02/08/2012 09:22 am ET | Updated Apr 09, 2012

What's Their Counterfactual?

As others have noted, conservatives who'd like bash the president on the economy are having an awfully hard time right now, as the recovery proceeds apace. Too slowly apace, for sure, but no objective observer can miss that the trend is our friend and that even the job market, while still far too weak and with conspicuous downsides (intractable long-term unemployment), is improving.

So, they're stuck with "yeah, things are getting better, but if we were in charge, they'd be even better!"

This, of course, is the flip side of a rap with which I'm intimately familiar: "sure, things are bad -- but without our actions, they'd be even worse!"

Neither are convincing to most people, because most people don't engage in the economist's counterfactual: the path the economy would have taken absent your interventions. It's the "compared-to-what" in the above statements.

Thing is, I know and believe, within confidence intervals, my counterfactual. It comes from tried and true modeling based on the historical relationships of how advanced economies respond to stimulus.

Or, if you don't like that sort of thing, you can derive a counterfactual from simply projecting the course the economy was on before you did your policy thing, and compare that to the actual path of growth and jobs (you can see that approach here -- see discussion around Table 3). [Note: the fresh-water economists, who continue to willfully ignore critical lessons of our past, deeply disdain the Keynesian multiplier models -- but I haven't heard their objections to this other, much less theoretical approach, as in Table 3 in the above doc.]

What I don't get is their counterfactual. Other than unconvincingly waving hands, muttering how things should be better, how the EPA and OSHA rules are killing businesses, yada, yada -- let's see some analysis.

Gov. Romney's got real economists on his team. If he wants to make the case that things would be better if we followed his plan -- which actually looks pretty Hoover'esque to me -- explicitly anti-stimulus re: jobs and liquidate the housing market -- let's see the model. True, most people won't believe it anyway, but those of us familiar with counterfactual analysis would like to see if there's anything there, or is this just disgruntled smoke-blowing.

I'm not saying we (when I was with the admin) or the Federal Reserve got everything right by a long shot. But what I don't see is anything approaching a coherent argument about how things would be better otherwise.

This post originally appeared at Jared Bernstein's On The Economy blog.