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Christina Romer, chair of the President’s Council of Economic Advisors, recently admitted in an interview with CNBC’s Maria Bartiromo that it is effectively impossible to accurately measure how many jobs the stimulus saved, will save, created, or will create.
If one of those Austrian school economists had said this, he probably would have been derided as an orthodox ideologue. But Romer - a mainstream and prominent economist who advises the President – said this, which is a very big deal.
Here is the exchange (begins at 6:49):
BARTIROMO: When the stimulus was first announced, the President said that he expected that in the coming years the administration, based on the policies on economic revival could save or create 3.5 million jobs. At this point does the administration know how many jobs have been created or saved?
ROMER: You know, it's very hard to say exactly because you don't know what the baseline is. Because you don't know what the economy would have done without it.
Romer admits that nobody can know what the baseline is – how many jobs would be around without the stimulus.
But in The Job Impact Of The American Recovery And Reinvestment Plan, Romer and Jared Bernstein projected precisely how many jobs would be created by the stimulus. They wrote:
“Table 1 shows that we expect the proposed recovery plan to have significant effects on the aggregate number of jobs created, relative to the no-stimulus baseline”.
The table specifies that 3,675,000 jobs would be created by the stimulus by the 4th quarter of 2010. Specifically, 133,876,000 jobs would be around by the 4th quarter of 2010 without a stimulus, instead of 137,550,000 jobs with one. (Check out the bottom of page three and top of page four to see all this for yourself.)
But since she admits that nobody can know how many jobs would be created without the stimulus, she admits that it is impossible to know if the stimulus will create 3,675,000 jobs that would not have otherwise been created.
Even if the unemployment rate were to dip down to 5% or even 4% by the 4th quarter of 2010, it would be impossible to know the stimulus succeeded because, according to Romer, it is impossible to know how many jobs the stimulus created that would not have otherwise been created.
If the unemployment rate continues to rise, expect liberals to lobby for another stimulus package or some other government intervention. If the unemployment rate drops, expect liberals to claim it was because of the stimulus package.
Usually, understanding of the consequences of a decision improves overtime - thus, the phrase that 'hindsight is always 20-20'.
But according to her statements, Romer's understanding of the effects on job creation of the stimulus package has deteriorated overtime. Or maybe she has just become less eager to publicly predict the consequences for job creation/saving of spending over $780 billion in a stimulus package? I wonder why that would be?