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  • CBO Stimulus Report Begs the Question

    Imagine I told you that if you were to spin around in place 1,000 times really, really fast in the opposite direction to the earth’s rotation, it would actually cause the earth to spin in reverse.

    You’d think I’m crazy, right? But just for fun, you spin around 1,000 times and, after you stop being dizzy, report back to me that you did as I said.

    Without collecting any actual information on the direction the earth is rotating right now, having seen your performance I announce emphatically that the earth is now in fact spinning in the opposite direction as it was. (Please ignore the fact that the sun continues to traverse the skies exactly as it has for billions of years.)

    The assertion that a person spinning around can change the earth’s rotation is obviously ridiculous. But the faulty reasoning and lack of actual analysis that allowed me to make such an absurd assertion is the same kind of reasoning and analysis the Congressional Budget Office (CBO) uses to assess the impact of President Obama’s 2009 stimulus spending boondoggle.

    That flawed reasoning and analysis leads it to similarly unrealistic conclusions.

    The law that created the 2009 stimulus, besides squandering nearly $1 trillion, requires the CBO to report on the stimulus’s effect every three months. Dutifully, CBO has produced its latest flawed report on the effects of the stimulus had in the first quarter of 2012.

    Do we really need a faulty nine-page report from CBO to figure how the stimulus is doing? The evidence is all around us that the stimulus failed. The unemployment rate rests uncomfortably above 8 percent. The economy grew at a dismal 2.2 percent last quarter. And almost 12.5 million Americans remain unemployed.

    Despite all this tangible evidence that the stimulus failed, CBO reports that in the first quarter of 2012 the stimulus’s policies:

    • Raised real (inflation-adjusted) gross domestic product by between 0.1 percent and 1.0 percent;
    • Lowered the unemployment rate by between 0.1 percentage points and 0.8 percentage points; and
    • Increased the number of people employed by between 0.2 million and 1.5 million

    The CBO is so far off from reality because, like me saying the earth is rotating in the opposite direction without looking to verify if it actually was, CBO doesn’t actually measure the impact the stimulus is having by collecting economic data from families, businesses, or other government agencies. The problem isn’t a lack of resources but the fact that few of these potential responders could possibly tell CBO what they would be doing absent the stimulus.

    Instead, CBO uses the same economic model it used to predict the effect that the stimulus would have on the economy before Congress passed it and President Obama signed it into law.

    The problem is that the CBO model assumes that deficit spending stimulus works, just as I assumed that if you spun around 1000 times the earth would change direction. The problem is a matter of circular logic, or “begging the question.”

    The CBO model said that if the government spent $831 billion through the stimulus, all sorts of beneficial economic effects would result. Now that President Obama and Congress have gone and spent all that money through the stimulus, the CBO reruns its model and reports back that those effects it previously predicted have indeed occurred.

    Both the CBO’s conclusion and mine about the spin of the earth are wrong—not only because we used circular logic to arrive at them but because they are also based on terribly flawed premises.

    CBO’s flawed premise is that its model assumes the same fiscal alchemy that beguiled policy makers in early 2009: that Congress and President Obama could stimulate the economy back to growth by taking that $831 billion out of the economy and then putting that money back into the economy through the machinations of the federal government’s bureaucracy.

    Government spending can’t stimulate the economy, because before it can spend it, the government has to first take it away from the private sector. For every dollar it spends, it destroys a dollar—at best—of economic output elsewhere in the economy. And that doesn’t even account for the economic downside of the tremendous run up in debt such massive spending creates.

    Only families, businesses, investors, and entrepreneurs can generate growth by increasing their productive activities in response to new opportunities. No matter how many times CBO runs its model to try and prove otherwise, that won’t change.

    Posted in Featured [slideshow_deploy]

    10 Responses to CBO Stimulus Report Begs the Question

    1. Bobbie says:

      I got dizzy just reading it.

      It's evident government and all they're controlling (helping themselves to endless amounts of America's money,) are messing with the human minds, true stupidity. Where is the line drawn? Get rid of the GOVERNMENT deviant ignorance and those that promote it. We're done with this COSTLY disingenuous CRAP!

    2. tim123 says:

      i dont trust what the cbo says. its model is manipulated.

    3. John C. Davidson says:

      Any group that relies on the government for funding really can't be considered a reliable source for accurate information.

    4. profitup10 says:

      This has been true since the Greeks and Romans times – you can not tax yourselves to riches for the people.

    5. Lloyd Scallan says:

      The CBO is a government agency. Who controls all government agencies? Why would anyone expect truth from a government that is based on fraud and deceptions? Again we are using a government agency (CBO) as a scapegoat, while the real problem is allowed to hide behind the ABC's of government bureauroacy.

    6. kverdeck says:

      Let me get this straight. You're rejecting the CBO's report in order to reinforce your own preconceived notion that the stimulus failed by claiming that the CBO's reports are flawed because the CBO is.. trying to reinforce their own preconceived notion that the stimulus worked? What was that bit about circular reasoning again, Curtis?

      I'm no economist, but I think economists are the best people to ask about the stimulus. And some pretty smart economists predicted back in 2009 that the stimulus would have little impact because it wasn't nearly large or long-lasting enough to address the monumental crisis the economy was facing (and continues to face). And indeed, a number of independent studies performed over the past few years have borne out that the stimulus had little verifiable effect past a small initial boost, mainly because–surprise, surprise–it wasn't nearly large or long-lasting enough.

      • Nybbler says:

        After reading your response I agree with you…you're no economist….

        And let me get this straight; a number of "independent" studies have borne out the fact…that it didn't work because it wasn't large or long-lasting enough? And how did the "independent" studies determine that more stimulus would have worked when some didn't have any impact?

      • Stirling says:

        The idea that debt doesn't have conseqences is a disconnect you have with the average common sense american. At some point either your creditors stop lending you money, or the government devalues your money by printing more of it. .. Greece has borrowed and spent to the point that they are bankrupt, and to spend more and more will do the same for us. You can not make yourself "Rich" by going into debt.

      • Bobbie says:

        "Economists are the best people to ask about the stimulus?" Unacceptable when ALL REPORTS FINAL ARE tied to government and their interests.

        The only "economists that are the best people to ask" AT ALL TIMES pertaining to America's freedom to market, are those who work freely independent with no ties to government and their imposing unconstitutional authority! Why can't you think beyond speculation and surprise, surprise the trillions more won't work either. Such a lack of respect for common sense it's almost funny, but too serious. Please grow up or get help!

    7. Tim says:

      Your post is pointless. Kverdeck nails you on it: you're applying the same faulty logic you claim CBO is using. This is nothing short of hilarious, but I've come to expect this sort of thing from Heritage.

      The reality is that when evaluating the stimulus, depending on the economic model you're using, you'll get different results. If you use Heritage's model, it will say the stimulus did nothing. If you use CBO's, they'll say it worked. It has nothing to do with "begging the question" but rather reporting out on the implications of the model you choose.

      You might disagree with CBO's model, but at least CBO offers quite an extensive discussion in the appendix about why they chose the model they did, things they considered, etc. It would speak more of Heritage to go through those assumptions and explain why they disagree with them, not cry about logic fallacies that they themselves commit (ie, it's impossible for fiscal stimulus to work because our model says so).

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