American Elephants

The CBO Report Was Planned to Show that the Stimulus Was a Success. Are You Surprised? by The Elephant's Child

Oh, the Stimulus again!  The Congressional Budget Office (CBO) has delivered a new report that estimates that the $862 billion stimulus has so far created or saved 1.5 million jobs.

The CBO’s calculations are not based on observations of the economy’s recent performance, according to the Heritage Foundation’s Brian Riedl.  Rather they used an economic model that was programmed to assume that stimulus spending automatically creates jobs.

Mathematicians, Riedl says, call this assuming what you are trying to prove.

The CBO model started by automatically assuming that government spending increases Gross Domestic Product (GDP) by pre-set multipliers:

  • Every $1 of government spending that directly purchases goods and services ultimately raises the GDP by $1.75;
  • Every $1 of government spending sent to state and local governments for infrastructure ultimately raises GDP by $1.75;
  • Every $1 of government spending sent to state and local governments for non-infrastructure spending ultimately raises GDP by $1.25; and
  • Every $1 of government spending sent to an individual as a transfer payment ultimately raises GDP by $1.45

Mr. Reidl goes on to explain where they went wrong.  I am no mathematician, so please read the whole thing (it isn’t long) for a complete explanation.

To me it sounds suspiciously similar to recent revelations involving temperatures, sea levels, glaciers, African crops,  emails and computer codes.  That sort of thing.

9 Comments so far
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Even if their calculations are correct I don’t see how it can be called a success. That means it cost taxpayers over a half million dollars per job created. How is that a success?


Comment by Jay Burns

Nobody has yet explained just where the money went that supposedly was designated for non-existent Congressional districts. And there were lots of them. It seems as if this should be a big deal, but it has just dissolved away into the “old news” category. I guess there’s just so much wasted money that nobody wants to raise the question.


Comment by The Elephant's Child

The President still thinks were Stupid !


Comment by Ron spins

And if the CBO report had said the stimulus did not work all the market theologians would be using that report to support their egos. The CBO also said that tort reform would not significantly reduce health care cost. In this case Democrats used a percentage of the total health care cost and Republicans used the actual number.


Comment by Mark Baird


I would be interested to see where the CBO said tort reform would not significantly reduce health care costs. Could you please provide the link? It is my understanding that the CBO only talks about specific proposals that are in front of it, like it addresses the Democrats health care bills, but there has never been a bill that proposed tort reform. So I would be very interested in seeing their comments on tort reform. Would you link to them please?


Comment by American Elephant

Following is a GAO report on medical malpractice and could not find any evidence to substantiate the claims of lawsuits impacting health care costs, access to health care or defensive medicine (with one possible lose connection relating to OBGYN). But of course you will not see this report on any media outlet swinging left or right.

Click to access d03836.pdf

Remember the CBO report regarding the cost of a single payer system that we all grasped to support our arguments against a single payer system…

Well, there is the CBO report which had this to say about tort reform:

“But even large savings in premiums can have only a small direct impact on health care spending–private or governmental–because malpractice costs account for less than 2 percent of that spending.”

And of course there is Tillinghast-Towers Perrin (one of the largest in the world that provides risk management for the insurance and reinsurance industry).

According to the actuarial consulting firm Towers Perrin, medical malpractice tort costs were $30.4 billion in 2007, the last year for which data are available. We have a more than a $2 trillion health care system. That puts litigation costs and malpractice insurance at 1 to 1.5 percent of total medical costs. That’s a rounding error. Liability isn’t even the tail on the cost dog. It’s the hair on the end of the tail.

Of that 1 to 1.5 percent what portion of that is “frivolous”? (Page 10)

And then of course the report from Towers Perrin that states that the total tort cost in the US is 2% of the GDP. What percentage of that is “frivolous” and of that percentage what percentage is “frivolous” corporate lawsuits. So how much are “frivolous” lawsuits driving up the cost of everything? Maybe less than 2 cents on the dollar or maybe even less the 1 cent on the dollar?

Click to access getwebcachedoc

It is unfortunate that everyone is so willing to give up their right to sue with such a small cost to society, if in fact these facts are true. If that is the case then maybe we should do something with smokers or overweight people such as myself. After all they present a tremendous cost to society. Or maybe we should ration end of life care as this has a significant cost to society.

And there is defensive medicine of which the numbers all over the board and of which their have been no real good statistics to work with. (Of course you can not trust the common man to sit on a jury on decide what is best for his own community. Only liberals would think of something such as this.)


Comment by Mark

Measuring the cost of defensive medicine.

“After reviewing thousands of patient records, medical researchers have estimated that only 2 to 3 percent of cases of medical negligence lead to a malpractice claim.

Five percent of all doctors were responsible for 43.3% of all medical malpractice payments.(Pg. 42)

Click to access 2006_NPDB_Annual_Report.pdf

What about this case?

How much is this womans breasts worth, $250,000? What about if they were your testicles removed from a mis-diagnosis of cancer
“…A pathologist mixed up her tissue sample with that of another woman who did…”

“Physicians widely believe that jury verdicts are unfair. This Article tests that assumption by synthesizing three decades of jury research. Contrary to popular belief, the data show that juries consistently sympathize more with doctors who are sued than with patients who sue them. Physicians win roughly half of the cases that expert reviewers believe physicians should lose and nearly all of the cases that experts feel physicians should win. Defendants and their hired experts, it turns out, are more successful than plaintiffs and their hired experts at persuading juries to reach verdicts contrary to the opinions of independent reviewers.”

Click to access peters.pdf

“There’s a lot of money to be made in owning imaging machines,” said Dr. Richard Strax, president of the Texas Radiological Society. “You can buy a relatively inexpensive second- or third-hand MRI machine for a few hundred thousand dollars and make millions on it.”

“After reviewing thousands of patient records, medical researchers have estimated that only 2 to 3 percent of cases of medical negligence lead to a malpractice claim. For every notorious error — the teenager who died in North Carolina after being given the wrong blood type, the 39-year-old Massachusetts mother killed by a chemotherapy overdose, the newborn twins (children of the actor Dennis Quaid) given too much blood thinner — there are dozens more. You never hear about these other cases.”

And this particular error happened eight times previous to this in one year. I wonder if someone would have sued this hospital the first time this happened this would have changed things. How high would the award have had to been to change the process. Thankfully this happened to a high profile person such as Dennis Quaid so that this can get publicity.

California has a $250,000 cap. Was this the reason people did not sue prior to this case? No lawyer would take their case because they would lose money?

Maybe if we just sit by long enough everyone will be prevented from using state tort laws to hold people accountable. 100,000 people are killed each year by mistakes. 100,000 people killed every year and not even a mention on cable news.

So, yes, let’s put a national cap on pain and suffering and punitive damages so the common man will not be able to find a lawyer to take his case.

There are other means of controlling the “beast” if we can not trust the common man to make the correct decision about his community.


Comment by Mark

I read your evidence, Mark, which doesn’t really address the problem. Tort laws are different in different states, and I have no idea how much they differ. The whole thing is a state problem, and not properly the business of the federal government.

The question of tort reform and defensive medicine has little to do with the statistics on number of of medical malpractice events that lead to a malpractice claim, nor with the number of claims.

As I understand it, in general, tort law involves two kinds of awards. One is for damages to compensate the victim for actual harm; the other is an award for pain and suffering –their bad feelings. In both cases, what is involved are individuals’ differing ideas about “what is fair.” When a surgeon amputates the healthy leg by mistake, the need for damages is pretty clear. When a baby is born with a defect, is it a dirty trick by Mother Nature or the fault of the obstetrician? Awards of millions by sympathetic juries such as the one famously convinced by John Edwards — who channeled a dead baby– are the kind that drive defensive medicine.

It isn’t the ordinary award of $250,000 that drives defensive practice, it is the uncertainty of what a jury might do. If you have ever served on a jury, you might appreciate why lawyers mostly advise you to avoid going to court.

Defensive medicine means a doctor orders two tests when one might do, orders a CT scan or an MRI even though he suspects it is unnecessary, sends a patient to a specialist just to be sure.

In Indiana, Gov. Mitch Daniels has reduced the cost of health care by 11% a year by offering (not requiring) medical savings accounts. Patients offered the incentive of carrying over savings to the next year, and seeing directly what their medical costs are, save a lot of money. Patients who never see a bill except for their co-pay are encouraged to use as much medical care as they can. Consumer-driven medical care costs much less.

A lawyer who refuses to take a case with a $250,000 cap, isn’t very confident of his case. They usually get 40%. Some kind of certainty in tort law would be far better for all honest participants. Don’t set up straw-man arguments. The “common man”– the consumer– can bring down the cost of medicine if he can just get the bureaucrats to back off.

The post, by the way, was about Stimulus spending, so you’re a little off subject.


Comment by The Elephant's Child

“Some kind of certainty in tort law would be far better for all honest participants.”

I am a firm believer in the wisdom of the crowd and of people in general if they are given good information.

I am suing one of the largest companies in the world right now so I understand very well how the system works and the cost associated with discovery and the trial. The cost of discovery is very costly and that does not even get you into the court house.

So where does that leave me with a $400,000 cap in the state of Minnesota going against a company making $20 billion in annual revenue that can and has taken their cases all the way to the Supreme Court.

Did this company commit fraud or were they negligence in my sixteen year old sons death? Did they break any laws? It smells like it but to prove that takes discovery and that requires money. Will they try and out spend us? More then likely or they would not have hired the top lawyer in the country.

Of all the big law firms not one would take my case. So you see caps do have an impact on restricting a persons access to the courts.


Comment by Mark

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