ve put forward a stimulus plan. I’m quite willing to not adhere to the ideological position dogmatically, but people like you, Micheal Reynolds, Bernard Finel, and Our Paul keep pretending otherwise. Are you stupid, dishonest, both, something else. I’ll let you guys pick your poison here.

    I was primarily thinking of Krugman ($2T) and Mankiw ($0T) and the final value ($1T) as the two sides and the final outcome.

    Mankiw actually proposed a revenue restructuring that I like, but it was strange to dress it up as stimulus: “I would make the two tax changes equal in present value, so while the package results in a short-run budget deficit, there is no long-term budget impact.” I take that short-run budget deficit proposal to be a small one.

    Where were you? Somewhere close to Mankiw territory, weren’t you?

    My temptation, probably like a lot of moderate people, is to split the difference.

    You do understand the fallacy of the middile position right. Just because it is the middle position does not automatically make it the correct position.

    It is only a fallacy if I claim that splitting is a good answer. I don’t. I only claim that it is a human one, in the face of great uncertainty and divergent claims.

    * – code for X-Ray services not required.

  29. odograph says:

    You know, if we put Mankiw at $200B and the final outcome at $800B, then the outcome was closer to Mankiw’s plan than Krugman’s.

  30. How did I get dragged into this?

  31. Bernard:

    Crips, bloods, and guy just walking down the street.