Menzie Chinn on Assessing the ARRA
He writes:
Econbrowser: Assessing the Stimulus, One Year In: A View from the Mainstream: On the one year anniversary of the passage of the ARRA, it seems appropriate to recap, not what the academics say, but what the business sector forecasters say.... Is there a political bias associated with each of the forecasting firms? I haven't heard of there being any. Like all forecasters, there are any number of possible biases in play, but partisan effects I've never heard of. So, I think David Leonhardt is on safe ground when he concludes "Judging Stimulus by Job Data Reveals Success":
...Perhaps the best-known economic research firms are IHS Global Insight, Macroeconomic Advisers and Moody's Economy.com. They all estimate that the bill has added 1.6 million to 1.8 million jobs so far and that its ultimate impact will be roughly 2.5 million jobs. ...
This is where many "analysts" (e.g. here) conveniently dismiss these estimates, preferring to focus on the one or two studies (typically from academics) that imply negative effects or near zero effects.... Finally, we have in the Congressional Budget Office an organization committed to providing nonpartisan views regarding the impact of all sorts of government policies....
So, in order to make their case, critics who argue that the stimulus package passed a year ago had no positive impact on GDP need to either (1) explain why the commercial forecasters are incorrect in their assessments, (2) why the CBO is similarly misguided, or (3) why their preferred models are superior to the alternative approaches in this context (demonstrating, along the way, their superior predictive power). Until that occurs, I'll stick with the mainstream....
Additional Reading:
In addition to Leonhardt's story, see also Ezra Klein. For a typical criticism, read Russ Roberts, who mischaracterizes Leonhardt's statements on ultimate employment impacts; after quoting Leonhardt (the same one reproduced above), Russ writes:
That estimate of job creation is embarrassingly imprecise and the 1.6 million number would not be a conservative estimate but rather the high end estimate.
I believe that the "conservative" adjective applied to the ultimate impact at 2.5 million. Russ should've read the February CBO letter, discussed in this post. Taking a look at the 2009Q4 impact, one finds in Table 1 the low end number at 0.8 million, the high end at 2.3 million. The end 2010Q4 impact is low/high 1.2 million/3.6 million.
