Barack Obama pushed for almost $800 billion in stimulus spending by claiming that it would save or create millions of jobs this year. Critics pointed out that most of the spending started in 2010 and more than half of it came in 2011 or later, calling the stimulus useless at best for salvaging jobs, let alone creating them. The White House has quietly agreed with its critics, according to the New York Times, and now says it expects to see no hiring rebound in 2009:
President Obama’s chief economics forecaster said on Sunday that the country was not likely to see positive employment growth until 2010, even if the economy began to grow later this year.
Speaking on C-SPAN, Christina Romer, chairwoman of the White House Council of Economic Advisers, said that she expected the G.D.P. to begin growing in the fourth quarter of this year. Ben S. Bernanke, the Federal Reserve chairman, made a similar prediction last week.
But Ms. Romer also said that she expected unemployment to rise even after the economy turns, saying that the G.D.P. has to grow at a rate of about 2.5 percent before unemployment will fall. Before that happens, she said, it is “unfortunately pretty realistic” that the unemployment rate could reach 9.5 percent. A reasonable estimate for the G.D.P.’s growth rate in 2010, she said, is three percent.
Robert Reich, who served as labor secretary under President Bill Clinton and advised the Obama campaign, said on Sunday that the rate of growth would have to be higher — 4.5 percent — to reverse rising unemployment.
Talk about lowering expectations! We just got done hearing Obama take credit for saving 150,000 jobs — which his administration never documented. Now we’re hearing that the stimulus package demanded by Obama and passed over near-unanimous Republican objections won’t actually make any difference at all. The cure, Obama and his team now admit, is private-sector growth.
None of us are particularly surprised to hear this. We predicted all along that the massive government spending and the tax-revenue increases Obama planned would stifle growth and keep unemployment high. We knew this by looking at the actual results of the same kind of policies during the Great Depression and the 1970s, two of the worst economic periods in the US over the last century. In both cases, stripping capital from the market in service to expanding the federal government produced nothing but higher unemployment and stagnation.
I’m a little surprised to hear the Obama administration admit this, although they don’t really have much choice. They tried to spin the latest unemployment figures as an improvement, when it went up from 8.5% to 8.9% and only got slightly improved by the massive, temporary hiring at the Census Bureau. The rate of job loss in the private sector still exceeded 600,000 jobs a month, and the GDP has lost 6% on an annualized basis for the second straight quarter despite the stimulus. This chart from Geoff at Innocent Bystanders makes the reason for their sudden honesty plain:
Actually, only the red indicators come from Geoff. The chart itself comes from page 5 of an analysis prepared by Romer and Obama’s council of economic advisers in support of the $787 billion Porkulus plan:
The U.S. economy has already lost nearly 2.6 million jobs since the business cycle peak in December 2007. In the absence of stimulus, the economy could lose another 3 to 4 million more. Thus, we are working to counter a potential total job loss of at least 5 million. As Figure 1 shows, even with the large prototypical package, the unemployment rate in 2010Q4 is predicted to be approximately 7.0%, which is well below the approximately 8.8% that would result in the absence of a plan.
We’re already past 8.8%, well on the way to 9.5%, above her predictions in either case. They predicted that the upper curve would occur without spending $800 billion on government make-work, and that passage would prevent the severe spike in unemployment. Now Romer admits that the upper curve will happen anyway.
We need new economic advisors. Romer and her crew aren’t worth $800 in small bills, let alone the fortune we’ve frittered away on Obama’s policies and her recommendations.
Update: Third Base Politics says jobs are the new Iraqi War.