Revisiting the Obama administration’s unemployment promise
The folks at e21 remind us of something that should be at the forefront of every person’s memory as they consider what this administration has and hasn’t accomplished in its promise to “stimulate” the economy and create jobs. I call it the “big promise”. I don’t call it a “lie” since I use the traditional definition of a lie (a known falsehood) vs. the more modern one in use today by activists on both sides (being wrong about something). But that’s fodder for a future post.
In this one I want to issue a reminder of what was promised and what has been delivered. Promise:
Back in January 2009, Christina Romer and Jared Bernstein produced a report estimating future unemployment rates with and without a stimulus plan. Their estimates, which were widely circulated, projected that unemployment would approach 9% without a stimulus, but would never exceed 8% with the plan.
They got their “stimulus” – $800 plus billion in mostly borrowed money with which they were to stem the tide of unemployment then rising and keep it under 8% as promised.
The result wasn’t even close. In fact, other than two months of this year, the unemployment rate has stayed above 9%. By this time, according to the administrations plan, we were told we’d be at about 6.5%.
So it is clear that the “plan” was a total and unmitigated but costly failure.
What’s their explanation for such a huge miscalculation?
Romer and Bernstein defend their estimates with the argument that the economic situation turned out worse than they had anticipated; and so the economy would have done even worse without a stimulus.
Is that so? Then, as e21 says, they owe us a much deeper explanation of why that was so and why they considered their solution at the time to be the proper thing to do. Because it is seeming more and more like a very expensive boondoggle at the moment:
The recession “officially” ended two years ago, yet the first quarter of 2011 only saw 1.8% growth. The Administration and Congress should have a more robust discussion about their self-proclaimed “2010 Recovery Summer” – if for no other reason than to better inform the public about the recovery challenges the U.S. still faces in 2011.
For example, there is new research that suggests that the stimulus may actually have resulted in a net loss of jobs. Regardless of the exact number of jobs lost or created, however, the fact that some economists are even arguing that it had a negative impact tells you that the stimulus may very well have been a wash overall.
Larry Lindsey offered his own review of the stimulus this week, arguing that it failed what’s colloquially known as the Sharp Pencil Test. As he explains, “if you sit down and do a back of the envelope calculation of the [stimulus] program’s costs and benefits, there is no way to conjure up numbers that allow it to make sense.”
Lindsey went on to offer this analysis:
[E]ven if you buy the White House’s argument that the $800 billion package created 3 million jobs, that works out to $266,000 per job. Taxing or borrowing $266,000 from the private sector to create a single job is simply not a cost effective way of putting America back to work. The long-term debt burden of that $266,000 swamps any benefit that the single job created might provide.
The 3 million claim is dubious at best with no mention of the type, quality or sector these jobs were supposed “saved or created” (the stimulus propped up a lot of state budgets which helped delay layoffs to government workers). And as Lindsey points out, the cost of what can only be a temporary “save” are way out of whack with the benefit. Instead, it appears the stimulus was a giant waste of money that did little if anything to create jobs in the private sector and mostly benefited government at a huge cost per job.
I’m not sure how anyone could economically justify such an outcome. But I sure would like to hear them try. I think they owe us some answers on this. And I’d like to see the GOP begin asking those questions. This is one part of the Obama record they need to pound on – starting now.