I'll update this when I hear it's OK to post the response.
UPDATE: This is Karen's response:
Thanks for your email. We did not use a micro elasticity in the micro estimate. Our microsimulation model is a static tax calculator and no elasticities are assumed.
Our unemployment rate number was off. It was driven down by a miscellaneous assumption that was a relic of some previous trial runs. I have eliminated it and re-run the sim. The results are not significantly changed and the unemployment rate is now in line with the rest of the results. We will be sending out an update to our prelim results. We also plan on publishing a full report with a more detailed analysis (now that we have more details on the budget) and will show various robust testing that we did.
Thanks again for your feedback. Please let me know if you have other questions or comments. It is so valuable to have caliber people checking our work!
Paul Krugman is suggesting this is some great deception. I'm willing to give them the benefit of the doubt, but I'm still curious what could have skewed the estimates so badly. And even if it wasn't deceptive on their part, it says something about what goes on over there that such an absurdly low unemployment figure could have made its way out the door without someone saying "gee - that looks funny".