We have learned that the sequestration already has cut 1.6 million jobs. So we need job creation. We need to help the middle class by creating jobs.”
— Senate Majority Leader Harry Reid (D-Nev.), floor speech, July 31, 2013
Reid’s comment jumped out at us — 1.6 million jobs have already been lost because of the sequester? That seemed rather large.
The sequester, of course, is the automatic across-the-board spending cuts that were imposed March 1 when Republicans and Democrats could not reach agreement on a budget plan. The actual impact of the cuts has been in dispute, and we wrote a number of columns about fishy statistics that appeared to exaggerate the possible impact on the federal government. A follow-up review in June by The Washington Post found that claims of a breakdown in government services were, in fact, overblown.
Still, the furloughs of federal employees, the cutbacks to contractors and reductions in government services clearly have some sort of ripple effect across the economy. (Indeed, even the Edward Snowden leak case appears to have sprung from the sequester.)
Reid’s spokesman, Adam Jentleson, did not respond to queries, so we had to do a bit of searching to figure out Reid’s logic.
The Facts
The most obvious source for Reid’s figure is a Congressional Budget Office estimate that was released July 25, spawning a few news stories. CBO director Douglas W. Elmendorf wrote that if the sequester were canceled, it would boost employment between 300,000 and 1.6 million in the 2014 fiscal year (which ends Sept. 30, 2014).
There’s that 1.6 million figure, which showed in some headlines, such as “Report: Canceling Sequestration Could Add Up to 1.6 million Jobs.” But of course that’s only the maximum range — and we’re talking about an estimate for next year, not this year.
(Note: Though the CBO was making a prediction for canceling the sequester, under its models it is acceptable to reverse the numbers for the opposite action. Thus it would be fine for Reid to interpret the CBO finding as saying that if the sequester continued, it could result in a loss of as many as 1.6 million jobs.)
There’s another possibility for Reid’s math. The midpoint of the CBO estimate is 900,000 jobs in fiscal 2014. Earlier this year, the CBO estimated that 750,000 jobs would be lost in calendar year 2013 because of the sequester.
Did Reid add the two figures to come up with 1.6 million? Maybe, but that wouldn’t be correct either.
First of all, the two figures slightly overlap by one quarter. But more importantly, you can’t simply add the two figures. Each figure is distinct, relating to that time period. It is quite possible that the 750,000 jobs in 2013 would be just a subset of the 900,000 jobs in 2014.
In fact, there’s really no current estimate of how many jobs have been lost because of the sequester. Before the sequester began, there were many estimates, including one that predicted more than 2 million job losses in 2013.
But the size of the sequester was reduced, various functions (such as air traffic controllers) were spared, and many planned furloughs were reduced, so the impact is probably significantly less than many expected before the sequester was implemented.
Mark Zandi, chief economist at Moody’s Analytics who is frequently cited by the Obama administration, says the real impact of the sequester may not have been felt yet. Still, he told the Christian Science Monitor that for 2013, the impact on the economy would likely be 25,000 jobs a month, for a total of 250,000 jobs.
“Job growth has come down a notch, but only a notch,” Zandi said.
The Pinocchio Test
It is possible that Reid misspoke. We don’t like to play gotcha, but we also get suspicious when a politician’s aides do not respond to queries.
In any case, even if Reid was relying on the CBO estimate, 1.6 million is the high-end of a range for next year, not this year.
A more careful speaker would have chosen the midpoint — 900,000 — which is also the first employment number highlighted in the CBO letter.
While the dust has not settled on the impact of the sequester on employment this year, the available evidence shows that Reid’s claim that 1.6 million jobs already have been cut this year appears wildly off course
Four Pinocchios
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