Unemployment Worse with Stimulus than Without
In fact, the White House never predicted that unemployment would rise above nine percent regardless of whether Congress spent the nearly $800 billion in so-called economic stimulus spending it recommended at the time.
The predictions came from a Jan. 10, 2009, report issued by Christina Romer, now chair of the White House Council of Economic Advisors, and Jared Bernstein, currently Vice President Joe Biden’s chief economist. The administration used the report as both a blueprint and a justification for the $787-billion spending package Obama signed in February.
“The American Recovery and Reinvestment Act that I will sign today, a plan that meets the principles I laid out in January, is the most sweeping economic recovery package in our history,” Obama said at the bill’s Denver signing.
“What makes this recovery plan so important is not just that it will create or save 3½ million jobs over the next two years, including nearly 60,000 in Colorado. It's that we are putting Americans to work doing the work that America needs done,” he said.
That January outline predicted that with a stimulus bill, unemployment would be less than eight percent by the end of June 2009. Without the stimulus spending, unemployment was projected to rise to about 8.3 percent by June.
June’s unemployment numbers show that Obama’s estimates of how successful the stimulus would be were inaccurate and overestimated the effect that billions of federal dollars would have on employment. Under the estimate, the stimulus plan would have kept unemployment below eight percent, driving unemployment down by October 2009.
“[E]ven with the large prototypical [stimulus] 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,” the report states.
In fact, Obama’s own estimate shows that the economy might have fared better without any stimulus spending at all. Romer and Bernstein’s projections show that without a stimulus package, unemployment would rise to just above nine percent in December 2009, staying there through most of 2010 before falling off in early 2011.
June’s unemployment numbers are well above what even the Obama administration said they would be if Congress didn’t enact a stimulus plan. In selling the massive new spending, Obama said that economic conditions without the plan would be intolerable.
“If we do not move swiftly to sign the American Recovery and Reinvestment Act into law, an economy that is already in crisis will be faced with catastrophe," Obama said on Feb. 5.
Now, the president is predicting unemployment will rise to 10 percent, saying in his own defense that his administration’s previous reports were issued before they really knew what the recession looked like.
“At that point, nobody understood what the depths of this recession were going to look like,” Obama said June 21. “And so it's not surprising, then, that we missed the mark in terms of our estimates of where unemployment would go.
“[I]t’s pretty clear now that unemployment will end up going over 10 percent,” he said.
Obama then claimed that the key to turning the economy around was to spend more of the stimulus money faster.
“We've got to get our Recovery Act money out faster,” he said.
Rep. Mike Pence (R-Ind.) said that the record high unemployment was a sign that Obama’s signature legislation had been a failure and added that more spending was not the answer to a deepening economic crisis.
“At a time when families are struggling to make ends meet, the rising unemployment rate is further evidence that we cannot borrow and spend and bail our way back to a growing economy,” Pence said in a statement.
“More than four months after the economic stimulus was signed into law, our country still faces the highest unemployment in almost three decades,” he said.