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Jewish World Review March 18, 2011 12 Adar II, 5771 A job-loss statistic produced out of thin air By Glenn Kessler
— Rep. Xavier Becerra (D-Calif.), March 15, 2011 The House of Representatives, on a bipartisan vote Tuesday, passed another stopgap spending bill that would keep the government running at least until April 8. The bill, known as a continuing resolution, also would cut 2011 budget authority by $6 billion, in what the Republicans call a down payment on their push to trim $61 billion from the fiscal 2011 budget. The three-week bill is expected to clear the Senate as early as today, but Rep. Becerra, vice chair of the Democratic conference, lashed out at the GOP plan at a news conference Tuesday, saying it would result in 75,000 jobs being lost. (He also voted against the bill.) Where did that figure come from, and is it true? The Facts The original source of the number is economist Mark Zandi of Moody’s Analytics, who last month crunched the numbers and concluded that a $61 billion cut in federal spending would mean 672,000 fewer jobs would be created by the end of 2012, as the country emerges from the recession. He rounded up to 700,000 in a blog post and said, in an interview Wednesday, “I was surprised by the attention it got.” Lost in much of the coverage of Zandi’s figure is that it is a two-year number — and that it does not necessarily mean people would lose their jobs. He is simply calculating how cuts of that magnitude would affect gross domestic product and employment in the coming months. He also tried to account for the type of spending the GOP targeted, because of course not all spending is equal. A full breakdown of his calculations, quarter by quarter, can be found here. The decline in jobs being created does not happen all at once because the decline in spending would actually take place mostly in 2012. That’s because there are two key figures in the federal budget — budget authority (how much can be spent) and outlays (what is being spent). The $61 billion in cuts would be in budget authority, but the decline in outlays in 2011 would be much less. This is where Becerra gets in trouble with his statistic. A Becerra aide, who asked not to be identified, said he “was roughly calculating the impact a three-week version of that budget would have on the economy” — in other words, if you lose 700,000 jobs in a 28-week budget (the time left in fiscal year 2011), then 75,000 jobs would be lost in a three-week budget. Becerra should know better. The true authority on the cost of congressional spending bills is the Congressional Budget Office, and its calculations show that there is virtually no difference in outlays this year between the GOP bill and the continuing resolution. As calculated by the CBO, the outlays under the full-year GOP bill would be $1.358 trillion, compared to $1.359 trillion in the stopgap spending bill. Over time, the effects would be greater, but it’s hard to discern from Zandi’s calculations that this $6 billion over the course of two years would result in 75,000 fewer jobs. Zandi said he “hadn’t paid any attention” to the debate over the stopgap spending bill and did not know what the impact would be. Federal Reserve Chairman Ben Bernanke estimated that the potential reduction of new jobs would be much lower — 200,000. But Macroeconomic Advisers LLC, another well-regarded forecaster, also crunched the numbers and came up with somewhat similar effects as Zandi on the gross domestic product and the unemployment rate. The Becerra aide said that “however you slice it, Republicans are slow-walking a budget that will destroy 700,000 jobs in the long term and put our economic recovery on hold.” But Macroeconomic Advisers noted that the GDP and employment shifts are “short-run effects” and “over a longer period of time, the re-allocation of resources from federal to private spending could be expected to raise the level of GDP modestly.” It added that “the issue is not whether to reduce the federal deficit but by how much, how fast, and when.” Incidentally, at the same news conference, House Minority Leader Nancy Pelosi (D-Calif.) described Zandi as “the Republican economist [who] said the Republican spending bill would destroy 700,000 jobs.” Zandi said he is a registered Democrat who has consulted with members of both parties, including Sen. John McCain (R-Ariz.). A Pelosi aide explained that she meant to say he was an adviser to a Republican running for president. The Pinocchio Test Becerra’s claim looks like it was calculated on a napkin. He took one figure — which is really a two-year estimate — and twisted it into another figure in order to make a three-week spending bill look as extreme as possible. But that kind of guesswork has little basis in reality. Two Pinocchios
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An award-winning journalism career spanning nearly three decades, Glenn Kessler has covered foreign policy, economic policy, the White House, Congress, politics, airline safety and Wall Street. He was The Washington Post's chief State Department reporter for nine years, traveling around the world with three different Secretaries of State. Before that, he covered tax and budget policy for The Washington Post and also served as the newspaper's national business editor. Kessler has long specialized in digging beyond the conventional wisdom, such as when he earned a "laurel" from the Columbia Journalism Review
• 03/10/17: A budget analogy that earns a Geppetto checkmark • 03/10/11: Four pinocchios for the American public on the budget • 03/09/11: Obama and the White House's ‘halfway’ fixation with the budget • 03/08/11: Foreign policy braggadocio on Libya and AIDS • 03/07/11: Democrats keep misleading on claimed budget ‘cuts’ • 03/01/11: Mike Huckabee is on to something here, but jumped the gun
• 02/25/11: Harry Reid's illusory $41 billion in budget cuts
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