Obama adviser admits economic models “often wrong,” but touts new administration report claiming stimulus responsible for 2 million jobs.
Christina Romer, chair of the Obama administration’s Council of Economic Advisers, on Tuesday evening touted the office’s latest quarterly report to Congress finding that 1.5 million to 2 million jobs have been “created or saved” by the economic stimulus package.
“Close to two million jobs have been created or saved by the Recovery Act as of the end of 2009,” Romer said on a conference call with reporters. She called it “a truly stunning and important effect of the Act.”
Earlier this week, ABC News had reported that the administration would retire the phrase after it became the subject of ridicule.
The CEA report also claimed that while the stimulus package had boosted gross domestic product by 3 percent to 4 percent in the third quarter of 2009, its effect was only 1.5 percent to 3 percent in the fourth quarter. Romer said that the impact on growth is typically the largest when spending initially gets “ramped up.”
During the call, I had a chance to press Romer on the methodology used to calculate how many jobs were “created or saved.” I noted that a lot of economists were predicting that there would be positive job growth in December, but it turned out that 85,000 jobs were lost. If economic forecasts based on statistical models are often proven wrong, I asked, then why did she feel confident touting the fact that nearly 2 million jobs were “created or saved”?
She acknowledged that economists were often wrong, but still said she had reason to be confident in the administration’s assumptions about what the job market would have looked like without the stimulus.
“I will be the first to admit that none of us have a crystal ball, and you’re absolutely right,” Romer told me. “What I do, what any professional economist does, what any professional forecaster does, is to use everything we have from historical relationships, to knowledge of economic theory, to advanced statistical methods to try to do the best we can to say, ‘what does the data suggest about the path we were on?’ And things like that. So, fundamentally what you’re saying is, ‘This is hard,’ and I would agree completely. That’s why my office spends a lot of time on this. That’s why professional forecasters across both the government and in private industry spend a lot of time trying to do the best that they can. You’re right, we are often wrong. But I think after the fact, we are often correct.”
Romer said that the fact that other economists have come up with estimates that are in the ballpark of the administration’s numbers increases her confidence.
“I very much believe that we have done a careful and credible job and I do stand very much behind these numbers,” Romer said.
She said that the estimates were further corroborated by reports coming in from recipients of federal aid.
“This I think is a sign of how seriously both we and the Congress have taken trying to measure the impact of this,” she said. “This is something that hasn’t been done before on a major fiscal stimulus like this one.”
However, the jobs data coming in from recipients has been largely discredited after the revelation that jobs were said to be created in non-existent Congressional districts.
In December, the unemployment rate stood at 10 percent, and the number of jobs lost since the signing of the stimulus bill rose to over 2.7 million. Romer argued that since the average monthly job losses were much higher this time last year, it bolsters the view that the stimulus is working.
As of the end of 2009, Romer said, about one-third of the $787 billion in stimulus spending and tax measures had been distributed, and that number rises to about one-half when obligations to spend the money on certain projects are taken into account.
Putting aside the fact that modeling what the job market would have hypothetically looked like without the stimulus bill is subject to a high degree of uncertainty, touting the number of jobs that were “created or saved” is not useful politically.
People don’t cast their votes during elections based on hypothetical scenarios, but on how they perceive reality. Once Americans turned against the Iraq War, all they saw was that Bush had created a huge mess. It didn’t do Republicans any good in 2006 and 2008 to argue that we would have been at greater risk if Saddam Hussein were still in power, or to emphasize that “Bush kept us safe” since Sept. 11. By the same measure, if the job climate is still weak come November, Romer’s statistical models suggesting that millions more jobs would have been lost were it not for Obama’s actions will be of little comfort.
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