Archive for Paul Krugman

Dirty Stimulus Jobs Data Exaggerates Stimulus Impact

One of the key talking points for the stimulus that was passed earlier this year was that it would “save or create” jobs. Lots of jobs. Oodles of jobs. Jobs piled so high, we’ll have to hire people to dig us out of all the jobs we will have.

Or, more specifically, the Obama administration stated that they would “save or create” 4 million jobs.

This led to a great deal of mockery over the “save or create” turn of phrase, but the administration set out to actually measure the number of jobs that were saved or created by having recipients of the stimulus funds fill out a form in which they indicate how many jobs that particular chunk of the stimulus created (that form can be found here).

Now, if you look at recovery.gov, you’ll see that the stimulus has “saved or created” 640,000 jobs. That is only 16% of the promised jobs, but it’s still a pretty big number. I was curious how they got it, so I downloaded the raw data and started sifting through it. This is what I found:

  • Over 6,500 of all the “created or saved” jobs are cost-of-living adjustments (COLA), which is really just a raise of about 2% for 6,500 people. That’s not a job saved, no matter how you calculate it.
  • Over 6,000 of the jobs are federal work study jobs, which are part time jobs for needy students. As such, they’re not really “jobs” in the sense that most other federal agencies report job statistics (We don’t count full time college students as “unemployed” in the statistics.)
  • About half of the jobs (over 300,000) fall under the “State Fiscal Stabilization Fund”, which can be described like so: Your state (perhaps it rhymes with Balicornia) can’t afford all the programs it has running, but when the state government tries to raise taxes, people yell and scream and threaten to move. The federal government comes in with stimulus funds and subsidizes the state programs. Consider this a “reach-around” tax in which the state can’t raise taxes its citizens any more, but the federal government can. So the federal government just gives the state the money to keep running programs they can’t afford on their own.
  • There are, scattered hither and non, contracts and grants that state in no unclear language that “This project has no jobs created or retained” but lists dozens, if not hundreds, of jobs that have been “saved or created” by the project. It makes no sense whatsoever.

Finally, there is a statistical problem to the data here that I’ve not heard discussed at all, the problem of job duration.

Because there is no guidance in the forms on the proper way to measure “a job”, recipients are left to themselves to figure out what counts as a job. Some of them fill it out by calculating “man-weeks” and assume one “job-year” to be the measurement of a single job. Others fulfill contracts that only require two weeks, but they count every person they hire for every job to be a separate job created.

As an illustration: Let’s say you have a highway construction project in the Salt Lake City area that takes one month. A foreman is hired for the project and he brings on 20 guys he likes to work with to fill out his crew. That is 21 jobs “saved or created”. While that job is being completed, the funding if being secured for another highway construction project. By the time that funding goes through, the first project is done and they decide to just move the whole crew over to the next project. That is another 21 jobs “saved or created”.

If this happens four more times, on paper it looks like 124 jobs have been “saved or created” when in reality 21 people have been fully employed for six months. But if you judge jobs through a “man-weeks”/”job-years” lens, you have 10.5 jobs.

This is how the Blooming Grove Housing Authority in San Antonio, Texas can run a project titled “Stemules Grant” to create 450 roofing jobs for only $42 per job. My educated guess is that they hired day-laborers, paid them minimum wage or below and only worked them for a single day. Each new day brought new workers which meant more jobs “created”. Either that or they simply lied on the form. (UPDATE: USA Today interviewed the owner here. He says that he used only 5 people on the roofing jobs but that a federal official told him that his original number wasn’t right, so he adjusted it to count the number of hours worked, not the numbers of jobs created.)

Rational people can see that this kind of behavior skews the data upward. How much upward? It’s hard to say, although it is a safe bet that any project that manages to create a job for less than $20,000 is probably telling you some kind of fib.

My ultimate conclusion from looking at the jobs data is that:

  • The jobs numbers reported on recovery.gov are heavily exaggerated
  • The jobs numbers reported are not subjected to any scrutiny or auditing whatsoever; they are a simple data dump and therefore be seen with heavy skepticism
  • The jobs numbers are a laudable transparency effort. I’m impressed that so much work has gone into trying to measure the results of the stimulus funding. Normally, these kinds of numbers would be shrouded in mystery and a normal Joe like myself would be unable to investigate them. Kudos to the Obama administration for implementing this data gathering and display initiative. However, they put too much faith in the data and statements like “The stimulus has saved or created 640,000 jobs” are uttered with a profound ignorance in the nitty-gritty details of what the data actually says.

For more interesting stimulus jobs data, you can see Paul Krugman getting angry about it here and Greg Mankiw responding to that anger here and Brad DeLong calling Allan Meltzer a shameless partisan hack about the topic over here and a story of how $900 worth of boots became 9 jobs over here. Or you can just download the jobs data and look through it yourself. There’s lots of interesting stories in there.

Are You A Real Scientist? Find Out Now!

(click for a larger view)

RealScientistFlow

This chart is my social commentary on the strange attack on Stephen Dubner and Steven Levitt’s new SuperFreakonomicsbook. It seems a large chunk of people are worked up over a chapter in the book in which they look into alternate, controversial ways of solving the climate-change/global-warming/whatever-the-kids-are-calling-it-these-days problem.

At the eye of the storm are people accusing Dubner and Levitt of lies and misrepresentation in their book, particularly as it relates to their conversations with Ken Caldeira, a respected climate scientist working with Intellectual Ventures (possibly the most arrogantly named company ever).

Long story short: A blogger at Climate Progress claimed that Caldeira objected to his portrayal in the book and that Dubner and Levitt essentially flipped him off and left burning dog crap on his porch. Dubner responded that Caldeira read through two drafts of the chapter, correcting things he felt were wrong. Caldeira feels the authors worked in good faith and, while he may or may not agree with their conclusions, he feels their portrayal was fair.

What I find funny about the whole thing is the extent to which most people are blasting Dubner and Levitt even though they have explained repeatedly that they are not challenging the scientific status quo concerning climate change, that their reference to global cooling is a reference to finding ways to use technology to reverse global warming, which they unabashedly believe is happening. Their chapter looks at people working to solve the problem (you know, the problem of global warming which they believe is happening) who are working outside the “climate-change establishment”.

On a related note, Dubner has announced that he will change his name to Stephen Dubner-Yes-I-Believe-Climate-Change-Is-A-Problem.

But for the blasting of Dubner and Levitt and the (unconvincing, in my opinion) Brad DeLong’s “you should have let me write your book” post, no one can really give me a good reason to believe that they have a better grasp on the topic than Dubner and Levitt.

(Update: Greg Mankiw gives me reason to believe that Yoram Bauman has a better grasp on the topic and he seems disappointed. However, his back and forth with Steve Levitt amounted to “You may be technically right on the specifics, but the gist you gave was inaccurate.” I’m still struggling to try and reconcile that with the statements attributed to Ken Caldeira who, you may recall, previewed multiple drafts of the chapter. If he really did OK the overall scientific gist of the chapter, that strikes me as a pretty powerful authority.)

Up till now, I’ve stayed out of the climate change arena because I don’t have anything resembling an appropriate background for dealing with the topic. But the problem I’ve found is that people on both sides of the argument don’t really give a crap about credentials or scientific rigor.

What they care about is simply “Did this guy end up on my side of the argument?” If he did, he is a real honest to goodness scientist. If he didn’t, he is a hack, a washed up old know-nothing, a dishonest tool for religious environmentalism or a shill for the oil companies (depending on which side you’re on).

The reason I’m skewering the pro-climate-change side in this visual is because they seem to be much narrower in their orthodoxy. I’ve known extremely liberal people with graduate degrees in nuclear physics who get angry because no one wants to hear their solution to climate change (hint: it rhymes with buclear flower pants) due to the fact that the movement (from a political stand point) is dominated by long time environmentalists who spent their formative years fighting against nuclear power and don’t want to admit that they might have gotten that one wrong. (How is that for a run-on sentence?)

The “climate skeptics” side is often just as scientifically lackadaisical, but they’ll welcome anyone with open arms as long as they’re even remotely skeptical of any part of the political climate change agenda. They’ll accept anything including “climate change isn’t happening”, “man isn’t causing climate change”, “climate change isn’t a problem”, or (my favorite) “the solution isn’t (Kyoto/carbon tax/ethanol/hybrid car/whatever-my-political-enemies-like), the real solution is (fill-in-the-blanks-with-something-that-will-make-my-political-enemies-angry)”.

But, ultimately, I find the pro side to be more humorous because it is populated by approximately 30 actual scientists with knowledge in the field and millions of people with no scientific knowledge in the field who just like to feel smug about being all “scientific” while bashing other people who aren’t “scientific”.

And how do they determine who falls into which category? See the chart above.

How Big is $9 Trillion? – Willful Omissions From Paul Krugman

You may have seen the Paul Krugman post “How Big is $9 Trillion” in which he attempts to defend the Obama administration’s recent announcement that they expect that their policies will increase the national debt by $9 trillion. His tack is to “explain” that $9 trillion isn’t really all that much when you understand it in context.

it’s being treated as an inconceivable sum, far beyond anything that could possibly be handled. And it isn’t.

What you have to bear in mind is that the economy — and hence the federal tax base — is enormous, too. Right now GDP is around $14 trillion. If economic growth averages 2.5% a year, which has been the norm, and inflation is 2% a year, which is the target (and which the bond market seems to believe), GDP will be around $22 trillion a decade from now. So we’re talking about adding debt that’s equal to around 40% of GDP.

Right now, federal debt is about 50% of GDP. So even if we do run these deficits, federal debt as a share of GDP will be substantially less than it was at the end of World War II.

I defer to Paul Krugman on a lot of things because he is transparently smarter than I am. But it is precisely because of this fact that I know he is conscious of the obvious reasons his analysis is hogwash.

First of all, the national debt in WWII was initiated by an existential threat to the very continuation of our country. Mr. Krugman does not make even attempt to make the case that we have a similar crisis that justifies this kind of debt.

Second, implicit in his observation is the concept that since we did fine after WWII, we’ll do fine now. But the years after WWII saw drastic reductions in the inflation-adjusted debt driven by drastic reductions in spending. Mr. Krugman points to no similar possibility in the post-Obama world.

Third, we have something now that we didn’t have in the 1940’s. Back in the 1945, at the height of the spending that saw our national debt rise so dramatically, entitlement spending and interest on the national debt made up a meager 5% of our total budget.

By the end of President Obama’s term (if he runs two terms) we’ll be looking at a federal budget that is 70% mandatory spending. (I assume for the purposes of consistency that mandatory spending includes interest on the national debt because we don’t really have a choice in not paying it.)

Here’s a quick visual of the difference in the budgets in 1945 and 2016. (Ugly, because I did it fast… I’m on vacation.)

1945 vs 2016

If you look at the 1945 budget with the single question “How are we going to reduce our debt?” you can identify the major problem. It’s the defense budget, which is almost 90% of the budget. Interestingly, reducing the defense budget is exactly what we did in order to reduce the debt, cutting it over 80% in 3 years (it helped that we won the war).

As a contrast, President Obama’s solution to reducing overall spending is… well, I don’t think he really has a plan. His projected budget in 2016 has reduced the defense budget as a percentage of the overall budget from 20% to 14%, but military spending isn’t what is killing us. The president has no plans to reduce mandatory spending whatsoever. In fact, his only change to entitlement spending is to increase it.

My problem with Mr. Krugman’s “How big is $9 trillion?” is that he is aware of all the problems I pointed out. He didn’t explain how much $9 trillion is; he obfuscated it. By comparing the debt load in the heart of a world-shaking war to a debt load that was accumulated in (relative) peacetime, he has misled his readers to the real significance of the data.

(By the way… if you would like to blame the debt load on the Iraq war, you should know that those costs have raised our debt by 5% of the GDP. Comparing this to WWII, which raised our debt by 70% of the GDP, is a pretty weak argument.)