September 14, 2010

Via Cafe Hayek, James Surowiecki writes:

But in Washington stimulus has become the policy that dare not speak its name.

This wouldn’t be surprising if we were talking about a failed program. But, by any reasonable measure, the $800-billion stimulus package that Congress passed in the winter of 2009 was a clear, if limited, success. The Congressional Budget Office estimates that it reduced unemployment by somewhere between 0.8 and 1.7 per cent in recent months.

This is why I was hopping up and down with annoyance when that study came out and got publicized on Facebook. Whether or not it was a good report, idiots people who are not sufficiently careful were bound to interpret it as saying that the CBO had somehow measured the impact of the stimulus and shown that it worked.

One more time: It is literally impossible for the method employed by the CBO to have declared the stimulus a failure. No set of circumstances would have allowed that conclusion. If the entire world had been hit by an asteroid and destroyed except for the guy who wrote the report, the CBO would have estimated that post-apocalypse unemployment was 0.8 to 1.7 points lower than it otherwise would have been.

I feel a little like the boy who cried wolf here, because I’ve been known to use unwarranted hyperbole in the past. But you have to understand: the CBO’s report is a tautology. It would make no sense for people who think that the stimulus “failed” to be convinced otherwise by this report.


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