Great quotes

Picture source:

"... if a mandate was the solution, we can try that to solve homelessness by mandating everybody to buy a house..."

- A campaigning Senator Obama in 2008, criticizing Hilary Clinton's proposal of an insurance mandate.

Calculating program impacts

It can be very difficult to forecast the impact of economic legislation before it is passed, and just as hard to measure this even after the passage of time... So, for example, discussions of what was achieved by The American Recovery and Reinvestment Act of 2009 (ARRA) range all over the map - from Republicans claiming that it has exacerbated the economic problems of the country, to Democrats who insist that it was very successful in generating employment and economic activity and that the situation would be much worse had it not been passed, to positions in between....

A CBO report, 'Estimated Impact of the American Recovery and Reinvestment Act on Employment and Economic Output from October 2011 Through December 2011', speaks to the methodologies used by The Congressional Budget Office to estimate the legislation's impact.

The first methodology is driven by the legislation itself... It required those who received over $25,000 as a result of the legislation to report on a quarterly basis a myriad of details about the projects funded and their impacts. If you summed them up this provided numbers of people employed, which could then be attributed to the effects of the legislation.

The CBO report points out the deficiencies of this methodology:

"However, the reported number of jobs funded is not a comprehensive measure of ARRA’s effect on overall employment or even of those provisions of ARRA for which recipients’ reports are required. The actual impact could, in principle, be significantly larger or smaller than the number of jobs reported. If, for example, recipients’ reports include employment that would have occurred without ARRA, the impact on employment suggested by the reports could be too great. Some people whose employment was attributed to ARRA might have worked on other activities in the absence of the law...

Conversely, the reported figure could be too low because the reporting requirement is limited to primary and secondary recipients of funds and thus excludes lower level recipients, such as subcontractors hired by a main subcontractor. Thus, if expenditures under ARRA led to increases in employment among lower-level subcontractors and vendors, those effects would be missed by the reports.

Recipients’ reports also do not include indirect effects that could increase or decrease the impact on employment. Among those effects are potential declines in employment in other businesses or economic sectors as demand shifts toward the recipients of ARRA funding— a phenomenon often called the “crowding out” effect of government policies.

Conversely, spending under ARRA could lead to higher employment at companies that are not directly connected to that spending...

Finally, the recipients’ reports reflect only about one-fifth of the total amount of spending increases or tax reductions that are attributable to ARRA’s provisions. The reports cover direct government purchases of goods and services, grants and loans to private entities, and some grants to states and localities, but they do not cover tax cuts or increases in transfer payments to individuals..."

So, the CBO turns to a second methodology. In this case it grouped all the ARRA provisions into a number of categories (see chart below) and then applied the historical "multipliers" (using a 'low' and a 'high' estimate for each category based on a consensus amongst economists) to the various expenditures at the various dates that they occurred... The output estimates thus obtained were translated into estimates of effects on employment and unemployment, etc.

This second methodology also has pluses and minuses... Per the CBO report:

"... A key advantage of the model-based approach used in this analysis is the ability to provide estimates of the total effects throughout the economy of the government spending, transfer payments, and tax cuts resulting from ARRA...

A key disadvantage of the model-based approach is the considerable uncertainty about many of the economic relationships that are important in the modeling. Because economists differ on which analytical approaches provide the most convincing evidence about such relationships, they can reach different conclusions about those relationships... For those reasons, CBO provides 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..."

However, unlike economists, most politicians don't go for estimates, ranges, or nuance! So, if the CBO estimates that between 0.7 million to 3.3 million jobs may have been created by ARRA in 2010, the administration will tout the 3.3 million figure!

In memoriam - Anthony Shadid

This past week the news broke that Anthony Shadid had died on assignment... Immediately the encomiums started to flow - "... In an era blessed with more than its fair share of brilliant foreign correspondents, he was the best of the breed...," being a relatively mild example (for more see the reactions of his NYT colleagues at: Remembering Anthony Shadid or do a Google search...) It seemed that every journalist covering international affairs was coming out of the woodwork to say how he or she had been touched, inspired, awed, etc. by Anthony Shadid... This blogger has two observations:

• The praise was well-deserved, Anthony Shadid was a great reporter who told it the way it is...
• However, there is scant evidence that the legions of journalists professing to have been inspired by him were all inspired enough to emulate him insofar as it comes to taking the time and care (as he did) in writing about the subjects that they cover! Most are pale shadows of Shadid. For example, which of the main journalists covering say, Iran, are doing a good job of laying out the facts and circumstances of a complex narrative? Hardly any - most seem content to be stenographers, parroting the positions of the administration or of various U.S. politicians; while others are actively beating the drums of war...

This is a big loss....

Anthony Shadid (1968 - 2012)
Anthony Shadid: The Best of Our Breed
At Work in Syria, Times Correspondent Dies
Correspondent Anthony Shadid, 43, dies in Syria
Anthony Shadid dies, leaves hole in foreign correspondency
Journalists and Friends Respond to Death of Anthony Shadid...

The 2004 Pulitzer winners - International Reporting - Anthony Shadid
The 2010 Pulitzer winners - International Reporting - Anthony Shadid

Random chart - gas prices

Source: Gasoline Prices: $4.50 per gallon by Memorial Day?

Random chart - unemployment context

Source: CBO: Understanding and Responding to Persistently High Unemployment

Where we are:

• The unemployment rate reached a very high level, peaking at 10.0 percent in October 2009. That rate has been topped in the post–World War II period only once before—during the severe 1981–1982 recession. From the end of2007 to October 2009, the number of unemployed people rose by almost 8 million.

• Unemployment has been high for an extended period. As of January 2012, the unemployment rate had been above 8 percent for 36 months and at or above 9 percent for 28 of the preceding 36 months. In contrast, the unemployment rate exceeded 8 percent for 26 months and was at or above 9 percent for 19 months during the recession of the early 1980s.
  

• Many people would like to work but have not searched for a job in the past four weeks, or are working part-time but would prefer full-time work. If those people were counted among the unemployed, the unemployment rate in January 2012 would have been about 15 percent.
  

• The share of unemployment accounted for by the long-term unemployed (people who have been seeking work for more than 26 weeks) has been at an all-time high. Over 40 percent of people who are currently unemployed have been out of work for more than half a year, as compared with about one-quarter during the 1981–1982 recession.
  

And the factors that caused the unemployment rate to increase from five percent in December 2007 to 8.5 percent in December 2011 - a three and a half percent increase:

• Weak demand for goods and services as a result of the recession and its aftermath, which accounts for about two-and-a-half percentage points;
  

• Mismatches between the needs of employers and the skills and location of the unemployed, which account for about one-half of one percentage point;
  

• Incentives from extensions of unemployment insurance for people to stay in the labor force and continue searching for work, which account for about one quarter of one percentage point; and.
  

• Erosion of skills and the stigma attached to long-term unemployment—that is, employers’ perception that people who have been unemployed for a long time would be low-quality workers—which together account for about one-quarter of one percentage point.
  

Perhaps why it isn't working...

Source: NATO Training Mission-Afghanistan (NTM-A/CSTC-A) Organizational Chart

Random chart - Iraq, Afghan tribal differences

Source: U.S. Army Human Terrain Report: Afghan Tribal Structure Versus Iraqi Tribal Structure

"... Most US personnel that are serving in Afghanistan have already served a tour in Iraq and are accustomed to doing things “the Iraq way”. Many people are trying to apply the lessons learned in Iraq to Afghanistan, which in many cases is inappropriate. AF2 wants to provide a product to US units to compare and contrast Iraqi tribal structure and Pashtun tribal structure to prevent future missteps by US forces.

The notion of applying ideas that worked in Iraq to Afghanistan is fraught with problems. The “lessons don’t transfer directly,” according to John Nagl, one of the authors of the Army/Marine Corps Counterinsurgency Field Manual (FM 3-24). William McCallister, an expert advisor to the Marine Corps on tribal dynamics in Iraq2 said he is “not a fan of taking the Anbar experience and creating TTPs” for a Pashtun context.

The reasons behind this are legion. For one, the historical experiences of Iraqi and Pashtun societies are so dissimilar as to make comparing them difficult, if not impossible. For another, the specific circumstances of each warzone—one a sectarian conflict, the other a fractured society handling an international insurgency—doesn’t allow for easy generalization between the two.

Furthermore, each society is fundamentally different on a structural level. In Iraq, leadership is in a sense “institutionalized,” or “codified” in the sense that there is a set and identifiable structure for community leadership to interact with each other and with the State. In Afghanistan, however, that system is neither “institutionalized” nor “codified” in any real sense; therefore, structures of community leadership and power relationships within and between tribal groups and the state are much more ad hoc and cannot be discussed in a general sense. Comparing these two societies side-by-side demonstrates this, and shows just how difficult it is to draw lessons from one to the other..."