Has the distribution of simulus funds been influenced by political factors? A study by Veronique de Rugy suggested a partisan tilt in the disbursement of stimulus funds; she found a strong correlation, but no definitive evidence of causation. This prompted a response from Nate Silver at FiveThirtyEight. de Rugy replied here, prompting a surreply from Silver. And here’s a comment from Nick Gillespie.
Here is de Rugy’s bottom line:
my take on the data has always been the following: The regression analysis shows that district’s party representation matters. However, I cannot say how much it matters compared to other factors (such as the formula used by different agencies). I said it loud and clear each time I presented my findings. . .
If it is not possible to nail down the precise amount that party affiliation matters, does anyone truly want to argue that there are no political factors influencing this stimulus or stimuli in the past (whether put into place by Republicans or Democrats)? There is a lot of literature in economic-history journals on similar patterns in New Deal spending, and it consistently shows that New Deal spending correlated rather strongly and negatively with the margin of votes in the previous election. Areas where Roosevelt won by a little got more New Deal bucks than ones where he won by a lot. (I was directed to one article in particular by a reader this morning, and it is worth looking into: Price V. Fishback, Shawn Kantor, and John Joseph Wallis’s “Can the New Deal’s Three Rs Be Rehabilitated?: A program-by-program, county-by-county analysis.” Explorations in Economic History 40 (2003), pp. 278-307.)
I am confident that a similar pattern can be found with President Bush’s stimuli, which, by the way, I was publicly and consistently against. . . .
my predisposition toward limited government and sound fiscal policy hardly means that I rig my data or designs. Rather, it simply means that I am particularly skeptical when anyone claims that politicians (of all parties) do not programmatically seek to advantage their allies while punishing their adversaries. That was a useful guiding assumption under George W. Bush and, under the current administration, no less so.
And Silver, who is skeptical, summarizes his view:
For me, personally, the notion that the allocation of stimulus funds could have reflected a broad-based and widespread effort to benefit districts represented by Democrats seems implausible — something which is well worth examining but something which should have received especially rigorous scrutiny. This is particularly so given that many of the funds were intermediated by state governments, not all of which are controlled by Democrats, as well as federal agencies that were constrained by formula rules.
There are two other variations that I find less impluasible:
I find it less impausible that the funds could have been directed toward those sorts of districts which tend to vote Democratic (e.g. as measured by PVI or by Obama vote share) — even after controlling for other demographic variabes — a possibility that de Rugy raises in her response but which was not the focus of her hypothesis. The difference is that that this could have resulted from a sort of unconscious bias in the design of the stimulus rather than a deliberate conspiracy.
I also find it less implausible that some *particular* projects could have been directed toward those districts that had a Democratic representative who was either especially influential or who a key swing vote in the House. (This is what we call pork.) However, de Rugy ran various tests on the types of Democratic districts that benefited from the stimulus and did not find any relationships with the characteristics of the Democratic members of Congress that tended to represent them.
One point on which they both agree is that the quality and comprehensiveness of the data on Recovery.gov is quite poor — we’re not getting our $18 million worth here. As Silver notes:
I share de Rugy’s disappointment with the quality of the data available at recovery.gov. Frankly, I am not sure that testing her hypothesis to a peer-reviewable level of robustness is possible given the middling quality of data and the inherent ambiguity with how particular projects must be assigned to particular congressional districts.
Glenn Bowen says:
I believe the current administration is steeped in, and originates from, a brand of politics where all things are declared political.
April 4, 2010, 10:17 amrpt says:
GB:
If true, this can hardly be called new.
JA:
What is the effect of the prominent rejection of funds by a number of R governors; it’s not that the funds were not offered, it’s that they were refused.
April 4, 2010, 10:21 ambyomtov says:
Whether deliberately biased or not, it is clear that de Rugy’s original analysis, on which she based Congressional testimony, was extremely badly done, so much so as to be worthless.
Silver’s major criticism, for the benefit of those who haven’t read his first response, was that the areas receiving a hugely disproportionate share of stimulus funds, per the database, were state capitals.
He points out that a lot of the funds are sent to state agencies, who then distribute them to projects around the state, so this data hardly tells us where the money was spent.
His further point is that this is quite obvious from even the most cursory look at the data, and that this should have hit de Rugy on the head before she got started with regressions and whatnot.
Whether she was biased, or just turned out a very poor piece of work that accidentally supported her political views is left as an exercise for the reader.
April 4, 2010, 10:26 amShelbyC says:
Why all studies? Shouldn’t we just assume that what politicians do is political? Isn’t the question above kind of like suggesting that a for-profit corporation is trying to make money?
April 4, 2010, 10:31 amS says:
Silver’s take down of de Rugy was a particularly amusing, example of the art. After noting that there is a glaring omission from De Rugy’s analysis he states:
Ha.
April 4, 2010, 10:35 amJonathan H. Adler says:
byomtov and S –
The failure to look at state capitals was a significant omission but what’s really interesting is that even when that is controlled for, the party effect remains. As Silver reports:
I don’t think there’s much dispute that the initial analysis was slapdash, or that the data available at Recovery.gov is insufficient to fully control for some variables. Nonetheless, de Rugy says she’s going to account for more variables in follow ups, and it will be interesting to see what, if anything, she finds.
I would also note that the political effect was only a small (if prominent) part of the analysis presented in de Rugy’s testimony. Much of her analysis focused on how there is no evidence that stimulus funds were targeted at those areas in greatest need.
JHA
April 4, 2010, 11:03 amTim Hulsey says:
When it comes to a choice of unscrupulous or not, when speaking of politicians, always go with unscrupulous. It’s kind of like investing in gold.
April 4, 2010, 11:04 amMnZ says:
I really don’t think this is an especially useful study as the results are hardly surprising. I suspect the result is due to three factors.
1) Democratic districts tend to have more poor, troubled schools, crumbling infrastructure, etc. at which the stimulus funds were targeted.
2) The state and local governments in Democratic districts tend to have large bureaucracies giving them more resources to write proposals to win federal money.
3) The state and local governments in Democratic districts were more willing to spend money to get money to increase/maintain spending. In other words, I suspect that most of the grants were “expense sharing” grants in which the state or local government was expected to pick up a substantial share of the cost. Democrats marginal propensity to spend state and local revenues in these circumstances is almost assuredly higher.
A more interesting study would be to examine these factors and estimate which is driving the discrepency. If it is #1 (and arguably #3), then I don’t think we should be very concerned. If the cause is #2, then there should be an close examination of how federal grants are allocated. These grants should be based on need…not on the grant writing ability of local bureaucrats.
April 4, 2010, 11:29 amMartinned says:
That seems plausible. This effect follows if we assume that a) poor people are more likely to vote Democratic and b) poor people are more likely to receive stimulus money. (I realise, to make it entirely waterproof, you’d need more and more precise assumptions, but let’s go with it.) This doesn’t mean the stimulus is partisan (though, as noted, it still may be). It could just as easily mean that the government is using an approach to stimulus that is actually sensible. (Check out this Non Sequitur cartoon for contrast.) The theory behind a stimulus suggests that it should be given to people who will spend it rather than save it (i.e. not the rich and not those with debt to pay off) and that it should be spent in those industries that have the most overcapacity as a result of the crisis (i.e. construction but not health care). A reasonable (meaning non-partisan) application of such principles would still result in a statistically significant “democratic congressman effect”, even if you control for the “state capital effect”.
April 4, 2010, 11:34 amArthur Kirkland says:
In a merit-based world, Veronique de Rugy’s supervisors would fire her and hire Nate Silver.
Does anyone know whether her supervisors conduct a merit-based operation?
April 4, 2010, 11:38 amEarly Bird says:
So let me get this straight. De Rugy does a slapdash analysis of data that is so incomplete it’s not really usable. And yet we’re still talking about what her next study will show? How does she have any credibility left?
April 4, 2010, 11:39 ampireader says:
Professor Adler –
Your post, and your subsequent comment, seem to miss the main lesson of this episode — that Veronique de Rugy has destroyed her own credibility, especially on this subject.
Evidently, she holds such rigid pre-conceptions that she happily accepts even the goofiest conclusions, based on the shabbiest evidence, when it’s ideologically convenient.
So why do you say that “it will be interesting to see what, if anything, she finds”?
Why would any serious person give her credence the next time that she
April 4, 2010, 11:43 amcries wolfreports her ‘findings’? Instead, file them wherever you keep the latest ‘findings’ from the 9/11 truthers.Ichthyophagous says:
At the risk of being labelled as off-topic, one should note another part of de Rugy’s report not yet commented on:
Controlling for the percentage [in] each district that was employed in the construction sector, and the median income of the congressional district, I find that the variation in the unemployment rate has no correlation with the stimulus finding. [p. 5]
The scatter plots on the pages that follow show that the districts with the largest decreases in employment for 2007 to 2008 did not get significantly more fnding than those with small decreases. Nor did the districts with the highest total unemployment get significantly more money than those with smaller unemployment. The same lack of correlation is observable in graphing the relation between funding and districts with lower mean income vs higher, and districts with lower median income and higher. [pp. 6-9]
April 4, 2010, 12:01 pmbyomtov says:
Jonathan,
Yes, she says she’s going to include more variables. Good. But that’s not going to keep her original, “slapdash,” study from being widely cited by the usual ranters.
Note too that Silver’s comment that there is hope for her study yet should be qualified. he describes a lot of possible improvements, and then concludes:
That doesn’t sound like he’s particularly convinced.
There is another methodological point that Silver does not raise. De Rugy looked at other political data as well as a district’s congressional representation, and found little or no political effect.
My point is that if you look at enough political variables, or any other kind, you’re going to find some sort of positive correlation with one of them. You can’t then tout that correlation as showing anything at all. It’s not even, in some sense, a “real” correlation. It’s an accident.
April 4, 2010, 12:05 pmtrotsky says:
The stimulus is on its face political in ways that Joel Kotkin, for instance, has ably outlined: The spending favored Democratic priorities — education, unemployment insurance, food stamps, environmental cleanup, etc. I live in a very Republican district, but we still have schoolteachers and poor people (more poor people than average, actually, but that’s another story).
April 4, 2010, 12:06 pmMartinned says:
Please note that many of those are among the areas suggested by Keynesian stimulus theory. (High marginal consumption rate and high underemployment of people and assets.)
April 4, 2010, 12:11 pmSteve says:
Under the prior administration there was a major political battle over whether homeland security funds would be allocated on the basis of need and threat level, or whether they would simply be a new form of pork.
Those who thought homeland security should be taken seriously generally lost the battle. At the 2004 Republican convention, Mayor Bloomberg asserted during his welcoming speech that homeland security funds should be allocated on the basis of threat level alone. The crowd of Republican delegates, who had been quite generous with their applause up until that point, sat there in stony silence. Those folks from Wyoming want their fair share of the pork too, you see.
Anyone who didn’t say a word about the allocation of homeland security dollars under the Bush administration is disqualified from trying to score political points by complaining about the stimulus spending, in my view.
April 4, 2010, 12:40 pmMichael P says:
If controlling for the presence of a state capital is so (allegedly) important, it seems like that just proves that the stimulus money was biased by politics: The “stimulus” was disproportionately given to existing bureaucracy, and did not focus enough on the general citizenry’s needs.
April 4, 2010, 1:08 pmbyomtov says:
Michael P,
If controlling for the presence of a state capital is so (allegedly) important, it seems like that just proves that the stimulus money was biased by politics: The “stimulus” was disproportionately given to existing bureaucracy, and did not focus enough on the general citizenry’s needs.
The point of the criticism is that a large share of the stimulus money went to the state capital so the state government could allocate it. In other words, the state capital was the first stop, not the final destination. If the data were available it would be interesting to see how the final allocation correlated with political interests at the state level.
April 4, 2010, 1:47 pmArthur Kirkland says:
Damn those Democrats, their concern about education, the unemployed, the hungry and our environment, and their oily hides*!
*Mr. Burns: That’s right, keep eating…Little do you know you’re drawing ever closer to the poison donut! [cackles evilly] There is a poison one, isn’t there Smithers?
April 4, 2010, 1:57 pmSmithers: Err…no, sir. I discussed this with our lawyers and…uh… they consider it murder.
Burns: Damn their oily hides!
Bill Harshaw says:
OMB Watch also does a takedown.
April 4, 2010, 2:03 pmCharleyCarp says:
http://www.missoulian.com/news/state-and-regional/article_7cc6695a-3fa6-11df-8158-001cc4c03286.html
Will no one think of the milkshakes?
April 4, 2010, 2:07 pmIchthyophagous says:
Concerning the question of stimulus funding by state, so that the issue of state capitals does not come up, see here: http://reason.com/archives/2009/11/03/the-secret-message-of-stimulus
April 4, 2010, 2:10 pmFunds are not allocated on a basis of state need as measured by unemployment.
CharleyCarp says:
It’d be interesting to know which are the other two states north of the line in de Rugy’s state-by-state analysis. I suspect that they are, like the ones named, very small in population, which would lead to higher per capita costs. (A new freeway bridge isn’t a whole lot cheaper in ND than in CA). My guess is that they are low population red states.
The world is too complicated for simplifications of this sort.
April 4, 2010, 2:24 pmsteve s says:
Future research by de Rugy is not invalidated just because of one very large, very obvious mistake. What may become interesting is how people will now claim the states should have passed out the money. Are people going to claim the the federal government should have micromanaged how funds were spent at the state level?
Steve
April 4, 2010, 2:50 pmbyomtov says:
CharleyCarp is correct that the state-by-state analysis is oversimplified to the point of uselessness. Reading the article, it’s clear that de Rugy has very strong ideological views.
Her research seems to have been done mostly (entirely?) at right-wing institutions, and I have been unable to locate any academic papers she has published.
April 4, 2010, 3:09 pmIchthyophagous says:
In de Rugy’s original paper published in the fall, there is no question of what states are “north of the line.” They are North Dakota, Vermont, and the District of Columbia. Three states are identified as south of the line: California, Rhode Island, and Michigan. If the states north of the line are there because of a few large projects involving lots of workers — why were such projects chosen, given that unemployment was lower than in three states south of the line state? Why not put lots of large projects in just those states with the highest rates rather than in the lowest? Even more to the point, de Rugy’s line suggests a low level of correlation between aid per person and unemployment rate generally.
April 4, 2010, 3:37 pmtrotsky says:
Who said there’s anything wrong with those priorities? Or anything wrong with Democrats following them when they’re elected?
Here’s Kotkin’s piece from last year: http://www.newgeography.com/content/00579-stimulus-plan-caters-privileged-public-sector.
The bottom line, which has been borne out in California at least, is that the public sector in aggregate has lost hardly any jobs while private-sector employment has plunged. Maybe that’s the best macroeconomic policy to maintain stability in a crisis — and I’m hardly rooting for the evisceration of our public schools — but the fact is if you’re a (probably unionized, probably Democratic-voting) government worker, you’re far more likely have had Congress write a check to save your job.
April 4, 2010, 4:28 pmIchthyophagous says:
Democrats had better hope the voters don’t find out.
April 4, 2010, 4:36 pmLaura(southernxyl) says:
Is the distressing and vulgar rape imagery really necessary? You can’t make your point without it?
April 4, 2010, 4:52 pmThatGuy says:
What? Politicians belonging to the party holding the white house and both houses of congress are sending more spoils back to their districts? Stop the presses!
In other news, the sun came up today.
April 4, 2010, 4:53 pmSuperSkeptic says:
…since we’re using cartoons to make points…
Professor Adler: “Is stimulus funding political?”
Eric Cartman: “Does a bear crap in the woods and does the Pope crap on the dreams of 200 deaf boys?”
April 4, 2010, 4:53 pmBlue says:
The state capitals error made by De Rugy is particularly egregious because, were she following standard modeling techniques, she would have discovered them EVEN WITHOUT including them in the initial model when she checked for significant outliers. What missing them means is that she didn’t do the basic model validation things one would expect.
April 4, 2010, 5:10 pmS says:
Are you as partisan as deRugy? No, the effect does not remain — or at least, you like everyone else, including the discredited deRugy, have no idea whether that is so, because that study, and why those numbers show up, was NOT done. It was never done, because once deRugy, got a number she liked she did not complete the analysis, when she either incompetently missed or deliberately ignored the largest correlation, by far, present in the data.
April 4, 2010, 5:17 pmCrazyTrain says:
Uhhhhhh. Problem. Her analysis missed that a substantial portion of the money went to states that then distributed it. Thus, she did not look at what the states then did with the money so those conclusions are just as unreliable as her other conclusions.
By the way, I second the comment re the wit of Nate’s takedown — frankly, I think de Rugy’s mistake was so bad it could not have been intentional. She was just obviously blinded by her preconceptions and completely missed an obvious, obvious, obvious politically-neutral variable (districts with state capitols) that was affecting the disposition of stimulus funds.
April 4, 2010, 6:06 pmbyomtov says:
JHA,
In addition to what S said, the effect does not remain because, as OMB Watch points out, the 31% figure from Silver does not include the redistribution of funds sent to state capitals. Presumably it oincludes only funds sent directly to various localities, bypassing state government. So we can’t at all say the effect remains. Indeed, we need to know why some money did not go through state capitals to make sense of this information.
April 4, 2010, 6:56 pmS says:
Well, I spent 10 minutes on recovery.gov. Given that deRugy missed that state capitols were well funded, I decided to check on a large city, which has multiple congressional districts and multiple zip codes. I found almost all the money went to one congressional district in that city! Indeed, to one zip code in that district! A place with relatively low unemployment, even!
How could that be? I mean, just because this well funded zip code in this well funded district contains city hall, state agency offices, and private group headquarters, can’t mean anything, can it?
April 4, 2010, 7:11 pmMark Field says:
Agreed. Thanks for saying it.
April 4, 2010, 7:56 pmS says:
Absolutely. I just saw that, with your comment, Mark. I don’t think I have ever seen anything like those comments here before. Disgusting and stupid.
April 4, 2010, 8:08 pmJohn J. Perulfi says:
Silver notes:
April 4, 2010, 9:17 pm“…I am not sure that testing her hypothesis to a peer-reviewable level of robustness is possible given the middling quality of the data…” Whoa! Are we talking global warming here?
LTEC says:
Why not take the administration at their word:
The point of this quote by Clinton was that that they were going to use the crisis to help an ideological agenda (in this case a “green” one), rather than follow some kind of objective economic theory about how best to revive the economy. I believe them.
April 4, 2010, 9:45 pmPAULV says:
The fact remains that the stimulus is a failure. Keynes said that after failure of New Deal cuts in payroll taxes were most effective. Romer did her academic work on failures in federal spending to end Great Depression, but she was not listened to. The stimulus preserved government union jobs for a while but it would seem that layoffs were only delayed and those jobs will be lost in recession’s second dip. After controlling for state capitals 31% is significant. Unlike a commnt above the grants to states were micro managed by Feds and were not block grants. It seems strange that some want to declare victory and avoid liiking deeply at issues raised.
April 4, 2010, 9:49 pmAllan says:
I wonder if it possible that some of the disparity is due to governors who refused. And some more of the disparity is because the local governments did not ask.
I think it obvious that all governments controlled by Democrats asked for and accepted offered assistance. That cannot be said for the Republican controlled governments, perhaps.
April 4, 2010, 10:27 pmgeokstr says:
Michael Barone puts it well:
“There was something of a Gotcha! tone to Silver’s initial post. He continues to express skepticism that Democrats designed the stimulus package to funnel money to Democratic districts. But he ignores another political implication of his correct finding that state capital congressional districts got so much from the stimulus package. Why did districts with state capitals rake in so much money?”
Gotcha on Stimulus Spending
It was a payoff to public employees unions, who were Obama’s and the Democrats’ biggest donors in 2008. It wouldn’t even make any difference whether the governor or state legislature was R or D; they’d both be full of loyal public union members.
It could be just an amazing coincidence, but all the massive job losses in this recession were in the private sector, virtually none in the public sector, who continue to show unemployment rates at below full employment rates. (Not to mention pay rates 50% higher than comparable private sector jobs, not even including the hugely bigger benefit packages and nearly totally unfunded defined benefits retirement plans, which are quickly bankrupting state governments.)
April 4, 2010, 10:30 pmbyomtov says:
geokstr,
If Barone said that, then he’s an idiot. Have you or Barone been following the discussion at all? The money that went to the state capitals was redistributed to other parts of the state. That’s the whole point of Silver’s criticism.
Does Great Conservative Intellectual Michael Barone really not understand that?
April 4, 2010, 10:40 pmtrotsky says:
byomtov,
Barone’s point is that all the money distributed through state capitals largely was distributed to other arms of the public sector — as basically a giant union payoff.
It takes an awfully cynical partisanship to see nothing but a union payoff in supporting education, but that’s his point.
April 4, 2010, 11:56 pmRicardo says:
Here is one correlation that is actually worth noting. Scroll down to the “Stimulus Around the Globe” graph. Note first that there is a positive correlation between stimulus spending across countries and higher GDP growth relative to previous forecasts. Then note that most of the data points lie below the zero intercept. The Occam’s Razor explanation of this pattern is that fiscal stimulus did lead to higher economic growth (the U.S. is only slightly below the regression line) but that the recession was much, much worse than anyone predicted when spending packages were being debated.
Not really. Most of her academic work has been on monetary policy with only a more recent (before joining the Obama Administration) emphasis on fiscal policy. Even then, her work on fiscal policy has been mostly on tax policy since there is enough variation in the data to do meaningful analysis.
Certainly, the spending programs that existed at the time were not sufficient to end the Great Depression — that’s a simple empirical fact. But if you want to jump from that fact to imputing the view to Romer that the fiscal spending multiplier is small or smaller than the tax multiplier, you would be wrong to do so.
April 5, 2010, 4:02 amRicardo says:
There’s no more content here than in the left-wing claim that the war in Iraq was a payoff to Dick Cheney’s Republican cronies at Halliburton. Both stories have the tail wagging the dog. People who work in the defense industry tend to vote Republican. Civil servants tend to vote Democrat. Do you want to go out on a limb and guess why this might be the case?
April 5, 2010, 4:10 amIchthyophagous says:
Ricardo — Brad de Long’s graph of “Stimulus around the Globe” shows only changes in GDP. De Long follows this with a graph of employment change and ARRA Medicaid Spending by state which shows the stimulus having a slight favorable effect on unemployment (about .2 percentage point between the states with the most spending vs the states with the least). So the stimulus is still a failure as far as jobs are concerned.
Giving money to the defense industry at least has the merit of distributing benefits to a wide swath of the economy and creating jobs. Giving money to state bureaucracies much less so; these people are already overpaid.
April 5, 2010, 5:49 amRicardo says:
1. This isn’t a very good measure of the stimulus since it is limited to a narrow form of spending. It’s a very weak piece of evidence compared to the other pieces lined up — that’s why it’s last.
2. As DeLong also shows, employment growth between Q109 and Q209 was the largest on record in terms of raw numbers and probably one of the largest in percentage terms.
3. States are what economists call “small, open economies.” In macro, small, open economies tend not to benefit much individually from fiscal policy since much of the money will get spent on imports and spill-over into other economies.
The U.S. as a whole, on the other hand, is a large, comparatively closed economy (Americans spend much less on imports than, say, the average Belgian) which means it is much better positioned to benefit from fiscal stimulus.
April 5, 2010, 6:25 amRicardo says:
Whereas “giving” money to just about any other industry fails to distribute benefits or create jobs? Like, for instance, increasing food stamp payments by $20 billion or spending $29 billion on highway improvements (two items from the stimulus package)? Another $90 billion was allocated to the states for Medicaid and you don’t seem to dispute that this 11% of the stimulus package had some positive impact on employment.
I guess I’m not clear on your point. Would you be happy if the stimulus package had still been passed but included more spending channeled through private industry (especially the defense industry)? Do you think the federal government ought to allocate more money directly rather than disburse through state governments — keeping in mind that aid to states not related to Medicaid was $53 billion or 6.7% of the total package?
April 5, 2010, 6:40 amIchthyophagous says:
I was commenting on de Long’s graphs. They don’t prove his case on the stimulus, and you appear to agree since you say that any graph of state-by-state impact doesn’t prove much and ARRA Medicaid spending is a narrow measure.
My real interest is in the question of how the stimulus might have been designed so that recovery would be more rapid. The reason why I brought up the issue of defense spending was that new defense orders would immediately create jobs. Boeing or whoever must hire people to build the equipment. There are other measures that could have a similar effect. I’m for them. But I don’t see that more Medicaid and food stamps would have such an effect because they create additional demand for services and items that could easily be satisfied by firms even when many workers are unemployed. That is, these firms (those who sell the items that food stamp recipients would purchase, or health clinics and hospitals would buy) can easily meet the demand even with their current reduced staffs. Therefore these welfare-oriented measures would increase GDP but not create new jobs. That has been the effect we have experienced.
April 5, 2010, 8:46 amS says:
Ich – It hardly makes sense for the government to temporarily create jobs by buying things it does not need and can’t use, while losing jobs in goods and services industries, where effective demand is currently limited, by falling incomes. It is much better to keep jobs in place that already exist, than to try to create new fantasy jobs, like you propose.
April 5, 2010, 9:01 amIchthyophagous says:
I’m not asking that the government buy unnecessary things. If there are no defense projects worth spending money on, then maybe there is something else. I wish you could tell me how we’re supposed to keep in place a job in a declining industry. Does that mean erecting trade barriers?
April 5, 2010, 9:18 amAriel says:
We were told that we would be able to track where every last dime went. Every dime. Recovery.gov was supposed to be the vehicle by which we the people could see where every last dime went, so that we would know that the stimulus money was being well spent.
In my view, de Rugy was too quick to give way to Silver. Yes, the data set she has is bad. But that makes an important point – the $18M site is not providing us with data at a low enough level to be able to do the kind of analysis that was promised. I’ve worked on projects where we’ve created this sort of data warehouse – my guess is that you could develop something that could track everything to the last dime for less than $18M.
Recovery.gov, to fulfill its purported mission, would not have shown money only distributed to the first level, and then allowed state governments to launder it as they pleased. Instead, it would have shown where the money went. Then we could readily do this kind of calculation.
Out of curiosity, I looked at MA, clicked on the dot for the State House and found this out:
MA Dep’t of Fish & Game – $484K, 0 jobs
MA Dep’t of Education – $20K, 0 jobs
MA Dep’t of Education – $6.3M, 52 jobs, $120K/job
MA Dep’t of Education – $23.3M, 0 jobs
Commonwealth of MA – $21M, 0.79 jobs, $26M/job
Commonwealth of MA – $84.6M, 1,238 jobs, $68K/job
Commonwealth of MA – $20,336, 0 jobs
Commonwealth of MA – $10K, 0 jobs
Commonwealth of MA – $796K, 0.31 jobs
Commonwealth of MA – $4.6M, 0 jobs
Commonwealth of MA – $2M, 3.94 jobs
Commonwealth of MA – $4.5M, 0 jobs
MA Dep’t of Housing and Community Dev – $249K, 248.67 jobs, 1K/job (are they paying minimum wage?!?)
MA Dep’t of Housing and Community Dev – $36M, 9.25 jobs
MA Dep’t of Housing and Community Dev – $30.5M, 162 jobs
MA Dep’t of Public Health – $1.1M, 0 jobs
MA Dep’t of Public Health – $1.8M, 1.78 jobs
MA Dep’t of State Treasurer – $43.6K, 10.92 jobs (are they paying minimum wage?!?)
MA Exec. Office of Public Safety – $11.3M, 210.64 jobs
MA Exec. Office of Elder Affairs – $37.8K, 0 jobs
MA Dep’t of Employment and Training – $11.95M, 309.88 jobs
MA Dep’t of Energy Resources – $46.9M, 13.56 jobs
MA Comm’n for the Blind – $1.9M, 2.61 jobs
I suspect that some of these are in fact giving more jobs than they state and others probably giving less – or the government is violating its own minimum wage laws. As with de Rugy’s study, this also speaks to the poor quality of the data that Recovery.Gov is collecting. I know I’ve said this, but, again, if the money is being redistributed, as Silver alleged, shouldn’t Recovery.Gov be tracking that? Aren’t the jobs and dollars numbers meaningless if the website is not tracking them to their ultimate destination?
Another important point that de Rugy found is that unemployment is not correlated to amount of stimulus funding. Given that the stimulus was purportedly to cap national unemployment at 8%, the areas where funding would have been most impactful would probably be those with the highest unemployment rates – I would expect the actual relationship to be not linear, but exponential (mildly), with unemployment. It turns out that’s not the case.
April 5, 2010, 11:08 ambyomtov says:
Trotsky,
Thanks. I misunderstood.
Ariel,
OK. There may well be grounds for legitimate criticism of the data provided. But that doesn’t justify de Rugy’s analysis. If you lack the data you need to explore a question you can either try to get it or find something else to do. Taking patently inapplicable data and drawing conclusions from it is not acceptable.
April 5, 2010, 1:10 pmStan says:
Well, Ariel, you can start by getting your facts right. They have spent 6 million on The Recovery.gov website not 18 million (which is the total for the contract through 2014, only if all options are exercised).
April 5, 2010, 1:10 pmews says:
“It takes an awfully cynical partisanship to see nothing but a union payoff in supporting education”
***
Uh no. It doesn’t. At all.
Of course, I suspect you and I have far different definitions of “supporting education.”
April 5, 2010, 1:14 pmS says:
Huh? Medical, food, construction and education are not declining industries.
April 5, 2010, 1:16 pmIchthyophagous says:
I said “declining industries” because you wrote of keeping jobs in place. To me that sounds like spending huge amounts to keep Govt Motors going. Your argument seems to be that we can’t allow the number of workers in medical care, for example, to decrease. But if we make medical care more efficient as Obama says he wants to, then the number of medical workers should decrease. Or if we have more effective educational methods in place, we may succeed in reducing the number of educational workers. But if there is no real demand for a medical worker or teacher why should he or she continue?
I think you assume that workers in certain areas deemed essential should be saved from the fluctuations of the market by guaranteeing their jobs. To me this is a formula for stagnation and inefficiency. Look at the inflated pay of state and municipal workers, and the growth of spending by their governments. Are you sure all of it is really needed? Perhaps some of these workers would be better advised to find work in something else. I hope you’ve seen some of the articles about bad teachers who can’t be fired, thanks to union rules.
April 5, 2010, 2:47 pmS says:
Ich – You assume? OK. I can see you’re not serious. Those fantasies you have match your fantasy jobs.
April 5, 2010, 2:55 pmIchthyophagous says:
S – no, you are the one who is assuming. I’m only trying to keep in mind both the need to create jobs and not to grow a huge overpaid bureaucrat class whose members see themselves as indispensable.
April 5, 2010, 3:04 pmAriel says:
I don’t fully agree, though I think I would have added that sort of qualifier in her place. Where I disagree is that this data purports to be data that tracks spending to the last dime. We were not promised a system that would track money until the statehouse, we promised a system that would give us transparency, so that we could see the benefits of the stimulus. Well, let’s see them. It’s not that de Rugy selected bad data, it’s that the government is not providing good data. (As I said, I would have put in a footnote to say this.)
I was just citing Adler above.
April 5, 2010, 4:11 pmRicardo says:
Say what? The graph I specifically referenced was the cross-country comparison of stimulus spending and actual minus predicted GDP growth. This certainly does help prove the case on the stimulus. Instead of commenting on that graph, though, you instead take issue with the state-by-state Medicaid spending graph. Do you have any specific rebuttal to the cross-country graph I specifically referenced in my earlier comment? If not, you have no case for saying the graph does not help prove the case for the stimulus.
The increase in Medicaid spending was again a small part of the stimulus package but even then, we do indeed see a slight positive correlation between Medicaid spending an employment as you concede. As for food stamps, they hold no real value unless people spend them anyway so more food stamps will certainly lead to higher consumption. Whether that higher consumption translates into higher employment in the food processing, transportation or retail sectors is still a question. Do you have any data or first-hand experience in the relevant sectors to suggest higher demand could “easily be satisfied” by firms without hiring more workers? I’m not sure what you are basing your assertions on.
April 5, 2010, 11:18 pmtrotsky says:
ews,
Last year, in California at least, there would have been a record number of teacher layoffs — and thus a dramatic increase in class sizes, along with a dramatic wave of program cuts — if the federal government hadn’t stepped in and basically maintainted the status quo.
Now, instead, this year will see the big school cuts. I’m not a teacher and my daughter’s not in school yet, so it won’t affect me directly. But there’s no doubt the kids’ education will be diminished. That’s why the richer burgs in the state are voting for local parcel taxes to supplement the declining state revenues. Do you suppose all those parents in Palo Alto and Marin are raising their taxes because they want to pay off the teachers’ union?
April 6, 2010, 1:11 amIchthyophagous says:
Ricardo -
Concerning the effect of the stimulus on employment in the food industry, here is what I did. I looked at the 10-K annual reports to the SEC for three major food companies for both 2008 and 2009. You may be aware that these reports usually have a statement of the total number of employees at the end of the year in question. The three companies are Kraft, Publix Supermarkets, and Safeway. These companies were chosen as the largest; one is a food producer and two are supermarket chains, for the sake of diversity. I considered Kroger but left it out since it has a large number of jewelry stores also.
—————————
Kraft:
At December 31, 2009, we employed approximately 97,000 people worldwide.
In 2008, we completed our five-year restructuring program. As part of the program, we announced the elimination of approximately 18,600 positions. As of December 31, 2009, we had eliminated approximately 17,300 of those positions. (ibid)
At December 31, 2008, we employed approximately 98,000 people worldwide.
Publix
The Company had 142,000 employees at the end of 2009, 69,000 on a full-time basis and 73,000 on a part-time basis. By comparison, the Company had 144,000 employees at the end of 2008, 70,000 on a full-time basis and 74,000 on a part-time basis.
Safeway
At year-end 2009, Safeway had more than 186,000 full- and part-time employees.
At year-end 2008, Safeway had more than 197,000 full- and part-time employees.
————————-
So from this sample it appears that over 2009 the total number of employees in this sample of the food industry has decreased. If you want to prove the stimulus has had a beneficial effect on employment in the food industry, your job is cut out for you.
April 6, 2010, 5:53 amneimoller says:
ich – also, more people died in haiti this year than last. if you want to prove that transition from voodoo had a beneficial effect on health outcomes, your job is cut out for you.
April 6, 2010, 6:36 amneimoller says:
pity that she was too (deliberately?) dumb to see it. i only put the “?” to feign ignorance of her ideological compulsions to get the answers she got.
April 6, 2010, 6:50 amIchthyophagous says:
Niemoller, your wisecrack means nothing. I am asserting a null hypothesis. Ricardo is asserting cause and effect. No, his work is cut out for him. Your work is to show that you can think consecutively.
April 6, 2010, 7:05 amIchthyophagous says:
I typed “firing bad teachers” into Google and got 129,000 hits. This may explain why some people are so upset.
April 6, 2010, 7:19 amIchthyophagous says:
Just to be fair — I did look up end-of-year employment for two companies specializing in home health care services: Amedisys and LHC Group, and here I did find employment increases of about 15%. So yes, the stimulus is apparently having some effect. Both companies involved employ roughly 15000 people. Given that most of the people they serve are elderly and home-bound with difficulty in respiration, it would be best to argue for the Medicaid in terms of humanity rather than its economic effect. I haven’t looked up companies in any other medical area, and don’t see why I should with people like S and Niemoller abusing me.
April 6, 2010, 9:20 amRicardo says:
It’s not up to me to prove. The assumption behind your posts here is that an extra $1 million spent on defense generates X additional jobs while an extra $1 million spent in a sector like food or health care generates Y additional jobs with Y < X. You haven't provided any research to back up this contention and, as far as I know, there isn't any reliable research that says this. Yes, supermarkets and food companies cut jobs between 2008 and 2009 like nearly every other company in the private sector. This neither proves nor disproves the contention that additional food stamps saved jobs. To be perfectly honest, it doesn't add any additional information at all — we already knew the recession through 2009 was very nasty and much worse than most would have predicted.
More importantly, the main point is still that stimulus spending does appear to increase GDP growth. This is the end-game. The focus on jobs created is a bit misguided — if government creates a bunch of jobs but with no increase in GDP, that's actually a sign of stagnation and, yes, socialism. It means people are literally being paid to do nothing and have no external benefit to the economy. Another point is that employment usually lags GDP so it's more difficult to see the impact of spending on employment than the impact on GDP. It takes longer to create new jobs than to increase GDP.
Finally, the point of stimulus spending is not to have people dependent on the government for their paychecks. That seems to be what you are advocating by focusing directly on how many people are hired as a direct result of government spending. It's not sustainable to have people depend on the government like that and, again, is a sign of socialism and stagnation. When the government paychecks end so do the jobs. The real point is to boost confidence in the future so that people who receive government checks start to spend money which increased employment and production in other sectors of the economy, and those workers spend more while their employers boost investment spending and so on.
April 6, 2010, 9:30 amون بيس 459 says:
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July 12, 2010, 3:15 pm