Veronique De Rugy at The Corner:
Using recipient report data from Recovery.gov, as well as economic and political data from the Bureau of Labor Statistics, the Census Bureau, GovTrack.us, and others, I have compiled a series of facts about stimulus spending. The complete dataset used for this report is available for download at Mercatus.org — it covers the fourth quarter of the calendar-year 2009 Recovery Act contracts and grants only — but here are the main facts.
First: The idea behind the $787 billion stimulus bill is that, if the government spends money where it is the most needed, it will create jobs and trigger economic growth. Hence, we should expect the government to invest more money in districts with higher unemployment rates.
Controlling for the percentage of the district employed in the construction industry, a proxy for the vulnerability to recession of a district, I find no statistical correlation for all relevant unemployment indicators and the allocation of funds. This suggests that unemployment is not the factor leading the awards. Also, I found no correlation between other economic indicators, such as income, and stimulus funding.
Second: On average, Democratic districts received one-and-a-half times as many awards as Republican ones. Democratic districts also received two-and-a-half times more stimulus dollars than Republican districts ($122,127,186,509 vs. $46,139,592,268). Republican districts also received smaller awards on average. (The average dollars awarded per Republican district is $260,675,663, while the average dollars awarded per Democratic district is $471,533,539.)
Of course, there are more Democratic districts than Republican districts in the Congress. So I checked for the correlation between political indicators and stimulus funding. I found that with the exception of the district’s party affiliation (whether the district’s representation was Republican or Democratic), political variables had no effect on stimulus funds allocation.
So how much did party affiliation matter? Well, while the effect was significant, because of the specifications of the model more confidence should be placed in the relationship between the two variables than on the quantification of that relationship. In other words, while we know that whether the district is represented by R or D mattered for funding, I can’t tell you how much this factor mattered compare to other factors.
Third: In this second quarter for which Recovery.gov reports are available, over 65,000 contracts and grants were awarded. The total spending topped $170 billion.
Fourth: The total number of jobs claimed as created or saved overall by the stimulus actually declined from last quarter, shrinking from about 634,000 to a little over 597,000.
This job shrinkage could be the result from changes made by the White House to its method for counting jobs. However, I doubt it. The new job count considers that every job paid for with stimulus dollars is a job created. This logic applies to pay raises.
Five: I found that an average cost of $286,000 was awarded per job created, a 16.3 percent increase over the previous period.
More de Rugy at Big Government:
I received many emails on Friday and this weekend about the data published here showing that on average Democratic districts are getting almost twice the amount of stimulus money than Republican districts. Republican districts also received smaller awards on average. The average dollars awarded per Republican district is $260,675,663, while the average dollars awarded per Democratic district is $471,533,539.
Several readers asked if the difference could be explained by the fact that Democratic districts have many more people than Republican districts have. So I looked at the numbers and here is the result. It’s not.
Republican districts get $362 per capita on average
Democratic districts get $692 per capita on average
Also, on average, Democratic districts received one-and-a-half times as many awards as Republican ones. Democratic districts also received two-and-a-half times more stimulus dollars than Republican districts ($122 million vs. $46 million). Of course, there are more Democratic districts than Republican districts in the Congress.
Is the politics part of the allocation decision?
Well I checked for the correlation between political indicators and stimulus funding. I found that there are no effect of political variables (leadership, tenure in office …) on stimulus funds allocation with one exception: the district’s party affiliation (whether the district’s representation was Republican or Democratic) does matter.
So how much does party affiliation mattered? While the effect is significant, because of the specifications of the model, more confidence should be placed on the relationship between the two variables then on the quantification of that relationship. In other words, while I am confident that whether the district is represented by R or D matters for funding, I just can’t tell you how much this factor matters compared to the other factors that went into the allocation decision.
Not only that, but the number of jobs “created or saved” has actually declined in the last quarter, leaving the amount of money spent per job at a cool … $286,000. As for the accusation of political favoritism, I’ll defer to de Rugy since she’s the economist, but I actually never understood the stimulus to be targeted specifically at districts where unemployment was highest. My understanding was that, yeah, the money would be spread around the country, but that the intended effect was systemic: Money directed to district X would stimulate its economy, which would in theory increase demand for goods or services produced locally or in far-flung district Y, just as an injection in the arm can be aimed at curing a problem in some other part of your body via circulation. But even assuming she’s right, is it safe to draw an inference of favoritism? Here’s what USA Today reported in July 2009, shortly after our Keynesian experiment got up and running:
Counties that supported Obama last year have reaped twice as much money per person from the administration’s $787 billion economic stimulus package as those that voted for his Republican rival, Sen. John McCain, a USA TODAY analysis of government disclosure and accounting records shows. That money includes aid to repair military bases, improve public housing and help students pay for college…
Investigators who track the stimulus are skeptical that political considerations could be at work. The imbalance is so pronounced — and the aid so far from complete — that it would be almost inconceivable for it to be the result of political tinkering, says Adam Hughes, the director of federal fiscal policy for the non-profit OMB Watch. “Even if they wanted to, I don’t think the administration has enough people in place yet to actually do that,” he says…
The imbalance didn’t start with the stimulus. From 2005 through 2007, the counties that later voted for Obama collected about 50% more government aid than those that supported McCain, according to spending reports from the U.S. Census Bureau. USA TODAY’s review did not include Alaska, which does not report its election results by county.
The report concluded that the money was doled out “guided by formulas that have been in place for decades and leave little room for manipulation.” Sure would be nice to see a follow-up piece springboarding off of de Rugy’s work now that we have another nine months of data in the bank. I’m sure everything’s kosher: Surely a president who showed such fierce resistance to special interests during the ObamaCare process wouldn’t let political considerations affect his stimulus awards.
De Rugy rightly points out that she can’t account entirely for the statistical relevance of party affiliation but that the data strongly suggests a political element in the granting of stim, money contracts.
I’d love to see a study on a comparison between the economic health of areas that received stim money and those that didn’t. I’ll bet that kind of analysis would show no difference between those who got the pork and those who didn’t.
The study, by Veronique de Rugy of George Mason University and the National Review, claims that congressional districts which elected a Democrat to the Congress received a larger amount of stimulus finds by a margin which is statistically significant even after controlling for certain other effects like the unemployment rate. However, the study does not control for at least one other variable that is overwhelmingly important in determining the dispensation of stimulus funds.
The variable in question is in fact pretty obvious if you simply look at the districts that have received the largest amount of stimulus money, according to de Rugy’s dataset.
The district that received the largest amount of stimulus funding in the 4th Quarter of 2009, according to de Rugy’s tally, is California’s 5th Congressional District. Is there anything notable about the 5th Congressional? Well, it is home to the state capital, Sacramento. Let’s keep that in mind.
Next on the list is New York’s 21st Congressional District. The largest city in the 21st is the state capital of New York, Albany.
Third is the 21st Congressional District of Texas. It contains parts of Texas’ state capital, the wonderful city of Austin. (Another district that contains parts of Austin — the 25th — ranks 14th on de Rugy’s list.)
At this point, it ought to be pretty obvious what is going on. The three districts receiving the largest amount of stimulus funds are home to the capitals of the three largest states — New York, California, and Texas. Let’s pause for a moment and make a bold prediction. I’ll bet you that the district that ranks 4th on the list will contain the capital of the 4th largest state, Florida.
Bingo. Up 4th on the list is Florida’s 2nd Congressional, home to Tallahassee.
Fifth is Pennsylvania’s 17th, which hosts the state capital, Harrisburg.
The sixth through tenth districts contain the capital cities of other large states: Ohio, Georgia, Michigan, Illinois and New Jersey, respectively. They are followed by districts that include the state capitals of Indiana, Tennessee, Virginia — then another part of Austin, Texas — then Arizona, Missouri, North Carolina and Wisconsin. Finally, in 19th place is South Carolina’s 3rd Congressional District, which does not host a state capital. (Ironically, it has elected a Republican — J. Gresham Barrett — to the Congress).
This, of course, makes perfect sense. A lot of stimulus funds are distributed to state agencies, which are then responsible for allocating and administering the funds to the presumed benefit of citizens throughout the state. These state agencies, of course, are usually located in or near the state capital.
That de Rugy has testified before Congress on the basis of her evidence, and never paused to consider why the top five congressional districts on her list overlap with Sacramento, Albany, Austin, Tallahassee and Harrisburg, is mind-boggling. The presence of a state capital is the overwhelmingly dominant factor it predicting the dispensation of stimulus funds. This could have been discerned in literally five minutes if she had bothered to look at the apparent outliers in her dataset and considered whether they had anything in common — a practice that should be among the first things that any researcher does when evaluating any dataset.
de Rugy responds to Silver:
Nate Silver, the respected blogger at 538.com, has taken issue with my study of how stimulus funds have been disbursed. This is a good thing, because we really need to have more discussions to determine where the stimulus dollars are going and why they might be headed in particular directions. In fact, this is the reason why all my data is up at the Mercatus Center website for everyone to see and discuss. This is also why I have detailed my methodology in the paper. This report is part of a series that will come out every quarter as more data becomes available, and it is a work in process.
Mr. Silver characterizes the findings in my study by saying, “My bet is that this is all a bunch of noise resulting from an incomplete — and possibly deliberately biased — research design.”
However, there is more to my analysis than Mr. Silver’s post suggests.
1) I agree with Mr. Silver that checking for urban/rural populations and race may be a good idea, and I’d like to re-run the regressions per his specifications. I will gladly give him the Stata printouts when I am done.
2) I will also check for state capitals. While is no doubt that since the reporting only includes primary and sub recipients, it might be the case that money is being disbursed from the capitals. However, after skimming government documents about how the money is allocated there is no clear evidence that this is the case. I will look into it with Mr. Silver’s comments in mind.
I worked within the confines of $18 million Recovery.gov website, a website that we were promised would allow us to track the money to the last cent. Obviously, that is not the case. The money trail ends at the level reported, and from the website one cannot tell where the money went next.
As for this point alone being evidence of a lack of political bias, I would like to quote Mr. Silver’s own words: “By the way — if you throw out the districts that are home to state capitals, those which elected Democratic members to Congress still rank higher, receiving 31 percent more stimulus funds, on average, than those which elected Republicans. So, perhaps there is hope for her analysis yet.”
So even after I use his methodology I will find that Democratic districts, other than state capital ones, are getting 30 percent more than Republican ones. That does seem like a possible political bias to me, which would be worth looking into.
How much of a bias? I don’t know. Let’s not forget that my take on the data has always been the following: The regression analysis shows that district’s party representation matters. However, I cannot say how much it matters compared to other factors (such as the formula used by different agencies). I said it loud and clear each time I presented my findings. Indeed, I explained it in plain language to Chairman Oberstar last Friday when I testified before his committee.
If it is not possible to nail down the precise amount that party affiliation matters, does anyone truly want to argue that there are no political factors influencing this stimulus or stimuli in the past (whether put into place by Republicans or Democrats)? There is a lot of literature in economic-history journals on similar patterns in New Deal spending, and it consistently shows that New Deal spending correlated rather strongly and negatively with the margin of votes in the previous election. Areas where Roosevelt won by a little got more New Deal bucks than ones where he won by a lot. (I was directed to one article in particular by a reader this morning, and it is worth looking into: Price V. Fishback, Shawn Kantor, and John Joseph Wallis’s “Can the New Deal’s Three Rs Be Rehabilitated?: A program-by-program, county-by-county analysis.” Explorations in Economic History 40 (2003), pp. 278-307.)
I am confident that a similar pattern can be found with President Bush’s stimuli, which, by the way, I was publicly and consistently against.
Veronique de Rugy has issued a fairly gracious response to my critique of her study on the disbursement of stimulus funds, the crux of which was that she had failed to account for a variable (the presence of a state capital) that was extremely important in predicting the allocation of stimulus funds (because much of the money is intermediated by state governments).
Most importantly, she has promised to evaluate some of my concerns and to re-run her analysis. This is terrific — and she is to be commended for her responsiveness. de Rugy is also to be commended for having released portions of her dataset** on the Mercauts Center website (something which she had done originally). Nevertheless, some further comment on her response — and the issues in research design that her study raised — is warranted:
— I share de Rugy’s disappointment with the quality of the data available at recovery.gov. Frankly, I am not sure that testing her hypothesis to a peer-reviewable level of robustness is possible given the middling quality of data and the inherent ambiguity with how particular projects must be assigned to particular congressional districts.
— de Rugy writes: “The unemployment data for the regressions has in fact been used by congressional district, not by MSA. The confusion comes from the fact that the Excel file on the website includes unemployment by MSA.” Good: that particular issue is cleared up, as well as the reason for my confusion.
— For me, personally, the notion that the allocation of stimulus funds could have reflected a broad-based and widespread effort to benefit districts represented by Democrats seems implausible — something which is well worth examining but something which should have received especially rigorous scrutiny. This is particularly so given that many of the funds were intermediated by state governments, not all of which are controlled by Democrats, as well as federal agencies that were constrained by formula rules.
There are two other variations that I find less impluasible:
I find it less impausible that the funds could have been directed toward those sorts of districts which tend to vote Democratic (e.g. as measured by PVI or by Obama vote share) — even after controlling for other demographic variabes — a possibility that de Rugy raises in her response but which was not the focus of her hypothesis. The difference is that that this could have resulted from a sort of unconscious bias in the design of the stimulus rather than a deliberate conspiracy.
I also find it less implausible that some *particular* projects could have been directed toward those districts that had a Democratic representative who was either especially influential or who a key swing vote in the House. (This is what we call pork.) However, de Rugy ran various tests on the types of Democratic districts that benefited from the stimulus and did not find any relationships with the characteristics of the Democratic members of Congress that tended to represent them.
Wow. Read Nate Silver’s takedown of a study that’s been making the right-wing rounds, claiming that stimulus funds have been funneled to Democratic districts. It turns out that most of the districts receiving big funds are Democratic, but that’s because … most of them are districts that include state capitals (usually urban, and typically Democratic), and a lot of the aid is funneled through state governments.
Jonathan Chait at TNR
Nate’s analysis shows that the underlying study was ludicrously wrong, but not that it was dishonest. But the response by Veronique de Rugy of George Mason is inconsistent with any attempt to do honest work. When someone points out that the result you’ve trumpeted is actually a data artifact, the correct response is “Ooops!” not “The dataset made me do it!”
If Ward Churchill deserved to be fired for scholarly misconduct (as opposed to his obnoxious opinions) so does de Rugy. No one even vaguely competent would have made such a blunder, and no one even approximately honest would have done anything but make a forthright retraction once it had been revealed.
Of course there’s a big overlap between the wingnuts who have been trumpeting “climategate” and the wingnuts who claimed that de Rugy had found the smoking gun proving that the stimulus bill was just Democratic pork. You can count on them not to correct either of their false assertions.
Derek Thompson at The Atlantic:
In fact, the argument that Republicans are footing the bill for lavish spending on Democratic states might be backward. Harvard’s Jeff Frankels finds that the relationship between federal spending and conservatism in the states actually flows in the opposite direction: conservative states get more government largess per buck.
He plots the relationship between federal expenditures per dollar of taxes paid on the X-axis (2005 data) against percent of Republican votes per state on the Y-axis. In other words, as you move to the right along the X-axis, states receive more federal spending per tax dollar. As you move north on the Y-axis, states get more Republican. Here’s the graph:
Paul Waldman at Tapped:
To follow up on Tim‘s discussion of Nate Silver‘s takedown of Veronique de Rugy‘s bogus study claiming to find that the stimulus has been distributed in a partisan way, this is yet more evidence that the Internet is awesome.
In the old days, a completely disingenuous argument like De Rugy’s would find its way into influential hands due to her institutional connections with establishment Republicans, get repeated a million times, and perhaps even have an impact on future debates. It would be countered only by somebody at a liberal think tank, who might write a paper showing why it was wrong, and nobody would notice. But now, the mighty Nate Silver, who has a tremendous amount of credibility built not on connections with important people but solely on merit, can quickly gut de Rugy’s argument like a trout, and people will actually notice. That’s because he has a large audience that he’s built up without any kind of institutional support. I’m guessing Rachel Maddow will do a segment on this tonight, and pretty soon de Rugy will be utterly discredited. Or we can hope, anyway.
EARLIER: The Green Depends On Whether You’re Red Or Blue
UPDATE: de Rugy responds
Tim Cavanaugh at Reason