Tomorrow is the one-year anniversary of the American Recovery and Reinvestment Act, or as it is more accurately described, President Barack Obama’s Failed Stimulus. When President Obama signed the now $862 billion deficit-spending bill into law, the unemployment rate stood at 7.6% and the U.S. economy employed 133.5 million people. At the time President Obama promised the American people that, thanks to his stimulus, unemployment would never go higher than 8.2% and the U.S. economy would support 138.6 million jobs by December 2010.
At the one year mark unemployment is now 9.7%, after rising above 10%, and the U.S. economy has lost 4 million jobs leaving the White House 9 million jobs short of the 138.6 million they promised to deliver by December of this year. By any objective measure President Obama’s $862 billion stimulus must be judged as a complete failure. Undeterred by these facts, the White House Council of Economic Advisers (CEA) published a report on the economic effects of the Administration’s economic stimulus plan claiming that there are 2 million more jobs in the economy than there otherwise would have been had the President’s stimulus not become law. But as Heritage Policy Analyst Karen Campbell has documented, the CEA report relies on completely arbitrary benchmark projections that fail even basic standards of economic analysis. If the Administration had used other economic forecasts, the results would not have been as impressive – in fact, some would have shown that the economy lost more jobs after the stimulus package was implemented.
Armed with their CEA propaganda, President Obama is dispatching his Cabinet officials to 35 communities across the country this week to try and convince the American people that his Failed Stimulus is in fact, a success. The President faces an uphill climb: according to the latest poll from The New York Times only 6% of Americans believe the stimulus has created jobs and 48% of Americans believe it never will.
One might hope that after $862 billion in failed stimulus spending, that liberals in Washington would take a break from spending other people’s borrowed money. No such luck. The House has already passed a new $154 billion stimulus package and Majority Leader Harry Reid (D-NV) is pushing a$15 billion plan in the Senate, $13 billion of which is a temporary Social Security payroll tax exemption for new hires. This temporary tax break will further increase our Social Security system’s existing deficits, will cost $1 million per only eight temporary new jobs according to the Congressional Budget Office, and will do nothing to decrease long-term unemployment.
While this would be President Obama’s second stimulus, it would actually be this recession’s third. In February 2008, President George Bush passed an equally useless mix of temporary tax cuts and mortgage grantees for Fannie Mae and Freddie Mac totaling $168 billion. That stimulus did nothing to stop the recession and neither will President Obama’s second stimulus. Our nation simply can’t afford wasting hundreds of billions of dollars and deficit Keynesian stimulus spending every February. Now is a good time to stop.
Quick Hits:
- In a secret joint operation by Pakistani and American intelligence forces, the Taliban’s top military commander was captured several days ago in Karachi, Pakistan.
- As fighting in Marja carried into its third day, the number of Taliban fighters in the area has dropped by about half.
- Opposition to a European Union bailout of Greece, where the retirement age is 63, is growing among Germans, who can’t retire until age 67.
- Latinos who backed President Barack Obama are frustrated by the lack of amnesty for illegal aliens.
- According to the latest Rasmussen poll, 59% of likely voters say states should have the right to opt out of federal government programs they don’t agree with.
The White House Council of Economic Advisers (CEA) has released a projection of jobs created by the economic stimulus bill. However, the method they used to get these numbers falls short of basic scientific standards. The CEA modeled a potential outcome for the economy without the stimulus, basing it on historical data. They then compared this computer simulation with the actual data about what occurred with the stimulus – and have declared that the stimulus worked.
This method would be met with a failing grade in any decent university economics course. A projection of a potential economic outcome based on a model must be compared with a baseline scenario produced by that same model. This is basic: the policy simulation must be compared with a baseline. Instead, the White House compared a simulation with empirical data!
This is absurd because any slightly different assumption in a simulation will produce a different result. When comparing with a baseline these can be controlled—we can see what assumptions went into the baseline scenario and which went into the simulation of the policy. There are no hidden tricks. But if a simulation is compared to empirical data, we have no way to know why the two differ. It could be anything.
What were the assumptions in this simulation, I wonder? Do they not know that they must use a baseline—or was this a purposeful political maneuver?