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February 24, 2010

How the CBO Cooked the Books on Stimulus Job Creation

Posted by Gregory of Yardale at February 24, 2010 2:17 PM


No matter how they try and spin the numbers, the truth is, "They Terkerjerr!"

Dimwit lefties will continue to mindlessly spew the talking point that "The CBO says the Stimulus created or saved 2 million jobs," when it did no such thing. This is readily demonstrated by the fact that millions of jobs have disappeared since the Stimulus was enacted. And the reason the Congressional Budget Office came up with such a misleading figure is that they used a formula that equated Government spending with job creation.

This is going to go right over the heads of talking-point spouting liberals, but Brian Riedl, a budget analyst affairs at the Heritage Foundation, explains how the CBO got its figures. They didn't actually count jobs, they used models that were set up to always show Government spending always resulting in job creation. (Just like the Climate Scammers used models that always showed Global Warming regardless of real temperature data).

The CBO model started by automatically assuming that government spending increases GDP by pre-set multipliers, such as:
  • Every $1 of government spending that directly purchases goods and services ultimately raises the GDP by $1.75;
  • Every $1 of government spending sent to state and local governments for infrastructure ultimately raises GDP by $1.75;
  • Every $1 of government spending sent to state and local governments for non-infrastructure spending ultimately raises GDP by $1.25; and
  • Every $1 of government spending sent to an individual as a transfer payment ultimately raises GDP by $1.45.

Then CBO plugged the stimulus provisions into the multipliers above, came up with a total increase in gross domestic product (GDP) of 2.6 percent, and then converted that added GDP into 1.5 million jobs.

The problem here is obvious. Once CBO decided to assume that every dollar of government spending increased GDP by the multipliers above, its conclusion that the stimulus saved jobs was pre-ordained.