The Obama administration has lately been touting the 640,329 jobs created or saved by the stimulus bill. (Full report here.) I am always amused by this degree of precision in any sort of economic calculation because it implies a degree of accuracy that is problematic at best.
Below is an example of why from the Wall Street Journal’s Washington Wire blog. I highlight it not to indict the administration for overstating its estimates, but rather to point out that all economic data from the GDP to the unemployment rate to the industrial production index et al. are based on exactly the same mechanism described in this report.
Somewhere, somebody had to fill out a report and put down some numbers that may or may not have any basis in reality. It might be because the person assigned the task didn’t give a damn or it may be because they had to finish the report before they could go home that night so they essentially made something up, figuring that it wouldn’t matter much in the aggregate.
But as this article demonstrates, sometimes the problems are conceptual—it just isn’t clear exactly what the correct answer is. I know because for some years I was in the sample for the Survey of Income and Program Participation. The survey form had many contradictions and ambiguities that my Census Bureau handler couldn’t answer. The best I could do was be consistent. I’m sure that the vast majority of others in the sample didn’t make a fraction of the effort I did to be accurate so errors undoubtedly were rampant.
I am reminded of the advice that was given to a young British economist many years ago about the quality of Indian statistics: "The government are very keen on amassing statistics—they collect them, add them, raise them to the nthe power, take the cube root and prepare wonderful diagrams. But what you must never forget is that every one of those figures comes in the first instance from the chowty dar (village watchman) who just puts down what he damn pleases." (Quoted by the Congressional Research Service here.)
In the Battle for Stimulus Jobs, Shoe Store Owner Tells War Story
Louise Radnofsky reports on how the stimulus money is being spent.
How did Kentucky shoe store owner Buddy Moore save nine jobs with just $889.60 in federal stimulus money? He didn’t, and that’s turning into a big headache for him.
Moore’s store in Campbellsville, Ky., filed one of 156,614 reports from recipients of stimulus dollars designed to show how money from the $787 billion program is being spent, and how many jobs the funds have created or saved.
Moore’s slice of the stimulus came in an $889.60 order from the Army Corps of Engineers for nine pairs of work boots for a stimulus project.
Moore says he’s been supplying the Corps with boots for at least two decades. This year, because he provided safety shoes for work funded by the stimulus package, he said he got a call from the Corps telling him he had to fill out a report for Recovery.gov detailing how he’d used the $889.60, and how many jobs it had helped him to create or save. He later got another call, asking him if he’d finished the report.
"The paperwork was unreal," said Moore, who added that he tried to figure out how to file the forms online, then gave up and asked his daughter to help.
Paula Moore-Kirby, 42 years old, had less trouble with the Web site, but couldn’t work out how to answer the question about how many jobs her father had created or saved. She couldn’t leave it blank, either, she said. After several calls to a helpline for recipients she came away with the impression that she would hear back if there was a problem with her response, and have a chance to correct it. So with 15 minutes to go before the reporting deadline, she sent in her answer: nine jobs, because her father helped nine members of the Corps to work.
"You could fill out the form in 10 minutes, but we were trying to fill out the form correctly," she said, guessing that she spent up to eight hours on it in total.
That was a few weeks ago. The only thing the Moores heard after that was that because they’d received less than $25,000 in stimulus money, they shouldn’t have reported in the first place.
Today, three days after the reports were made public, local television stations and national newspapers including The Wall Street Journal started telephoning Moore, because his nine jobs for $889.60 in stimulus money makes him look like one of the most effective spenders in the country.
Kirby-Moore says she then got a call from her dad, asking her, ‘Paula, I thought you knew what you were doing… What did you put in that form?"
"I thought it was the right answer," she said. "It is sad that creating nine jobs should get so much attention… If anybody’s looking for instant fame, I guess we’ve found the way."
"The question, I would like to know is: How do you answer that? Did we create zero? Is it creating a job because they have boots and go out and work for the Corps? I would be really curious to hear how somebody does create a job. The formula is out there for anyone to create, and it’s just so difficult," she said.
Republicans have criticized the Obama administration’s claims – based on forms like the one filed by Kirby-Moore — that the stimulus has created or saved 640,000 jobs. What counts, they say, are the number of Americans without jobs and the rising unemployment rate.
Nobody answered the phone at the U.S. Army Corps of Engineers in Louisville, Ky., this evening.
"Make it easy, just count everyone"
Indeed, there are lots of stories like this about.
E.g: From the Financial Times:
~~
...Many universities, for example, are including tenured academics in their “jobs created and saved” numbers even though their jobs were already guaranteed for life.
Ms Smith, who is associate vice-chancellor for research administration at the University of California, Los Angeles and leads a team handling its stimulus awards, received guidance from the UC Office of the President saying she should include everyone paid by stimulus dollars, including tenured faculty members.
...it did avoid a very sticky problem: how can you know for sure whether a job would have disappeared were it not for stimulus money?
~~~
And when in doubt, nobody wants to risk the error being on the down side.
Here in New York City, the transit workers union just got an 11% pay raise that the arbitrators (one of whom was the president of the union) said could be financed with $350 million of stimulus funds. Perhaps they'll count that as 35,000 jobs created or saved.
Education funding
Even the "correct" numbers are based on the simplest counterfactual, not a real one. If my university had not received any money, they would have raised tuition rates more -- they would not have fired employees; our union signed a contract freezing our pay but ensuring nobody would be fired. But I'm sure that somehow they'll say that since nobody was fired, they saved some jobs. Ridiculous.
The assumption is that if a business did not get stimulus money, those employees would have lost their jobs -- there are other things that could have happened.
"If I give you a raise, it saves a portion of your job"
Or a lot more than a portion!
Fun math follows...
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AP:
Salary Raises Counted as Saved Jobs
An Associated Press review of the latest stimulus reports ... found that more than two-thirds of 14,506 jobs credited to the recovery act under spending by just one federal office were overstated because they counted pay increases for existing workers as jobs saved.
The inflated job count is at least partly the product of the administration instructing local community agencies that received money to count the raises as jobs saved...
But officials defended the practice of counting raises as saved jobs.
"If I give you a raise, it is going to save a portion of your job," HHS spokesman Luis Rosero said.
Most of the inflated figures were like those cited ... by the Southwest Georgia Community Action in Moultrie, Ga.
The agency, like hundreds of others collecting Head Start money, claimed all its existing employees' jobs were saved because they received a pay raise with the stimulus cash ...
The agency employs 508 people but claimed 935 jobs were saved.
... director Myrtis Mulkey-Ndawula said she followed the guidelines the Obama administration provided. She said she multiplied the 508 employees by 1.84 — the percentage pay raise they received — and came up with 935 jobs saved.
~~~
And I thought I was being sarcastic when suggesting the 11% pay raise from stimulus funds to the NYC transit workers union might be counted as 35,000 jobs saved.
Using this math, it will be 385,000 jobs saved!
Yet it's interesting that they argue it is correct to count a pay raise as a partial job "saved". So the 11% raise for the transit workers "really is" 3,850 jobs "saved".