“How do you prove, the jobs you’re saving?” Host Neil Cavuto asked this tricky question during the Feb. 21 “Cavuto on Business.” “That would be like me saying if I go from eating 3 cannolis a day to 2 cannolis a day, I will save myself from gaining ten pounds but I’m still up 20, from eating the 2 cannolis.”
Italian pastries aside, Cavuto’s question prompted economist Ben Stein to dispute President Obama’s claims about how many jobs the stimulus bill will supposedly save.
To drum up support for the massive legislation, Obama repeatedly pledged that the stimulus package will create or save 3.5 million jobs. This vague wording concerned Stein and Cavuto and left them wondering how job saving can be proven.
Stein, author of “How to Ruin the United States of America,” described how Obama’s estimate cannot be justified. “At first it [jobs saved by the stimulus] was gonna be 4 million jobs, then it was down to 2 million and then up to 3 million,” he reminded. The results are so unknown because as he explained, “we don’t know a great great deal” about how the market will respond with and without the stimulus package.
Stein said he believed Obama sincerely wants to do the right thing, but pointed out “they just don’t know what they’re doing! And I have to say to be honest, neither does anyone else.”
Stein could have been referring to Mark Zandi, whose economic models Obama relied on when he promised the stimulus would create or save 3.5 million jobs. Zandi, chief economist of Moody’s Economy.com, admitted that his models involve high amounts of uncertainty. He also confessed that “the models are based on historic experience, and we’re outside anything we’ve experienced historically. We’re completely in a world we don’t understand and know.”
Economists use these econometric models to make predictions, yet their estimates involve high levels of guess work and rely on the assumption that the economy will act as it has historically. Thus, in this unprecedented time there is no perfect model to predict job losses, and there is no way to measure how many jobs will be truly saved as a direct result of the stimulus package.
Radio talk show host Nancy Skinnerassertively defended econometrics on the show and received a friendly criticism from Stein. “You are the last person in the world who believes in econometrics. God bless you, they should give you the Nobel Prize,” Stein sarcastically concluded.
Skinner fervently defended the accuracy of econometrics. When she matter-of-factly stated how many jobs the stimulus will create in
