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Zandi Claims Stimulus Didn’t Do Squat August 3, 2010

Posted by geoff in News.
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[UPDATE: Nada EcMajor pointed out a rather large mistake in this analysis: I had used compounded quarterly growth rates to back out the quarterly data, when I should have been dividing the annual data by 4X. This makes the stimulus look much better. On the other hand, I used a value for the stimulus spending from one of Blinder & Zandi’s tables, when I should have been using a more complete number provided in another table. This makes the stimulus look worse. The updated numbers are provided in the post.

Thanks to Nada EcMajor for the correction.]

I don’t think it’s what he meant to claim, but that’s the way it works out.

You see, Alan Blinder (Princeton Univ.) and Mark Zandi (Moody’s Economy), recently released a report titled “How US Policy Ended the Great Recession.” While a few articles have criticized the report, by and large the media reporting has looked like Ezra Klein’s “Zandi: Financial rescue and stimulus responsible for saving or creating 8.5 million jobs” article. Lots of cheerleading and high fives over the success of the stimulus and the immense wisdom of the Obama administration.

That’s a nice spin, but if you read the report, does it truly say that the “financial rescue and stimulus” were responsible for “saving or creating 8.5 million jobs?” Not really. The report actually places most of the credit on the changes in financial policy & TARP.

And in fact, though the authors wax enthusiastically over the ARRA stimulus, the calculations in the report show that the stimulus package was hugely inefficient and wasteful. I backed out some numbers from the report – numbers that Blinder & Zandi didn’t see fit to present. I’m using their numbers to compare the situation as it is (“Stimulus+Policy”) with the prediction for financial reform+TARP but no stimulus (“Just Policy”) Take a look at what I found:

Stimulus+Policy

Just Policy

GDP (1Q09 – 2Q10)

$19,558 Billion $19,631 Billion

$19,218 Billion $19,197 Billion

GDP Boost From Stimulus

$340 Billion $434 Billion

ARRA Stimulus Spent

(1Q09 – 2Q10)

$391 Billion $472 Billion

That’s right. According to Blinder & Zandi, we’ve spent $391 billion $472 billion in stimulus money in “now” dollars, to get a GDP increase of $340 billion $434 billion (in 2005 dollars), so we lost $51 billion $38 billion. Lost $51 billion $38 billion. If you adjust for inflation, it only cost us about $10 billion it’s a wash, but the point is that rather than spending the money in a way that has a big economic multiplier, it’s been spent with a economic multiplier less than of only 1.

They also tell us that their modeling predicts that the stimulus itself was responsible for 2.5 million jobs. If you simply take that at face value, and divide it into the $391 billion $472 billion spent thus far, you find that each job cost us more than $150K $185K. Yep – each job over that 18 month period cost us $100K/yr $125K/yr.

Liberals like to set up a strawman, saying that critics claimed that no jobs would be created. That’s nonsense – you can’t dump the better part of a trillion dollars into the economy and not create jobs. The real claim was that the stimulus was too slow, too inefficient, and would have adverse consequences in the long-term.

Here we are 18 months later, having spent $150K $189K for every job created and seeing a negative impact on GDP. Not to mention amazingly high unemployment. I think we can be forgiven our criticisms.

Comments»

1. Cathy - August 3, 2010

Oh My. Nailed it, Geoff.

Been suspicious of their shenanigans & shell-games.

2. geoff - August 3, 2010

The libs have been running wild, using this report as a vindication of Obama’s economic policies. I wanted to point out what it really says before they get too far with it.

3. lauraw - August 3, 2010

Hah!! Awesome. Well done, Mr. Crunchy McNumbers.

4. Michael - August 3, 2010

Geoff is too proud to do it, so I’m pimping this post all over the intertubes.

5. geoff - August 3, 2010

Thanks, everybody. And special thanks to lw and Michael for promoting it.

6. Marie - August 3, 2010

I am soooo glad that the smartest people in the room are running the government. Otherwise, we might actually make money instead of flushing it down the toilet.

7. firstpoppa - August 3, 2010

Maybe they should have just GIVEN the money away. The results would have been a lot better. But then, they wouldn’t have been able to make the political payoffs they did.

8. Doc - August 3, 2010

Just picked-up by AoSHQ (ace.mu.nu) – expect some interesting traffic if you’ve not seen it already!

Brilliant piece of work, goeff.

Cheers –

9. Tushar - August 3, 2010

>>Brilliant piece of work, goeff.

Yep, brilliant work, Goeff!

10. MostlyRight - August 3, 2010

I think you’re wrong, and this report proves we should immediately print and spend, borrow and spend or tax and spend $1,000,000,000,000,000 more. We’d save or create 8,500,000,000 more jobs, or 28 more jobs for every man, woman and child in the country! It’s simple math and we’re all gonna be rich.

11. How Did US Policy End the Great Recession? Blame Bush! - BabbleFest - August 3, 2010

[…] at Innocent Bystanders has crunched the numbers in a post titled Zandi Claims Stimulus Didn’t Do Squat:  That’s right. According to Blinder & Zandi, we’ve spent $391 billion in stimulus money […]

12. Instapundit » Blog Archive » OOPS: Zandi Claims Stimulus Didn’t Do Squat. “I don’t think it’s what he meant to claim, but… - August 3, 2010

[…] Zandi Claims Stimulus Didn’t Do Squat. “I don’t think it’s what he meant to claim, but that’s the way it works out. . . . Here […]

13. Enas Yorl - August 3, 2010

WHOOT!! INSTALANCHE!!!

14. geoff - August 3, 2010

Michael is the man.

15. JorgXMcKie - August 3, 2010

I’ve tried to explain to everyone that if we merely raised the minimum wage to $1000/hr then tax all income at 90% we’d be golden.

Everyone with a current job [some 130M+] would immediately have approximately $3000/week after taxes to spend, which would stimulate the economy, and the government would get something like 475Trillion dollars in taxes, simultaneously balancing the budget and wiping out all public debt.

Easy-peasy. For some odd reason, though, most economists seem to think this doesn’t work as well as the “Stimulus”.

16. mojavewolf - August 3, 2010

I beg to differ.

Zandi’s claims appear to suggest that the “stimulus” cost $51 billion in lost GDP. How can you conclude it “didn’t do squat?” Where I come from $51 billion is a lot of money.

17. lewy14 - August 3, 2010

Question – can we conclude then that “Policy” – the TARP/stress test/Fed QE – “worked”? Did it have a positive payoff?

I think it did. Note the banks have mostly paid off their aid. Fannie/Freddie/AIG/Maiden Lane are all still in the swamp, but unless the specific numbers in the report are challenged, I think they still get to claim that “Policy” was a substantial net plus.

Note – I think the “Policy” sucks. I think stimulus sucks too.

But intellectual honesty should compel one to acknowledge policies which suck and produce results from policies which suck, and produce waste.

18. Andrew_M_Garland - August 4, 2010

The government says that its spending is “stimulus”, but this is an excuse for confiscating money (higher taxes) from the people who organize the private sector (jobs), then giving that money to (politically connected) people who will spend it (have a celebration) to supposedly save us from recession. The government is robbing the people who produce employment. That is the cause of our jobless, stagnant economy.

You can feed a man forever by teaching him to fish. Or, you can buy a vote right now by giving him a fish.

Future News: Keynesian Bankrobbers Save Local Economy
= = = = =
The robbers offered an interesting bargain. In exchange for a pardon, they will spend all of the cash within the town on restaurant meals and consumer goods, thus stimulating the local economy. Town leaders are hopeful, and some are even pleased.
= = = = =

19. Running Zandi’s numbers | Hoystory - August 4, 2010

[…] are really stimulative” last week to point out the ridiculous nature of his claims. Well, Geoff over at Innocent Bystanders took a look at Zandi’s report and finds that – suprise – government spending doesn’t have a […]

20. mark l. - August 4, 2010

“The report actually places most of the credit on the changes in financial policy & TARP.”

thank you.

I keep reading libs who believe that obama saved us from the next great depression. As I saw history, TARP was done to prevent a finanical collapse, and the stimulus was just supposed to help us recover, emphasis on jobs.

I inderstand the gop’s desire to run away from TARP, as it causes a maalox moment among tea partiers, but this has largely restricted the political discussion of the effects and success of TARP.

just the numbers, per wiki…
(although they recently scrubbed the first number I offer)

the initial amount requested was 700 billion.
354 billion was spent.
all but 89 billion of that has been repaid.

(and to add another number that was recently scrubbed from the wiki entry on TARP)
GM received 49 billion, repaid a little more than 2 billion, and the govt removed their remaining debt, 47 billion.

so tarp in review?
44 billion is on bush’s head, but AIG is actually going to pay it…
47 billion is on obama, and gm will never repay it.

At this point, I’ll lay off obama, provided the dems admit that tarp was far cheaper than the public’s wildest dreams. No one in the gop wants to touch one of the great successes in modern history?

21. lewy14 - August 4, 2010

mark I. – I agree with you broadly with respect to TARP (see my comment above).

In defense of the conservative distaste with respect to what is otherwise arguably a big policy success, the problem people have is that the Wall St culture was largely untouched. TARP etc reinforced moral hazard.

This is not a high risk high reward – Wall St expropriates free call options on upside and sticks us with put options on the downside (which Greenspan initially accepted, and which Bernanke has continued with). The plain English is “privatizing gain, socializing loss”. Genuine free market supporters cannot champion this – except most grudgingly in that it prevented a return to a stone age economy.

So it is status quo, and the moral hazard / “Greenspan put” problem is still on the table (worldwide, essentially – look at Europe bail out their banks) and _will_ bite us again.

To be perfectly provocative, Obama failed to take advantage of a crisis. (FWIW, the left hates him for this too – check out HuffPo.)

So don’t begrudge the Tea Party folks their bitterness about TARP and the rest of monetary policy. It’s a principled and consequential view that prevents them from embracing that GOP “success”.

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23. roystgnr - August 4, 2010

You certainly CAN “dump the better part of a trillion dollars into the economy and not create jobs”. The trick is to take the trillion dollars, via taxes, borrowing, or inflation, from some place else in the economy that might have created the same jobs, rather than from magic fairies.

Now, someone refresh my memory – did those stimulus funds come out of the economy, or out of fairyland?

24. Shai Gaba Umbala Shoombala OOM! - August 4, 2010

[…] some of its supporters claim the stimulus “didn’t do squat” – (different look at the 0.8 multiplier effect mentioned […]

25. kwo - August 4, 2010

One nitpick: comparing 2005 vs. present dollars sorta undermines the point. $51 billion may sound better, but it’s not accurate. You’d have been better to stick with the normalized number.

26. Rootboy - August 4, 2010

Comparing the effect of the stimulus over the last 18 months, even though the overall effect will happen over several years, with the up-front cost is disingenuous.

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[…] Well, that’s not precisely what he claimed. But it probably should be. […]

30. Michael - August 4, 2010

Comparing the effect of the stimulus over the last 18 months, even though the overall effect will happen over several years, with the up-front cost is disingenuous.

No, it was disingenuous for Obama to claim that this boondoggle would be spent on “shovel-ready jobs.”

31. Michael - August 4, 2010

Geoff, please check your email.

32. mark l. - August 4, 2010

“…the problem people have is that the Wall St culture was largely untouched. TARP etc reinforced moral hazard.”

some agreement.

glass-steagal would have prevented the disaster, as firms wouldn’t have been able to provide their own insurance on their bundled mortagages. If aig was providing insurance on bundled loans from citi, they would have looked at the mortgages, and realized the risk was substantial, and charged according to risk.

instead we had companies providing absurdly low rates of insurance on the doomed loans, so that the bundled mortages would appear more solvent than reality. If the insurance premiums reflected the actual risk, the bubble never occurs.

wall street untouched?
I bought aig shares at .39 cents, before they folded 20-1. The market caps on the large companies have been destroyed. We even got to watch lehman fold…

“Obama failed to take advantage of a crisis.”
timing is everything. the alternative plan would have entailed the govt buying ALL the bad debt, getting stuck with millions of homes, mortgaged at 150% of value. The result would have let the large firms off the hook, and their market caps would have been punished, but not crucified. There is little doubt in my mind that had obama been in office, that this would have been the plan.

wall street did get punished, but with the absense of glass-steagal, they are under more pressure now to repeat the same process. I don’t see anything outside of US mortgages providing anything sufficent to leverage around, but chances are, the firms will find another.

if all else fails, they’ll go back to US mortgages, when they return to value in the next 5-10 years, and then we will just repeat the same collapse we had…

33. mark l. - August 4, 2010

“So don’t begrudge the Tea Party folks their bitterness about TARP and the rest of monetary policy.”

they are nice enough folk.
they mean well, and some of them have a pretty solid understanding of key economic issues.
their hearts are in the right place, as the are the most concerned about our fiscal trajectory.
I don’t think they are up to speed on monetary policy, but then, neither am I. I get a little fidgety when I see people holding signs which are ron paul-based theory.

as a fictitious example: imagine a 4 year old, holding a sign which says:
audit the fed.

their requests appear born of repeating slogans that someone else put them up to, which are proposing ideas beyond their understanding.

34. Cathy - August 4, 2010

they are nice enough folk. Sound a tad patronizing here fella.

they mean well, and some of them have a pretty solid understanding of key economic issues. How gracious of you.

their hearts are in the right place, as the are the most concerned about our fiscal trajectory. Most sane citizens are concerned about this.

don’t think they are up to speed on monetary policy, but then neither am I. Glad you confess your own short-comings. Who says that we all have to be up on it? Many of the Tea Party folks are extremely well-educated… professionals from many walks of life, businessmen & women, small business owners, lawyers, entrepreneurs, military personnel, financial analysts. Hey! Maybe many of them know a shit-load more about all this than you.

I get a little fidgety when I see people holding signs which are ron paul-based theory. Tea Party is truly grass roots. Most of US don’t regulate the signage of other individuals. If the Ron Paul and John Burch folks show up at events, they show up.

We Tea Party folks are truly grass roots individuals. Most of us concentrate on 5 basic principles of 1) limited government fostering individual liberty, 2) fiscal responsibility, 3) accountability of our elected representatives, 4) restoration of the rule of law, 5) promotion of a secure & sovereign nation. It’s actually kind of amazing how much we Tea Party individuals have in common overall. And that’s a beautiful thing. You are welcome.

35. Cathy - August 4, 2010

their requests appear born of repeating slogans that someone else put them up to, which are proposing ideas beyond their understanding.

Wow. I don’t know of one member of the Tea Party — and I know hundreds of us now — that would hold up a sign someone else ‘put them up to.’ Sheesh. Most of our signs are made in our homes with our own poster-boards and Sharpie-markers. There are some amazing and creative folks out here in reality-land.

The basic principles are very easily understood. Any 8th grader who got through a decent civics class can understand ’em… unless they’ve been brain-washed by lefties.

36. mark l. - August 4, 2010

the 4 year old anecdote got me thinking…

about Sharron Angle.

If I lived in the state, I’d vote for her(NOT in a primary), but then I’d vote for an anchovy-pickle-mayonaise sandwich over reid.

begrudge the tea party?
if angle loses, I will. Harry Reid was at one point, one of the lowest hagning fruits in the senate garden. Angle looks like the one person whose arms are too short to pick him from the seante tree.

ditto theme on palin. no on the primary, but if she makes it, there isn’t a doubt that I would vote for her as a ‘lesser of two evils’. I’m imagining the ‘snow white and seven dwarfs’ primary. Palin pulls support consistent with nicki haley, against an even more expansive field. Good or bad, women are in ascension in the gop, and so long as the choice of women among a ton of men remain small, they will dominate the gop for the next 10-12 years.

If I deem the net effect of the tea party is electing people who are more than willing to repeat their talking points, to the exclusion of knowledge about some much more serious questions, then I would begrudge the partiers.

looking at the generics, anything short of a democrat massacre, is going to disappoint me.

37. mark l. - August 4, 2010

cathy…

loved the tea partiers when they started.
it was an outpouring of individuals.

now it is an organization…complete with organizational support for politicians. I’ve went to some of the earliest rallies and saw individuals. The more the organized front tries to speak for these individuals, the more I gag.

There are individuals on note:
dana loesch: note to self, If I ever want to take over a group of individuals at a rally, bring a bullhorn. I like her, respect her, and she really hasn’t tried to speak out as a representative, just as a person.

ditto on the old woman who was on letterman. she was wonderful.

I have no idea who the tea party express is, and while I will attend rallies, it disgusts me to see them pretend that they have my vote. The practical solution was to establish a platform, and express willingness to vote for ANY candidate that accepts it. Endorsing particular candidates makes the tea party a politcal party.

most of the tea partiers hate political parties…

38. Cathy - August 4, 2010

Too bad the Tea Party stuff in your area is disgusting to you.

I don’t know where you are experiencing the Tea Party stuff, but thanks to good foundations set up for us a year and a half ago, our Dallas Tea Party does not and never intends to endorse or campaign for anyone. There has been some head-butting from some. It has been tough to maintain this through the many tea party neighborhood groups within the greater Dallas Tea Party (and Citizens for Common Sense) — BUT WE HAVE DONE IT — and I’m grateful.

We have resisted anyone being able to sorta camp-on to Tea Party and take over. WE influence them… not the other way around.

Some elected officials and candidates for election have requested special forums or town halls with genuine Tea Party folks. These events have been by invitation only. I’ve attended one and have heard about a few others. I won’t name names… that’s not the point. It was worthwhile. Whether these folks who want us to vote for them take heed of what is gnawing at us or not remains to be seen. We have developed ways to watch their records and hold them accountable.

Some of us Tea Party folks have sort of ‘invaded’ the Republican system — and here in Texas we were welcomed with open arms. I saw how much of what we were proposing has influenced our party officials and our political platform. I’m a Tea Party gal first — but also sense that the only way we are going to continue to be effective is to infiltrate and influence the party — much of this needs to happen in primaries — before general elections.

This all should tell you something. We have respect. WE have power. We will lose it if we succumb to some party-line or RINO-type behavior tendencies. Others fear us, I think, because we can not be controlled by anything but the ethics laid out in these basic principles and our own common decency.

39. mark l. - August 4, 2010

one other modest anecdote:
my sentiments on tarp are apparent from above.

on the radio the other day, I heard a local chapter of some tea party-esque group, decrying an incumbent gop-er for voting for tarp.

although, a couple of days later, I heard the same spot, with the tarp criticism removed…

I honestly don’t know who the real tea party is becoming.

In all honesty it’s a numbers thing…
maybe 10% of the american public understand the economy. Let’s be polite, and say that the tea party is an exceptional group, and their membership features 25% that are knowledgable. Bully for them, but you are still left with 75% that have no clue.

40. mark l. - August 4, 2010

cathy-
as a curiousity, do you know off-hand, who the economic braintrust of the tea party is…?

i’m a big art laffer guy, myself.

41. Roundup: This Week in Incompetent Governance | PAWaterCooler.com - August 4, 2010

[…] Some arithmetic on the Obama Stimulus (ARRA) reveals a Keynesian multiplier of… about 0.87.  We spent $391 billion in Q1, yielding […]

42. Cathy - August 4, 2010

…as a curiousity, do you know off-hand, who the economic braintrust of the tea party is…?

This is probably more information than you wanted, but here it goes.

I’m not sure there is one brain trust — from what I’ve gathered it’s more like brain-storming… lots of folks inspired by great writers who come up with ideas, adding to the ideas and creativity of others. Art Laffer, Ronald Reagan, Thomas Sowell, Milton Friedman, George Gilder are just a few that have been influential. And when I attend our Tea Party gatherings I hear educated people referring to others. Of course there is also now Mark Levin and his book “Liberty and Tyranny,” but all of these folks and more have provided fuel, ideas, and advocacy for Tea party folks who will not stop speaking about the need for responsible spending while continuing to limit government’s ability to pry into our lives, our privacy, and our pocketbooks. Art Laffer and his Laffer-curve and supply-side economics have my respect. Many of us were talking about all this stuff 25-30 years ago.

Have several friends who are more libertarians or independents who have been doing Tea Party stuff longer than most of us have heard of it. Most Tea Party folks I know are advocates of “Reaganomics” and are comfy using the term. Many of us are not youngsters and have been through this before with Carter. We’re not sheep.

I think the concept of the Tea Party movement has been floating around for more than a few years. The early rumblings started before Obama came into office. I’ve heard several speakers talk about how THEY got the idea all on their own — seeing irresponsible spending in Washington driven by a liberal congress, and realized using Boston Tea Party metaphors would help to legitimize their points.

Given that the Navy Jack, the red and white striped flag with the snake and motto “Don’t Tread On Me,” has been flown on our U.S. Naval ships now since shortly after 9/11, it starts to make sense that probably several folks arrived at the idea on their own to use the Gadsden flag, the solid yellow background with green snake and same motto, for a citizens movement. I don’t know this for sure, but it seems good idea that simply grew up. And the Tea Party folks were not the first ones to use these flags as a symbol of protest.

43. Michael - August 4, 2010

as a curiousity, do you know off-hand, who the economic braintrust of the tea party is…?

F.A. Hayek.

44. Cathy - August 4, 2010

^ or Selma Hayek?

*sorta nsfw*

45. Top Posts — WordPress.com - August 4, 2010

[…] Zandi Claims Stimulus Didn’t Do Squat I don’t think it’s what he meant to claim, but that’s the way it works out. You see, Alan Blinder […] […]

46. Cathy - August 4, 2010

Woo-hoo. Kudos, Geoff!

47. mark l. - August 4, 2010

“I know are advocates of “Reaganomics” and are comfy using the term.”

i look for them, but don’t see them. I don’t doubt for a minute they are there.

the general gist I get is people are angry about the system, which a majority easily identify as a ponzi scheme. it’s getting to the remedy that the bumps occur.

the ‘general tone’ i get is that the most economic minded of the tea partiers have some form of bastardized ron paul-onomics running thru their arguments.

the next move for the party is to find it’s representative economist…
it seems that paul ryan and bobby jindal already have their dance partners. Things could change.

I love the spirit of the tea partiers, a tremendous force, but there needs to be something concrete as far as economics.
laffer, kudlow, and a long shot…pete morici.

basically they need at least a few economics professor. maybe an economic manifesto…?

hayek…is he available for speaking engagements? nevermind…
I’ll take the other hayak, who knows table dancing.

*******************
a small case and point:
“contract from america”-they have website, with ‘political celebrity’ endorsements.

“3. Demand a Balanced Budget
Begin the Constitutional amendment process to require a balanced budget with a two-thirds majority needed for any tax hike. (69.69%)”

I understand that a balanced budget is a reasonable goal, but I also look at the potential misapplication.

Iraq War, Reagan Tax cuts, bush tax cuts…

In theory 34 senators could have blocked any of these, as they violate the concept of a balanced budget. (ironically the first gulf war would have been voted down, while the second one would have still passed in a democratic senate)

there comes a time, when you have to let the representative politicians decide what’s best. If they have to be pigeonholed into decisions it would represent giving up on our ability to trust our politcians. (and for the most part, I have given up and accept this anarchy. if you find an objective seat, I promise you quite a show)

I’d much rather find candidates with good judgment, and good econ and accounting skills. (irony in that larry craig had a master’s in accounting). This rule#3…

it strikes me as a group who has given up on the chance to find good representation, and just wants to design a system they can’t screw up…impossible.

48. Cathy - August 4, 2010

Salma Hayak’s thighs are sexier than Lady Gaga’s.
…And I like pie. Preferably pecan.

The Tea Party goals are simple. Educate. Energize. Engage.
We in the greater-Dallas area are doing just that.

You have a lot of good ideas that need to be addressed, but those items don’t have to be done by the Tea Party. We don’t need folks from the outside piling on their own agendas.

49. BrewFan - August 5, 2010

I understand that a balanced budget is a reasonable goal, but I also look at the potential misapplication.

Iraq War, Reagan Tax cuts, bush tax cuts…

A balanced budget does not mean you cannot borrow and carry debt. What it means is that you not have a structural deficit. Your attempt to marginalize the tea party movement by sterotyping them tells me you have no personal experience with the movement. The tea party does not need economists. They need you elitists to come down from your ivory tower and help undo several generations worth of statist indoctrination.

50. geoff - August 5, 2010

I think it’s sufficient at this time that the Tea Party carry on with its anti-Keynesian, anti-debt message. That message is simple, focused, understandable, and useful. Asking for the Tea Partiers to develop and adhere to an economic platform of their own undermines the grass roots nature of the movement.

51. Zandi Claims Stimulus Didn’t Do Squat (via Innocent Bystanders) | Bring the heat, Bring the Stupid - August 5, 2010

[…] I don't think it's what he meant to claim, but that's the way it works out. You see, Alan Blinder (Princeton Univ.) and Mark Zandi (Moody's Economy), recently released a report titled "How US Policy Ended the Great Recession." While a few articles have criticized the report, by and large the media reporting has looked like Ezra Klein's "Zandi: Financial rescue and stimulus responsible for saving or creating 8.5 million jobs" article. Lots of chee … Read More […]

52. MostlyRight - August 5, 2010

Congrats to Geoff re. AoS!

The Tea Party IMO has a great name, but should avoid becoming a party and focus on being a very focused, small government “interest group”, like a constitutional/conservative version of MoveOn.org but with real grass roots and a lot more people, rather than a tiny radical group with a loud megaphone purchased by a George Soros-type.

You could do much worse than have F.A. Hayek as one of your ideological founders.

S. Hayek? Always felt she is just one great boob job away from cleaning my hotel room. (Not my horribly racist joke…heard it from some comedian years ago. Now it pops into my head every time I see her, except when I see her in ‘From Dusk Till Dawn’.)

53. geoff - August 6, 2010

Congrats to Geoff re. AoS

Thanks. I’ve been on vacation since yesterday, so I’m late catching up to things – just read that post at Ace’s.

54. lauraw - August 6, 2010

Hey geoff! From Andy at H2:

55. Cathy - August 6, 2010

Geoff, so HAPPY to have gradumicated to AOS.

Read most of the comments on the post. Folks like it. Good on you.

Daddy and Mummy are so proud.

*snigger*

56. Nada EcMajor - August 6, 2010

“I backed out some numbers from the report.”

Could someone explain how these were “backed out” and not just pullout out from someones back side? Rather than 19,558 and $19,218 B it looks (to my simplistic spreadsheet eye) more like $19,631B and $19,198 which gives $433B ‘boost’ or ~11% return.

57. Nada EcMajor - August 6, 2010

FWIW the $433B boost seems more inline with: “Nonetheless, the effects of the fiscal stimulus alone appear very substantial, raising 2010 real GDP by about 3.4%”

58. geoff - August 6, 2010

Could someone explain how these were “backed out” and not just pullout out from someones back side?

Always happy to help out. Especially since you’re so very polite.

Table 7 provides SAAR values for each quarter for both the “No-stimulus” and “Stimulus” cases. That means that if the growth rate was 1%, then the 2nd quarter was 1.01xQ1, Q3 is 1.01xQ2, etc. So the SAAR value would be Q1x(1+1.01+1.01*1.01+1.01*1.01*1.01).

To compare the actual GDPs for both cases, I needed to retrieve the originally quarterly data. So I “backed out” the quarterly data from the SAAR numbers, and then summed them from Q109 to Q210.

59. geoff - August 6, 2010

In other words, you can’t simply sum them up and divide by 4, like you did.

60. Nada EcMajor - August 6, 2010

“Always happy to help out. Especially since you’re so very polite.”

Sorry. There seemed to be a snide tone to the thread, i figured i would try to fit in. My bad.

“In other words, you can’t simply sum them up and divide by 4, like you did.”

Ah. Thus the _seasonally_ in SA. Okay. Thanks.
I will re-ponder.

61. Michael - August 6, 2010

Nada, the real problem with Geoff’s post is not that he did the calculation wrong, but rather that he is a racist.

62. Cathy - August 6, 2010

There seemed to be a snide tone to the thread…

Snide slides off Geoff like snot off a wet noodle.

63. geoff - August 6, 2010

Ah. Thus the _seasonally_ in SA. Okay. Thanks.

No, thus the “Annual Rate” in SAAR. It is the value projected if the current growth rate continued for 3 more quarters.

64. Michael - August 6, 2010

See, there he goes being racist again.

65. Nada EcMajor - August 6, 2010

“No, thus the “Annual Rate” in SAAR”
You say tomatoe…
Perhaps i misused “thus”. Or perhaps i am still misunderstanding (pretty likely)… i thought you were saying it is not correct to take the posted quarterly numbers and divide by four because the quarterly numbers are a simple (x4) projected annual, but a projection adjusted for the seasonal variation in the quarters.
No need to waste your time tutoring me (yet … unless you really want) i will do a bit more researching.
Thanks

66. Nada EcMajor - August 6, 2010

“are a simple (x4) projected annual”
are *not* a simple (x4) projected annual.
sorry

67. geoff - August 6, 2010

No, the seasonal adjustment is applied to the quarterly data, so all of the quarters are already “evened out.” The difference here is that your calculation is the equivalent of simple interest, while their calculation is compound interest.

68. Michael - August 6, 2010

Dang, Geoff, why don’t you just lynch a brown person and shut up.

69. geoff - August 6, 2010

Dang, Geoff, why don’t you just lynch a brown person and shut up.

It is difficult to lynch and type at the same time.

…but I’m getting better at it.

70. Nada EcMajor - August 6, 2010

“No, the seasonal adjustment is applied to the quarterly data, so all of the quarters are already “evened out.” ”

erk?
If the posted quarterly data is ‘already evened out’, then it seems precisely okay to divide by 4. This seems borne out by adding the quarterly data and dividing by 4, giving the posted annual numbers (2 for 2 so far). If the quarters are already evened out for a comparable annual projection then they have already amortized the compound interest and not just adjusted for the seasonal variation, no? That is what the arithmetic seems to show.
To be frank i still have not “backed out” your numbers, but it seems like maybe you redundantly de-compounded?
Butt since i have not yet duplicated your math i am pretty much just pulling my speculation out of my back-side.

71. geoff - August 6, 2010

No, no, no.

Adjusting for seasonal variation gives a value for the current quarter that is presumably corrected for seasonal highs and lows, allowing direct quarter-to-quarter comparison. It has nothing to do with an annual projection. Then they calculate the change from the previous quarter. Then they apply that change for each successive quarter.

They don’t assume that the quarter’s results are repeated for the rest of the year – they assume that the growth rate of the GDP is repeated for the rest of the year.

So let’s call the previous quarter Old4Q. It has been seasonally corrected, as has New1Q. Dividing New1Q by Old4Q gives us our growth multiplier. Call that G, for growth.

Then the SAAR is Old4Q*(G+G*G+G*G*G+G*G*G*G) which is equal to New1Q*(1+G+G*G+G*G*G). Each quarter is G times the preceding quarter.

72. Michael - August 6, 2010

Then the SAAR is Old4Q*(G+G*G+G*G*G+G*G*G*G) which is equal to New1Q*(1+G+G*G+G*G*G). Each quarter is G times the preceding quarter.

Bastard. Why don’t you Just put your white hood on and start burning crosses?

I’m finished with you, Geoff. I’ve had enough of your racist screeds. You’re gonna hafta find some other site to publish your bigoted diatribes.

73. geoff - August 6, 2010

Actually, upon further reflection I haven’t done a very good job of answering the question yet. Let me think about it a sec.

74. Nada EcMajor - August 6, 2010

Thanks for the patience…
“Then the SAAR is Old4Q*(G+G*G+G*G*G+G*G*G*G)”
Ok. So dividing by 4 shows the adjusted and amortized quarter.
If this is true for each quarter, then adding all of the adjusted and amortized quarters and then dividing by 4 would negate the amortization and the seasonal adjustments would wash out….
Ah. Now maybe there is an issue with the projection used in the amortization varying per quarter so the summing and dividing by 4 might be slightly off…
Okay.
Still more pondering.

75. Michael - August 6, 2010

Let me think about it a sec.

No, don’t think about it.

Use an Excel spreadsheet.

76. Michael - August 6, 2010

Then import the results to a PowerPoint slide deck.

77. Michael - August 6, 2010

You don’t have to think. MicroSoft will do it for you.

78. geoff - August 6, 2010

Hmmm. I went back over everything, and I think I have to admit that I screwed up. The SAAR is a simple 4X of the quarterly data, not the compounded growth rate that I thought it was. So:

NadaEcMajor is so right, I’m so wrong.

The real number is $434 billion, as NEM says, giving an 11% return on the $391 billion spent. On the other hand, that $391 billion was only part of the ARRA money spent (that value was taken from Table 1). Table 2 says the complete number is $472 billion.

So there’s an 8% loss, rather than a 13% loss. With inflation, it’s a wash. I’ll update the post with the corrected numbers.

79. Nada EcMajor - August 6, 2010

Ok. Thanks for the help.
My head still hurts, though :-).

80. Cathy - August 6, 2010

Good on Nada. *snigger*

But we’re still fucked… Right?

81. geoff - August 6, 2010

Corrections are in.

82. Cathy - August 6, 2010

My head still hurts, though 🙂

Pondering should not involve pounding that head against a hard surface.

Glad you could put Mr. Chart-man-Geoff in his place.
Dude was getting pretty big for his britches.

83. Michael - August 6, 2010

Did I tell you that Geoff is a racist?

Huh?

Yes, I did tell you that.

84. Unemployment - Page 2 - PennJersey.info Forums - August 6, 2010

[…] multiplier [] of only 1. … and we wind up with the debt that must be paid back some day. Zandi Claims Stimulus Didn Innocent Bystanders That's the broken window theory. . __________________ Vote for a Regime Change. The First […]

85. Michael - August 6, 2010

I am now waiting for Geoff to rethink his attitude about China, and admit that I am right and he is wrong.

86. Nada EcMajor - August 6, 2010

“On the other hand, I used a value for the stimulus spending from one of Blinder & Zandi’s tables, when I should have been using a more complete number provided in another table.”

Yeah, that is an interesting (and probably more appropriate) table to incorporate. $38B lost. Imagine the outrage back in 09q3 if we only knew then that the expenditures overwhelmed the benefits by $108B, or 09q2 when it was at $100B, or 10q1 when it was at $71B. We better get mad soon or it will be too late 😉 (all numbers straight from the report, no adjustments for inflation or whatever).

87. Nada EcMajor - August 6, 2010

“09q2 when it was at $100B”
09q4. sorry again.

88. Cathy - August 6, 2010

I’m guessin, Nada is an Econ-Major???

*took econ, but no major*

89. Michael - August 6, 2010

sorry again

Don’t apologize.

Kick them when they’re down. That’s my strategy.

90. Nada EcMajor - August 6, 2010

“I’m guessin…”

In full disclosure… not a is correct.
I did have an econ class in high school, but that is it (something about buns and butter).
I *really* did not know what exactly SAAR was and Geoff was kind to walk me through it.

91. Cathy - August 6, 2010

Well Nada, now you really have me curious…

Does “EcMajor” mean something you can talk about without killing us?

92. Nada EcMajor - August 6, 2010

Sorry again.
“Not-a Ec[on]Major”
I meant it as a white flag so folks might stay their hand in pity before throwing rocks and garbage at me for asking stupid questions.
:-]

93. Cathy - August 6, 2010

Oh, that’s clever.

Duh on me for missing it.

94. MostlyRight - August 10, 2010

Geoff, you might find today’s Weekly Standard article interesting, if you haven’t seen it already:

http://www.weeklystandard.com/articles/did-stimulus-stimulate


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