Your Tax Dollars at Work, Garbage In - Garbage Out

"The Obama administration has explained the dire employment situation thusly:

The economy was way worse than anybody thought
Their predictions were in line with other economists
Things would have been worse without the stimulus
All in all, a nice deflection of blame from themselves (and usually on to the preceding administration). But history isn’t so kind.

You see, back around the time that the Obama team put forth their errant predictions, a fellow named Mark Zandi (Moody’s Economy) made a similar set of predictions using an actual economic model. And here’s how he did:

Yes, your eyes do not deceive you – the unemployment rate is closely tracking Zandi’s predictions for the non-stimulus case. This leads me to the following conclusions (which are somewhat at odds with the administration’s spin):

The economy was exactly as bad as some economists thought
The Obama team’s predictions were much more optimistic than other economists’
The stimulus has had no effect"

"CBO Confirms Its Methodology

In a recent speech to the National Association of Business Economics, CBO Director Doug Elmendorf confirmed this by stating:

[W]e don't think one can learn much from watching the evolution of particular components of GDP [gross domestic product] over the last few quarters about the effects of the stimulus … so we fall back on repeating the sort of analysis we did before. And we tried to be very explicit about it that it is essentially repeating the same exercise we did rather than an independent check on it.[1]

When asked if this means that any actual underperformance of the stimulus would fail to show up in the CBO's stimulus jobs count, Elmendorf replied "That's right." This means the 1.5 million jobs saved estimate was pre-determined.


Of course, the stimulus was originally promised to create (not just save) more than 3 million jobs.[2] Instead, the economy has since lost more than 3 million additional net jobs. The abject failure of the stimulus policies recommended by Keynesian economic models should induce some fundamental re-analysis of these models' assumptions. Instead, the CBO is re-releasing the same jobs analysis--with the same economic assumptions--that they had used a year ago."

"The "Begging the Question" Fallacy

The CBO's conclusion that the stimulus created jobs is based on an economic model that began with the premise that all stimulus bills create jobs. In other words, the conclusion is already assumed as a premise. Logicians call this the fallacy of begging the question. Mathematicians call it assuming what you are trying to prove.

More specifically, the CBO's model started by automatically assuming that government spending increases GDP by pre-set multipliers, such as:

Every $1 of government spending that directly purchases goods and services ultimately raises the
GDP by $1.75;

Every $1 of government spending sent to state and local governments for infrastructure ultimately raises GDP by $1.75;

Every $1 of government spending sent to state and local governments for non-infrastructure spending ultimately raises GDP by $1.25; and

Every $1 of government spending sent to an individual as a transfer payment ultimately raises GDP by $1.45.[3]

(Note that all CBO figures in this paper represent the midpoint between their high and low estimates.)

Then the CBO plugged the stimulus provisions into the multipliers above, came up with a total increase in GDP of 2.6 percent, and then converted that additional GDP into 1.5 million jobs.

The problem here is obvious. Once the CBO decided to assume that every dollar of government spending increased GDP by the multipliers above, its conclusion that the stimulus saved jobs was pre-ordained.

The economy could have lost 30 million jobs, and the model would have said that the economy would otherwise have lost 31.5 million jobs without the stimulus. An asteroid could have hit the United States, wiping out everyone outside of Washington, D.C., and (as long as Washington still spent the stimulus money) the CBO's economic model would have produced the same stimulus jobs data. There is no adjustment made to reflect what actually happened in the economy after the stimulus was enacted."

"Test the Multipliers

The debate over the efficacy of Keynesian stimulus is essentially a debate over the correct multipliers. Some believe the multipliers are high[4]; others believe they are as low as zero[5] (or even negative). Testing the stimulus requires testing the multipliers. Yet by simply assuming large multipliers, the CBO effectively pre-ordained its conclusion that the stimulus worked regardless of what actually happened in the economy.


Elmendorf has confirmed that the CBO's stimulus analysis consists of little more than re-releasing its pre-stimulus projections. Policymakers and analysts should not mistake this analysis for an actual examination of the stimulus's impact."

"The Burning Platform has posted a new item, 'NAACP - MOST RACIST ORGANIZATION IN AMERICA'

Again, I would like to reiterate that the NAACP, backed up by the hate spewing liberal media pundits on MSNBC and CNN, are just mouthpieces for the Obama agenda. Obama despises white people. Whenever his policies fail and the country is clearly headed downward, he will pull the race card. It is the liberal gameplan. They expect us white people to back down like we have for decades. No more. The Tea Party is about fiscal responsibility. The racists are in the NAACP and the Obama White House. Funny that black men like Thomas Sowell and Deroy Murdock aren’t invited on MSNBC to put Olbermann, Madow, and Matthews in their place. The liberal agenda is hate, racism and division.

Liberals fear the Tea Party. They should. We’re coming to get them.
"

""Consider the Tea Party’s Contract from America, a pledge to which it holds its endorsed candidates. (TheContract.org.)

Among 10 planks, it advocates a single-rate tax, a two-thirds-vote requirement for tax hikes,
ObamaCare’s repeal, and the defeat of cap-and-trade legislation.

Nothing is even remotely related to race, ethnicity or identity. Wouldn’t bigots devote at least one of 10 reforms to something racial?

The Tea Party movement avoids racial issues and instead advances lower taxes and spending and greater fiscal discipline. These issues are neither black nor white. They are green.""

"The Congressional Black Caucus is an organization representing the black members of the United States Congress. Membership is exclusive to blacks,[1]
"

"Watts said of his refusal to join the caucus, "...they said that I had sold out and Uncle Tom. And I said well, they deserve to have that view. But I have my thoughts. And I think they're race-hustling poverty pimps."

White members of Congress have never been welcomed into the caucus, although CBC by-laws specifically prohibit any discrimination.
"

"Ralph Nader incident

In 2004, independent presidential candidate and consumer activist Ralph Nader attended a meeting with the Caucus which turned into a shouting exchange. The caucus urged Nader to give up his presidential run, fearing that it could hurt John Kerry, the Democratic Party's nominee. Representative Sheila Jackson Lee (D-TX) called the upcoming election "a life or death matter" for the Caucus members' constituents. Nader accused Congressman Mel Watt of twice uttering an "obscene racial epithet" towards Nader; he alleged that Watt said: "You're just another arrogant white man – telling us what we can do – it's all about your ego – another f—king arrogant white
man." Watt never offered an apology.[9]

Nader wrote to the Caucus afterwards:

"Instead, exclamations at the meeting... end[ed] with the obscene racist epithet repeated twice by Yale Law School alumnus Congressman Melvin Watt of North Carolina. One member of your Caucus called to apologize for the crudity of some of the members. I had expected an expression of regret or apology from Congressman Watt in the subsequent days after he had cooled down. After all there was absolutely no vocal or verbal provocation from me or from my associates, including Peter Miguel Camejo, to warrant such an outburst. In all my years of struggling for justice, especially for the deprived and downtrodden, has any legislator—white or black—used such language? I do not like double standards, especially since our premise for interactions must be equality of respect that has no room, as I responded to Mr. Watt, for playing the race card. Therefore, just as African-Americans demanded an apology from Agriculture Secretary Earl Butz and Senator Trent Lott—prior to their resignation and demotion respectively—for their racist remarks, I expect that you and others in the Caucus will exert your moral persuasion and request an apology from Congressman Watt. Please consider this also my request for such an expression—a copy of which is being forwarded directly to Mr. Watt's office."[10]
"

""What the law did was force the banks to rethink their business lines, their pricing strategies, their methodology for maintaining their balance sheet," banking analyst Dick Bove of Rochdale Securities said in an interview. "When they rethink it all, they will be able to offset all of the costs of this bill."

But crafty financial veterans already are finding loopholes in the law and banks likely will profit both in spite of and because of the reforms.

"If you had anyone who knew anything about the financial industry writing this law, that's one thing," said Bove, who has called the law one of the worst in US history. "But if you have a bunch of hysterics who were looking for political gain, you get something that was an abortion. All it did was increase the cost of banking in the United States relative to the cost of banking in other countries."

The banks' course of action likely will break down into four strategies:

1. Outfox the foxes

A harsh critic of the law, Bove is among the analysts who nevertheless believe banks will thrive. One big reason is because he thinks industry executives will show that they're smarter than the legislators who crafted financial reform, also known as FinReg."