Apparently, the debate over the economy is over, and it’s settled science that government spending stimulates growth. At least that’s what President Obama wants you to believe. On CBS’ “60 Minutes” on Dec. 13, he boasted, “What we now know, and every economist who’s looked at it will acknowledge this, is that [the stimulus] helped us [stem] the panic and get the economy growing again.” Mr. Obama’s exaggerations are starting to sound a lot like Al Gore’s claimed “consensus” about global warming - a formerly hot topic that has cooled down recently.
Also on Dec. 13, Lawrence H. Summers, Mr. Obama’s top economic adviser, professed on multiple news shows that since the economy didn’t lose as many jobs in November as it had lost in January, that proves the $787 billion stimulus package saved the economy. Mr. Summers cited forecasters, saying most agree with him that unemployment will start improving in the spring. That’s a bit of a yarn since the 52 forecasters surveyed each month by the Wall Street Journal predict virtually no change in unemployment through June. But, in any case, that indicator does not imply things would have been worse without hundreds of billions in government spending.
Mr. Summers somehow fails to use that same yardstick - what forecasters were predicting - when evaluating how the stimulus has performed up to this point. Back in February, before the stimulus plan was passed, the 52 business economists and forecasters expected the unemployment rate this month to be at 8.8 percent, showing only a small increase from the 8.2 percent level of 10 months ago. Instead, the unemployment rate is hovering at 10 percent.
White House predictions were even more rosy, and off base. On Feb. 28, with the stimulus already passed, the Obama administration’s own forecast predicted an average unemployment rate for the year of just 8.1 percent. Despite the unemployment rate being 2 percentage points above what his own team promised, the president trumpets that his policies are working. Give us a break.
None of this is surprising. At the beginning of the year, we predicted many times that this big increase in unemployment would occur, precisely because of the stimulus.
Moreover, if Obama officials really want to take credit for changes in the unemployment rate, they are going to have to try to explain why the U.S. unemployment rate is soaring much faster than the rate in other countries. As Fox News reported earlier this month: “Among the 21 countries with available data for unemployment from January to October, the U.S. experienced the second biggest increase, going from 7.6 percent to 10.2 percent (a 2.6 percentage point change). The average increase for the non-U.S. countries was just 0.8 percentage points, just one-third what we experienced. Only Ireland faced a larger increase.”
Many times this year, Mr. Obama and his economists explained away the problems and griped that it was hard to turn the economy around because there was a worldwide recession. The troubled economies in the rest of the world supposedly were dragging down the American economy. This line of argument makes no sense given that our downturn was larger than just about everybody else’s dip.
The president refuses to admit the truth of the matter - that the economy was going to get better if the so-called stimulus had never passed. Whether one looks at the predictions of forecasters or the Obama administration’s own predictions, the implications are the same: Mr. Obama’s policies delayed the recovery.