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A Quick Look at the CEA’s “Million Jobs Saved” Claim September 11, 2009

Posted by geoff in News.

The Council of Economic Advisors told us yesterday that a million jobs had been saved by the stimulus package. Isn’t that great?

Let me start by saying that whatever the stimulus package did, it obviously wasn’t enough. The unemployment situation is awful and has not yet peaked. We always said that the package didn’t act quickly enough, and that’s already been proven by the economy’s loss of over a million jobs since the stimulus was signed.

And let me point out the price: we’ve spent $100 billion to save a million jobs for 6 months. That’s $200,000 per job per year.

Then let’s look at the actual analysis itself. The CEA predicts the “without stimulus” case and compares it to what we’ve experienced. The difference gives them the million jobs saved. But we have no idea how accurate this prediction is, since they never tested it using pre-stimulus data. That is, they should have tried to predict the 4Q08 and 1Q09 data and showed us that their method was reasonable.

Unfortunately I don’t know enough about vector autoregression to be able to duplicate her work quickly, so I can’t do it myself. If anybody has more experience with this method, however…

This chart caught my eye:

They use this chart to claim that the more Medicaid money-per-person a state receives, the better the employment situation. But that conclusion is driven by the solitary outlier on the right (New York). Without that single state, the curve looks like it would be absolutely flat, showing no effect of Medicaid spending on employment.

From that failed argument they move on, trying to show that the influx of Medicaid funds has allowed state governments to avoid staff cuts. To support this argument, they generated this chart:

Which shows that most states did indeed avoid staff cuts. In fact most states increased their staff!! [Just eyeballing it, this correlation is true even without NY] So the CEA has done a great job of proving a fundamental conservative tenet: throwing more money at government increases the size of the bureaucracy.

There’s more to say about this report, but I’ve gotta go earn a living. Hopefully other readers/bloggers can keep nibbling away at this thing.


1. BrewFan - September 11, 2009

Whatever remaining credibility the CEA had has now flown out the window. I’m getting more worried each day about the propensity for lies this administration has.

2. Neo - September 11, 2009

I’ve seen one estimate of 14% unemployment by next summer, when the “stimulus” should be in full bloom.

3. triangle - September 11, 2009

What’s with all the circles? Shapists…

4. Jones in CO - September 11, 2009

i know those charts are telling me something important

but soap bubbles on a seesaw come to mind

5. HeartlessLibertarian - September 13, 2009

“I’ve seen one estimate of 14% unemployment by next summer, when the “stimulus” should be in full bloom.”

I think that might be a little excessive, myself–it might depend on just how much monopoly money Obama can get the Fed to pump into the system. If the spending rate stays the same as it was this year, states are just going to end up using it to cover their budget shortfalls like they did this year. Of course, it really doesn’t matter when the guy in charge made claims like this:

“WASHINGTON (Reuters) — President-elect Obama said Saturday an analysis of his stimulus proposals shows that between 3 million and 4 million U.S. jobs could be saved or created by 2010, nearly 90% of them in the private sector.”


90% in the private sector? FAIL. And he’s only got 3 months left to get the balance of his prediction, which is 2/3 short right now.

6. Michael - September 13, 2009

If the spending rate stays the same as it was this year, states are just going to end up using it to cover their budget shortfalls like they did this year.

Ironically, these state bureaucrats are exactly the jobs we should eliminate, to free the economy from the regulatory overhead, as we have all witnessed from the bankruptcy of California.

7. September Unemployment: The Job Loss Accelerates « Innocent Bystanders - October 2, 2009

[…] The “million jobs saved” claim […]

8. jim - October 3, 2009

if the government got out of the way the market would flourish. but then the government would be giving up its control of the people. so that won’t happen. expect 7 or 8 years of high unemployment. plus, lets not forget about the inflation headed our way. elections do indeed have consequences.

9. JohnG - October 5, 2009

Our politicians at the Federal and State levels are both Ignorant of Basic Economics and Corrupt. We have Economically Ignorant Criminals Taxing us to death.

Frankly, we would be better off if “Don Corleone” was heading up the Council of Economic Advisers and paying off the stinking Professional Politicians in Washington to stay OUT of the private sector.

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