Bush economist: Jobs 'created or saved' figure touted by Obama is meaningless
Ed Lazear was the top economic adviser to President George W. Bush and much more of a free-marketer than the president, who ran up massive budget deficits.
In an opinion piece in today's Wall Street Journal, which you can read by clicking here, Lazear argues that the "jobs created or saved" figure touted by the Obama administration, thanks to the $787 billion stimulus, is meaningless.
His point: Reporting bias is typically at the heart of such claims, making the figures untrustworthy. He writes:
Recipients have strong incentives to inflate their reported numbers. In a race for federal dollars, contractors may assume that the programs that show the most job creation may be favored by the government when it allocates additional stimulus funds.
No dishonesty on the part of recipients is implied or required. But when a hire conceivably can be classified as resulting from the stimulus money, recipients have every incentive to classify the hire as such. Classification as stimulus-induced is even more likely if a respondent must only say that, except for the money, an employee would have been fired. In this case, no hiring need occur at all.
It's a good point. He argues that the administration is taking claims for only its gains yielded by the stimulus, not the negative impacts. For instance: The Cash for Clunkers program incentivized the purchase of small, fuel-sipping cars but disincentivized the purchase of larger cars and trucks, such as SUVs. You can argue that's good, from a conservation point of view, but economically, it ends up being near a zero-sum gain. Fewer bigger vehicles were produced exactly because of government intervention.
Here's the paragraph that caught my eye, with my emphasis added:
This past January, at the end of my term as chairman of the President's Council of Economic Advisers, my agency released the White House economic forecast. At that time, I said that I foresaw a couple of bad quarters but expected that the second half of 2009 would be positive, with perhaps very strong growth in 2010. These forecasts assumed no stimulus; the projected turnaround was instead based on the natural rebound of the economy that would come after the financial crisis had eased.
Wow. That means Lazear forecast a return to positive GDP -- which happened last week -- without the $787 billion stimulus spending, which added dangerously to the deficit and debt.
-- Frank Ahrens
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