This is deeply strange even for John (Assrocket) at the right-wing Powerline blog, A Verdict on Obama’s “Stimulus” Plan
Economists Timothy Conley and Bill Dupor have studied the effects of the American Recovery and Reinvestment Act (the purported stimulus bill) with great rigor. Earlier this week, they reported their findings in a paper titled “The American Recovery and Reinvestment Act: Public Sector Jobs Saved, Private Sector Jobs Forestalled.” The paper is dense and rather lengthy, and requires considerable study. Here, however, is the bottom line:
Our benchmark results suggest that the ARRA created/saved approximately 450 thousand state and local government jobs and destroyed/forestalled roughly one million private sector jobs. State and local government jobs were saved because ARRA funds were largely used to offset state revenue shortfalls and Medicaid increases rather than boost private sector employment. The majority of destroyed/forestalled jobs were in growth industries including health, education, professional and business services.
So the American people borrowed and spent close to a trillion dollars to destroy a net of more than one-half million jobs. Does President Obama understand this? I very much doubt it. When he expressed puzzlement at the idea that the stimulus money may not have been well-spent, and said that “spending equals stimulus,” he betrayed a shocking level of economic ignorance. (emphasis mine)
Over the years I’ve pointed out this common tactic of right-wing conservative pundits and bloggers. They point to some research, a news story or some statistics hoping no one will actually read and research that little part they snipped out to make their biased point. You could say they treat their readers as though they were idiots who were not interested in the truth. That may be partly true. Their readers do not go to their sites or watch their programs for information. They are looking for some kind, any kind of validation, for beliefs so closely held that facts would not dislodge them anyway. If there is anything here found to be “shocking” it is Assrocket’s public display of the worse kind of imbecility. He either has not read the whole report himself or does not understand it. he mentions that the report is difficult to get through. I agree that it is stepped in dry economic-speak, but much of it is in plain American-English. Assrockets excerpt is even deceptive. It is odd that he could not include a few more sentences from the abstract he quoted ( all the right-wing blogs who linked to him use the same paragraph). He leaves off the following,
State and local government jobs were saved because ARRA funds were largely used to o set state revenue shortfalls and Medicaid increases (Fig. A) rather than boost private sector employment (e.g. Fig. B). The majority of destroyed/forestalled jobs were in growth industries including health, education, professional and business services. Searching across alternative model speci cations, the best-case scenario for an e ectual ARRA has the Act creating/saving a net 659 thousand jobs, mainly in government.
So even by Assrocket’s experts the stimulus did create or save jobs ( not all of the stimulus has been spent yet. Those interested in tracking that information can go to recovery.gov. Checking under press releases is probably the easier route.) Note what it says about states using stimulus funds. Many did not use those funds for infrastructure projects or to make loans to businesses that would create jobs. That is one of the issues with the stimulus and what Congress intended – also acknowledged in the paper by Timothy Conley and Bill Duporz at Ohio State. The authors acknowledge that states used the stimulus funds(ARRA) instead of their own funds for some highway and infrastructure projects. In other words states with Republican governors used federal stimulus funds not to create jobs but to pay the state’s bills. That did save some jobs via not making cuts to education they would have made otherwise. Though in many cases – Wisconsin, Michigan, Florida, New Jersey, just to name a few used the federal money and cut teacher and other public jobs anyway. That also gave them, what they believed to be anyway, the political elbow room to cut those jobs while also giving away corporate tax cuts – thus once again making their budget balancing even more precarious than it actually had to be. They claim those corporate tax cuts create jobs, but those states have large corporations sitting on tons of cash and are not hiring. While no reasonable person wants corporate taxes to be too high there is no empirical economic proof that slashing corporate taxes in the current economy will create jobs. Further on in the Ohio Sate study is the authors version of what I just wrote. Assrocket, being brilliant compared to the stupidity of the President must not have understood or just skimmed past since it negates his larger thesis and makes the states with conservative governors look like hypocrites,
Texas provides a case in point. In Texas, ARRA dollars arrived and simultaneously the number of Texas highway, bridge and street construction workers declined. Employment in that sector fell from 34,600 workers in May of 2008 to 28,500 workers in May of 2010. Total capital outlay on highways in Texas (fiscal year ending on August 31) went from $3.38 billion in 2009 to $2.82 billion in 2010. This decrease in state expenditures occurred even though Texas spent $0.70 billion in ARRA highway funds during 2010.16 The Texas government responded to its receipt of ARRA highway dollars by cutting Texas’ own contribution to highway spending, which freed up state dollars to boost suffering state fi nances.
Texas just recently gave yacht owners a special tax break. They have gutted their education spending as well as health care funding for Medicaid ( which will result in thousands of elderly being turned out of nursing homes). Why did Governor Rick Perry (R) not use stimulus funds to simply continue the same average increase in infrastructure spending which would have created jobs. He and and overwhelmingly right-wing legislature decided it best to use the stimulus funds to finance tax breaks for millionaires and wealthy corporations. It that the kind of gotcha Assrocket had in mind when he wonders if the President “understands”.
Michigan provides another example. For the scal year ending on September 30, 2009, Michigan’s revenue from Federal aid had increased by $189.2 million over the previous scal year however, over the same horizon, capital outlays had risen by only $17.4 million. What might ex-plain this gap? Taxes and miscellaneous revenues received by the Department fell by $140.6 million relative to the previous scal year. The US DOT reported that it outlaid $110 million to Michigan through September 2009, $105 million of which was FHA money. As in Texas and New York, ARRA dollars were substituting for Michigan government dollars. Poten and Poten, a private company that collects, analyzes and sells information about the asphalt industry, describes the situation clearly: The lack of demand for asphalt is largely due to constrained public road funding and a weak private and commercial market for the product.
Most state and local governments have major budget problems. Federal funds related to the transportation budget and Stimulus are a critical source of current road funding, but it hardly makes up for the declines from state and local public funding sources…
In other words, the analysis is not that difficult. Michigan and these other states used federal money to balance their budgets rather than create jobs. We can get angry at Congress for either not being more specific or not attaching more strings to those funds, but it is ultimately the fault of the governors and legislators if the funds are used to pat state bills rather than spend the money on job creation. Texas remains a great example by not only keeping the federal money and not spending it on infrastructure, but not spending its own money on infrastructure. The Texas economy was once hailed by conservatives as a model for the country, yet it owes its current head slightly above water fiscal circumstances to the ARRA and President Obama. Even that precarious situation may change as the ARRA winds down – which it is doing this year.
While their figures on how states used their ARRA money are reasonably sound it is possible that the Conley and Duporz paper is mistaken in their conclusion. They, like all researchers have to add up the numbers and in their case make some assumptions. Wait, Did the Stimulus Work?
Based on its economic models, the Congressional Budget Office recently estimated that between 1.4 million and 3.4 million workers who have jobs would be unemployed if the stimulus hadn’t been enacted. Three of the best-known private economic research firms — IHS Global Insight, Macroeconomic Advisers and Moody’s Economy.com — have come up with similar estimates. The average estimated effect on employment is about 2.5 million jobs.
Nariman Behravesh, IHS Global Insight’s chief economist, has a nice way of summarizing what the bill did (and, to some extent, didn’t) do: “It prevented things from getting much worse than they otherwise would have been. I think everyone would have to acknowledge that’s a good thing.”
The Macroeconomic Advisers is also a slog, but it is here for those interested, MA on fiscal stimulus, the definitive answer: it works. MA refutes the demagoguery. Like other issues – torture, Iraq’s non-existent WMD, supply-side voodoo, women’s health issues – the Right has it’s first wave of propaganda. That propaganda is fact checked and refuted. They let some time pass and reinvent the same tired lies and half truths. The Right has been demagoging the ARRA almost since its passage. They were wrong than and they are wrong now, New CBO Report Finds Up to 3.6 Million People Owe Their Jobs to the Recovery Act and Conservatives Continue To Claim The Stimulus ‘Failed,’ After CBO Report Said Otherwise.
One more set of points from the Ohio State paper. It seems as though Assrocket could not get past the first three sentences. Keeping in mind this report is Powerline’s slam-dunk, please, please conservative readers do not read the conclusion that begins on page 28,
The most promising avenue in this regard is to allow for cross-state positive spillovers. This might result in estimates of a large positive jobs effect. Suppose, for example, that Georgia received relatively more ARRA aid, which in turn stimulated that state’s economy. If, as a result, Georgia residents’ vacation spending in Florida increased, then the increased vacationing might generate jobs in Florida. Our methodology cannot pick up this effect.
If this type of spillover from interstate trade is widespread nationally, then the economy-wide jobs effect of the ARRA may be actually larger than what we find. To address this, we are planning to redo our analysis by adding time series variation to the current cross-state variation. Given data collection lags and the fact that ARRA spending did not began in earnest until mid-2009, we did not have a suciently long time series to use this approach in the present paper.
Nothing that I have written here is meant as an attack pe rse on this paper’s authors. For now I’ll assume they are just economist that saw what they perceived to be curious anomalies and wrote up what they think they saw. The above shows that have done taken some aspects of the ARRA and its effects into account. New York for example used some of their ARRA funds for infrastructure and jobs creation, but also used some to pay state bills. And oops another problem for the slam and the dunk,
Next, research on the ARRA, and in particular our empirical ndings, demands greater structural economic modeling. In this study, we deliberately chose the relatively `model-free’ approach for one of the first studies on this new government program and data set. The drawback is that, at this point, we can only conjecture on the underlying, economic mechanisms that give rise to our findings. (emphasis mine)
Even the kool kids will have to drink a lot of the konservative kool-aid to read this and conclude oh yea, we gotcha. If that paragraph is not causing Powerlined heads to explode, it turns out the authors are somewhat sympathetic to the plight of the unemployed and it appears one of the reasons for writing the paper is to point out that indeed, some of the ARRA funds did not go to where they would have been most effective in creating jobs.
Second, as explained in the paper, relatively less educated people faced, and continue to face, a much worse job market than more educated people. The way that state and local governments channeled ARRA funding into different sectors is likely to have consequences for the effects of the Act. For this reason, an accurate model should d eentiate between high and low education workers along with their respective labor markets. Third, we have provided substantial evidence that state and local governments have used part of ARRA aid in a way not explicitly intended by Congress and the President. As such, an accurate modelof this period will include a hierarchal intergovernmental component in the spirit of Bradford and Oates (1971a).
So taking our chain of thought from a pundit from Wingnuttia, So the Right expects people to believe that an economic stimulus, that was required because they drove the economy into the ditch, is not effective, because of a report they did not read, do not understand, has some data that is or should be an embarrassment to Republicans and contains conclusions the authors admit might not be the best is the ultimate refutation of the ARRA. Do wing-nuts have reading comprehension and analysis issues? Maybe, or maybe they are maliciously ignorant on any occasion such ignorance suits their agenda. it is difficult to decide. Are conservatives as shockingly ignorant about the economy as they appear. Well the nation lost about $19 trillion dollars in wealth under their guidance.
The Long Goodbye 