For most of a century, macroeconomists have debated the pros and cons of government “stimulus” policies. Because there is no way to determine how the economy would have performed without a stimulus, the debate comes down to dueling economic models, assumptions, and theories. With Nobel Prize-winning economists lining up on both sides of the issue, the debate has seemed destined to continue. Apparently, that is, until now.
PolitiFact – a group of reporters affiliated with the St. Petersburg Times in Florida – has declared the debate over. In a “fact check” column, they have declared from on high that the last stimulus bill successfully created or saved 1 million jobs so far, and will create or save 1 million more in 2010. End of debate, right?
Typically, fact-checking is limited to checking, well, verifiable facts. Whether the budget deficit is rising, how much Washington spends on Social Security, and what provisions are in the latest health care bill are not open to interpretation. They can be verified factually.
Whether the economy would have performed better or worse without the President’s $862 billion stimulus is an analytical and theoretical argument. It is not a “fact” to be “checked.”
PolitiFact’s analysis displays a lack of understanding of the complexities of macroeconomic analysis. They cite as a “consensus” four studies claiming that the stimulus worked – yet those studies were all essentially Keynesian economic models, so of course they will declare that a Keynesian stimulus worked.
For example, PolitiFact cites a Congressional Budget Office (CBO) study claiming the stimulus saved (a middle estimate of) 1.5 million jobs. Yet CBO didn’t determine this from observing recent economic trends. Instead, they “proved” the stimulus created jobs by programming their economic model to assume that stimulus spending automatically creates jobs – a classic example of the begging-the-question fallacy.
PolitiFact included no economic models from other schools of economic thought, such as supply-side or neoclassical. Nor did they consult the multitude of economists who have concluded that governments cannot spend their way out of recessions.
Instead, they openly dismiss the entire population of conservative economists, saying that “With the notable exception of conservatives, the independent economists who have produced studies agree that the stimulus has saved or created upwards of 1 million jobs, and that the bill will likely create another million or so jobs in 2010.” [emphasis added]
PolitiFact does quote the Heritage Foundation’s more critical view of the stimulus – and then dismisses it simply because it conflicts with the more liberal Moody’s Economy.com.
These macroeconomic debates are complex, technical, and messy. There is no verifiable way to determine how many jobs the stimulus has saved or created. PolitiFact’s reporters are free to believe the stimulus saved or created millions of jobs, but such an analysis belongs in an opinion editorial – not a fact check.