Fox & Friends' crack investigative team exposes CBO's use of economic modeling
Blog ››› ››› JOCELYN FONG
As we've noted, Fox News has been targeting the Congressional Budget Office in an apparent attempt to undermine its conclusion that the health care reform law, if enacted as written, will not increase the federal debt. The campaign to discredit CBO continued this morning, with Fox & Friends featuring CBO director Douglas Elmendorf as the subject of its "Who's Ruining the Economy?" segment:
Why does Fox & Friends think Elmendorf, the head of Congress' nonpartisan office of economists and budget analysts, is ruining the economy? After all, CBO simply provides cost estimates and economic analyses and doesn't make policy. Well evidently, it's because CBO used economic models to estimate the job impact of the stimulus package and didn't "actually go out in the field and count the number of jobs created," in the words of Fox business analyst Stuart Varney.
Fox & Friends aired a clip from a video [relevant portion begins at 38:20] in which Elmendorf states that because "the best evidence" about the effects of the stimulus will likely come "from detailed studies, done often several years later," CBO's February 2010 estimate was generated through econometric models and multipliers that are essentially the same as those used when CBO made projections about the likely impact of the stimulus package back in early 2009. Using that methodology, CBO estimated in February 2010 that that by the end of 2009, the stimulus package "[i]ncreased the number of people employed by between 1.0 million and 2.1 million" compared to what would have occurred otherwise, and "[i]ncreased the number of full-time-equivalent jobs by 1.4 million to 3.0 million."
The news to the Fox & Friends crew is that CBO "didn't actually count the numbers," as co-host Steve Doocy declared. Of course, Fox & Friends didn't explain how they thought CBO could have "counted" the number of jobs saved or created by the stimulus -- the problem with trying to do a simple head count is that such a method doesn't capture the job impact of provisions like tax cuts or extended unemployment insurance. Indeed, most conservatives would say that President Bush's tax cuts created jobs, but that's not because they counted them.
The Obama administration actually has attempted to "count" the number of jobs supported by portions of the stimulus, by requiring recipients to report the number of jobs that were funded with the stimulus money they were granted. However, as CBO noted in its February 2010 estimate, "The recipients' reports reflect only about one-fifth of the total dollar amount of spending increases or tax reductions that resulted during the fourth quarter of 2009 from ARRA's [American Recovery and Reinvestment Act] provisions."
So what CBO (along with numerous private forecasters) uses to try to get a more complete picture of the stimulus impact is economic modeling. Fox & Friends makes this sound like some sort of secret that they just uncovered. But CBO clearly spelled out its methodology in its report:
CBO used information from various economic models and from analyses of historical data to estimate how output and employment responded to those increases in outlays and reductions in revenues. CBO's assessment is that different elements of ARRA (such as particular types of tax cuts, transfer payments, and government purchases) have different effects on economic output per dollar of higher spending or lower tax receipts. Multiplying estimates of those per-dollar effects by the dollar amounts of each element of ARRA yields an estimate of the law's total impact on output. CBO combined that result with estimates of how changes in output affect the unemployment rate and participation in the labor force to produce estimates of ARRA's total impact on employment.
CBO also included a table showing the multipliers used in their analysis. Noting that "uncertainty exists about many of the economic relationships that are important in the modeling," CBO provided "ranges of estimates of ARRA's economic effects that are intended to encompass most economists' views and thereby reflect the uncertainty involved in such estimates." Economists disagree on exactly what should be plugged into the models -- which is reflected by the large range of outcomes offered by CBO -- but Fox & Friends seems to be saying that the very fact that CBO used modeling is a "flaw" that undermines the estimate. Varney flatly asserted that CBO "got it wrong" on the stimulus, without providing any further explanation or specific complaints about CBO's assumptions. Needless to say, Fox & Friends did not mention that leading private analysts including IHS/Global Insight and Moody's Economy.com have produced stimulus job estimates that fall within the range given by CBO.
During the segment Varney also repeatedly claimed that CBO "can only work with the numbers that Congress gives them to work with." But CBO produces its own modeling and plugs in information about the law's provisions and the "timing and magnitude of changes to spending and revenues under ARRA." It's not clear what "numbers" Varney thinks Congress dictated to CBO for the stimulus analysis; he didn't elaborate.
And to top it all off, Fox & Friends made sure to call into doubt CBO's status as an independent nonpartisan agency. At the beginning of the segment, guest host Peter Johnson Jr. referred to "the so-called non-partisan Congressional Budget Office," and during the segment co-host Gretchen Carlson stated, "[K]eep in mind that Doug Elmendorf met with the president, and that's not necessarily supposed to happen quite that way if you are non-partisan":
CARLSON: Well the interesting thing is that so many members of Congress would not make up their minds about how they would vote on health care until they heard the CBO number. And then keep in mind that Doug Elmendorf met with the president, and that's not necessarily supposed to happen quite that way if you are non-partisan.
VARNEY: The implication is that there was some pressure applied to Mr. Elmendorf because he met personally with the president, I believe it was on a weekend, in the White House.
DOOCY: Saturday afternoon.
VARNEY: Saturday afternoon. Correct.
Got that? Elmendorf was pressured by Obama when he visited the White House on a "Saturday afternoon." Well, it was actually a Monday when Obama and "his key budget and health advisers" met with Elmendorf "and a handful of economists" to discuss options for reducing long-term health care costs. Asked about the appropriateness of that meeting, Republican-appointed former CBO director Dan Crippen reportedly said, "It's not something I would be too concerned about." And Alice Rivlin, the first CBO director said that "it is no big deal."
Recognizing that the Fox & Friends crew was pushing him to malign CBO a bit more than he was willing, Varney affirmed that CBO "is nonpartisan." After Carlson said that, no, in fact, CBO is like a partisan pollster, Varney asked, "Is this Fox & Friends or is this a new show called ambush? Which is it?," to which Carlson replied, "It's an information show."
From the March 30 edition of Fox News' Fox & Friends: