The Obama administration wants you to know just how lucky you are that we passed the Porkulus package and gave them a $787 billion blank check. However, your luck is about to run out:
The Obama administration, in its latest progress report on the $787 billion stimulus program, said both the overall economy and employment continued to be in better shape at the end of 2009 than they would have been without the government’s help.
But as expected, the program’s impact on economic growth in the fourth quarter was less than in two previous quarters, according to President Obama’s Council of Economic Advisers.
The council’s report, the second of the quarterly assessments mandated by Congress, said that in the fourth quarter the stimulus plan’s tax cuts and spending added about 2 percentage points to the gross domestic product, which is the size of the economy as measured by the total goods and services produced.
Though unemployment reached 10 percent at year’s end—two percentage points higher than the peak that the council forecast when the administration proposed the stimulus package to Congress nearly a year ago—the number of jobs was between 1.5 million to 2 million greater in the fourth quarter than it would have been without the recovery plan, the council said.
The stimulus has worked? Really? Let’s take a look at yesterday’s charts again:
And what did the White House promise us if we gave them the $787 billion they wanted?
First, the likely scale of employment loss is extremely large. 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.
According to the Bureau of Labor Statistics, we lost 3.423 million jobs in 2009 – with Porkulus. That’s right in the range that Romer predicted would happen without a stimulus package. In fact, this passage also negates the notion that large job losses in January and March somehow came as a surprise, since the White House’s economic advisers made it clear that they were aware of the potential for large losses in 2009. They thought their plan would stop them, and it didn’t.
What about growth? Romer predicted GDP growth as a result of this plan, but that hasn’t materialized either:
It’s taken longer to get any kind of upward push on production than an any other post-war recession, and what we’ve seen is anemic indeed. The administration points to Q3 GDP growth, which turned out to be a disappointing annual growth rate of 2.2% — and all of it attributable to temporary government incentives.
Claiming victory on this ground is about all Obama can do, but it’s shockingly disconnected from reality — and disconnected even from the White House’s own claims for the stimulus package it demanded.
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