Buried within the Congressional Budget Office's most recent report on the progress of President Obama's American Recovery and Reinvestment Act was a surprising admission: the CBO now estimates the stimulus might have been only half as effective as previously thought.
You wouldn't know it from the headlines. "Stimulus added up to 3.3M jobs," reads a representative piece from Politico reporting on the November CBO report. This headline is accurate for the high-end estimate. That estimate, however, is essentially unchanged from previous reports. In the past, the CBO's low estimate for jobs "created or saved" was 1.2 million which, in this report, has dropped to only 600,000.
A particularly unusual requirement in the stimulus was that the CBO issue regular reports on its estimates of the legislation's economic effectiveness. Standard neo-Keynesian macroeconomics, to which the CBO has long seemed to subscribe in its economic modeling, posits that government spending creates a "multiplier effect" that ripples throughout the economy and creates more growth than it would normally appear to. The CBO's newest report cuts one of their estimates in half, validating conservative criticism that they've been overestimating the effect of the stimulus.
If the debate about the law was shaped by the possibility that a $825 billion spending law would yield only six hundred thousand jobs, the debate may have been a lot different. Over $1.3 million dollars per job "created or saved?" That's not a number that Democrats are eager to be touting on Capitol Hill.
The Center on Budget and Policy Priorities put together a chart representing the CBO's revised estimates:
It might be difficult to find those who would argue that the stimulus was worth it if the CBO's new low-end estimate of jobs "created or saved" is accurate. The left will always have Paul Krugman and similar ideologically-aligned colleagues arguing that the CBO is wrong, that the economic multipliers are higher, and that the CBO is actually underestimating the growth that comes from a massive injection of government money into the economy. The problem for Krugman et. al is that the economics on such undertakings are far from settled.