Regarding your over-arching critique of the CBO approach, perhaps an analogy would be helpful in illuminating which approaches make sense, and which don’t. I give a patient with a fever aspirin. However, the fever continues to rise. I could conclude that aspirin caused the fever to rise relative to what would have occurred otherwise. Or I could use information regarding the effect of aspirin on fevers, obtained from previous experiments/experiences, and use that information to infer what the fever would have been in the absence of dosing with aspirin. How would you conduct inference in this case?
To which I responded:
Maybe extending your analogy could illustrate the point I’ve been trying to make.
Imagine that a second doctor warns that the first doctor that the evidence available is actually inconclusive, and that the prescription of aspirin won’t cure the fever. After the dose, the fever continues to rise. But the first doctor advertises to the world, on the basis of the same earlier studies, that he has successfully treated the patient, without bothering to mention that he has no new evidence to support that claim. I would not think that the second doctor would have any reason to be newly persuaded that the aspirin worked in this case or in general.
This is all part of a larger point I’ve been trying to make regarding the stimulus. The administration has been trying to chalk it up as an unmitigated success, and although the CBO’s recent report didn’t tell us anything new about the stimulus, that hasn’t prevented the administration from pretending that the report is the straw that broke the anti-stimulus camel’s back. Joe Biden:
This new report from the Congressional Budget Office is further evidence of what private forecasters and government economists have been saying: the Recovery Act is already responsible for more than 1 million jobs nationwide. From independent economists to Congress’s own nonpartisan research body, the experts have spoken and the debate is no longer whether the Recovery Act is creating and saving jobs, but how we provide even more opportunities to drive growth and support American workers.
I think that the stimulus has marginally improved the current economic outlook, although my fear is that it may have worsened the medium- and long-term outlooks. But the point is that the administration should not be allowed to trumpet huge, politically consequential victories when they have little evidence for those victories.