Statistical Sausage-Making

The Obama administration has lately been touting the 640,329 jobs created or saved by the stimulus bill. (Full report here.) I am always amused by this degree of precision in any sort of economic calculation because it implies a degree of accuracy that is problematic at best.

Below is an example of why from the Wall Street Journal’s Washington Wire blog. I highlight it not to indict the administration for overstating its estimates, but rather to point out that all economic data from the GDP to the unemployment rate to the industrial production index et al. are based on exactly the same mechanism described in this report.

Somewhere, somebody had to fill out a report and put down some numbers that may or may not have any basis in reality. It might be because the person assigned the task didn’t give a damn or it may be because they had to finish the report before they could go home that night so they essentially made something up, figuring that it wouldn’t matter much in the aggregate.

But as this article demonstrates, sometimes the problems are conceptual—it just isn’t clear exactly what the correct answer is. I know because for some years I was in the sample for the Survey of Income and Program Participation. The survey form had many contradictions and ambiguities that my Census Bureau handler couldn’t answer. The best I could do was be consistent. I’m sure that the vast majority of others in the sample didn’t make a fraction of the effort I did to be accurate so errors undoubtedly were rampant.

I am reminded of the advice that was given to a young British economist many years ago about the quality of Indian statistics: “The government are very keen on amassing statistics—they collect them, add them, raise them to the power, take the cube root and prepare wonderful diagrams. But what you must never forget is that every one of those figures comes in the first instance from the chowty dar (village watchman) who just puts down what he damn pleases.” (Quoted by the Congressional Research Service here.)

In the Battle for Stimulus Jobs, Shoe Store Owner Tells War Story

Louise Radnofsky reports on how the stimulus money is being spent.

How did Kentucky shoe store owner Buddy Moore save nine jobs with just $889.60 in federal stimulus money? He didn’t, and that’s turning into a big headache for him.

Moore’s store in Campbellsville, Ky., filed one of 156,614 reports from recipients of stimulus dollars designed to show how money from the $787 billion program is being spent, and how many jobs the funds have created or saved.

Moore’s slice of the stimulus came in an $889.60 order from the Army Corps of Engineers for nine pairs of work boots for a stimulus project.

Moore says he’s been supplying the Corps with boots for at least two decades. This year, because he provided safety shoes for work funded by the stimulus package, he said he got a call from the Corps telling him he had to fill out a report for Recovery.gov detailing how he’d used the $889.60, and how many jobs it had helped him to create or save. He later got another call, asking him if he’d finished the report.

“The paperwork was unreal,” said Moore, who added that he tried to figure out how to file the forms online, then gave up and asked his daughter to help.

Paula Moore-Kirby, 42 years old, had less trouble with the Web site, but couldn’t work out how to answer the question about how many jobs her father had created or saved. She couldn’t leave it blank, either, she said. After several calls to a helpline for recipients she came away with the impression that she would hear back if there was a problem with her response, and have a chance to correct it. So with 15 minutes to go before the reporting deadline, she sent in her answer: nine jobs, because her father helped nine members of the Corps to work.

“You could fill out the form in 10 minutes, but we were trying to fill out the form correctly,” she said, guessing that she spent up to eight hours on it in total.

That was a few weeks ago. The only thing the Moores heard after that was that because they’d received less than $25,000 in stimulus money, they shouldn’t have reported in the first place.

Today, three days after the reports were made public, local television stations and national newspapers including The Wall Street Journal started telephoning Moore, because his nine jobs for $889.60 in stimulus money makes him look like one of the most effective spenders in the country.

Kirby-Moore says she then got a call from her dad, asking her, ‘Paula, I thought you knew what you were doing… What did you put in that form?”

“I thought it was the right answer,” she said. “It is sad that creating nine jobs should get so much attention… If anybody’s looking for instant fame, I guess we’ve found the way.”

“The question, I would like to know is: How do you answer that? Did we create zero? Is it creating a job because they have boots and go out and work for the Corps? I would be really curious to hear how somebody does create a job. The formula is out there for anyone to create, and it’s just so difficult,” she said.

Republicans have criticized the Obama administration’s claims – based on forms like the one filed by Kirby-Moore — that the stimulus has created or saved 640,000 jobs. What counts, they say, are the number of Americans without jobs and the rising unemployment rate.

Nobody answered the phone at the U.S. Army Corps of Engineers in Louisville, Ky., this evening.

About Bruce Bartlett 76 Articles

Affiliation: Forbes

Bruce Bartlett is a columnist for Forbes.com, the online side of Forbes, the nation’s premier financial magazine.

He served for many years in prominent governmental positions including executive director of the Joint Economic Committee of Congress, Deputy Assistant Secretary for economic policy at the U.S. Treasury Department during the George H.W. Bush Administration, and as a senior policy analyst in the White House for Ronald Reagan.

Bruce is the author of seven books, including the New York Times best-selling Impostor: How George W. Bankrupted America and Betrayed the Reagan Legacy, and thousands of articles in national publications including the Wall Street Journal, New York Times, Washington Post, New Republic, Fortune and many others. He appears frequently on CNN, CNBC, C-SPAN and Fox News, and has been a guest on both the Daily Show with Jon Stewart and the Colbert Report.

Visit: Capital Gains and Games

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