I Must Say, If S&P's David Beers Had Set Out to Humiliate HImself...
Change of Subject: Ronald Reagan on Medicare, circa 1961. Prescient rhetoric or familiar alarmist claptrap?

Economic Impact of the Recovery Act

Menzie Chinn:

Econbrowser: Assessing the Stimulus and Its Aftermath: Or, on reading those who can do math, and those who can’t (i.e., yet more from Heritage). The CEA released its most recent assessment of the impact of the ARRA. Some popular accounts, from the Heritage Foundation, from the Weekly Standard, and from Ted Nugent, argue that those estimates of output and employment effects are outlandish. They also cite incredibly high cost-per-job figures. Here are some thoughts on the those arguments....

The CEA model approach (which incorporates using multipliers) is bracketed by the CBO low and high estimated effects. The CEA model approach yields a counterfactual GDP in 2011Q1 that is virtually indistinguishable from the private sector forecasts.... [I]t is somewhat surprising to see the ridicule heaped upon the CEA estimates, implying that they are outlandish.... CEA estimates are in line with private sector estimates indicating a substantial impact on GDP.

What is truly hysterically funny (and demonstrates the innumeracy so typical of so much writing these days) is the following assertion:

... The council reports that, using "mainstream estimates of economic multipliers for the effects of fiscal stimulus" (which it describes as a "natural way to estimate the effects of" the legislation), the "stimulus" has added or saved just under 2.4 million jobs — whether private or public -- at a cost (to date) of $666 billion. That’s a cost to taxpayers of $278,000 per job.

This seemed like a familiar argument, and then I realized Casey Mulligan performed a similarly (incorrect) calculation two years ago, which involved a similar stock-flow mismatch calculation.... Suppose in 2015, when almost all funds are expended, only one job was still being supported. Then using their preferred methodology would indicate each job cost $787 billion....

It’s also important to recall that around a third of the ARRA was tax related. Had more been devoted to infrastructure investment and transfers to the states, as I’d suggested [1], then the cost-per-worker-year would have been lower. It was only at the insistence of Republicans that a larger share of the stimulus was devoted to tax cuts. (By the way, where are all those critics who argued the recession would be too brief for infrastructure spending to matter?).