Skip to comments.REVISITING UNEMPLOYMENT PREDICTIONS : The Projections of Obama's Economic Team Are Totally Off!
Posted on 06/12/2011 9:13:15 AM PDT by SeekAndFind
Back in January 2009, Christina Romer and Jared Bernstein produced a report estimating future unemployment rates with and without a stimulus plan. Their estimates, which were widely circulated, projected that unemployment would approach 9% without a stimulus, but would never exceed 8% with the plan. The estimates, along with real unemployment rates, are posted below:
In May 2011, using the latest figures available from the BLS, the unemployment rate reached 9.1%. In contrast, the Romer and Bernstein projections estimated that the unemployment rate would be around 8.1% for this month without a recovery plan, or 6.8% with a stimulus plan (which was ultimately passed). The actual unemployment rate has been consistently above Romer and Bernsteins worse case scenario for the economy and by a considerable margin. They projected that the unemployment rate would never climb above 9%. As time has passed, it turns out that only two months out of the last two years have seen an unemployment rate lower than 9%.
And the unemployment trajectory appears to be getting worse, not better. The last two months have seen unemployment grow; again, against projections that unemployment would decline every single month after August 2009 with a stimulus in place.
The stark unreality of the Administrations estimates is actually not that surprising in retrospect given the nature of the estimates. Romer and Bernstein simply assumed that a dollar of spending would increase GDP by $1.55. If this assumption proved to be wrong, then all of the knock-on effects of the stimulus would simply not follow.
Romer and Bernstein defend their estimates with the argument that the economic situation turned out worse than they had anticipated; and so the economy would have done even worse without a stimulus. That may or may not be the case but at this point, a more thorough explanation is certainly warranted.
The recession officially ended two years ago, yet the first quarter of 2011 only saw 1.8% growth. The Administration and Congress should have a more robust discussion about their self-proclaimed 2010 Recovery Summer if for no other reason than to better inform the public about the recovery challenges the U.S. still faces in 2011.
For example, there is new research that suggests that the stimulus may actually have resulted in a net loss of jobs. Regardless of the exact number of jobs lost or created, however, the fact that some economists are even arguing that it had a negative impact tells you that the stimulus may very well have been a wash overall.
Larry Lindsey offered his own review of the stimulus this week, arguing that it failed whats colloquially known as the Sharp Pencil Test. As he explains, if you sit down and do a back of the envelope calculation of the [stimulus] programs costs and benefits, there is no way to conjure up numbers that allow it to make sense. Here is more on how Lindsey applies this test to the stimulus:
[E]ven if you buy the White Houses argument that the $800 billion package created 3 million jobs, that works out to $266,000 per job. Taxing or borrowing $266,000 from the private sector to create a single job is simply not a cost effective way of putting America back to work. The long-term debt burden of that $266,000 swamps any benefit that the single job created might provide.
At minimum, the public now deserves a response from policymakers about what they have learned from 2009 and 2010 about what actually does and does not help get the economy growing and producing more jobs.
unexpectedly, of course
Unless we are facing imminent threat from a foreign aggressor, Americans will vote in national elections on the basis of the state of the economy. Inflation is a major factor in this, but the most important issue is jobs. Unemployment is now chronically high.
We all now know that Obama is a socialist and his intent is to expand government at the expense of private enterprise. We also know that government never generates capital. It only consumes wealth; never creates it. We also know that the single greatest aspect of the economy affecting how people vote is employment. If I have have had my job eliminated, my hours cut back, have been furloughed from my job, I am more likely to vote against the incumbents.
Small and mid-sized businesses know that higher corporate taxes and government regulation, which Obama loves, destroys our free market system of prosperity. Small and mid-sized business owners know that the Obama administration must be defeated in 2012. Their contributing to the elections of those who run against Obama is not enough, however.
The best way for business to insure the defeat of Obama is for them to begin now to cut back their employment rolls even more - even if it means temporarily sacrificing their companies’ profitability. Putting people out of work temporarily in order to insure Obama’s defeat in 2012 will mean a healthier business climate in the years to come. Once we get government off the backs of business and the working middle class of this country, we will be on better footing to grow our economy once again.
It might sound like a draconian measure to lay people off in order to insure Obama’s defeat, but let’s face it Obama is out to destory our country and we are in dire straits. What’s needed, as in time of war, are drastic measures.
In the past, when our country was under a threat from external forces, men (and now women) have been called upon to leave their normal means of employment to join the armed forces to insure the security of our nation for our families and posterity.
Now our country is under a different kind of threat - a threat from within - a threat from our own government which has hijacked our Constitution and has concentrated power in the hands of a few elitists. The threat is no less real than when our enemies have been external to us.
So the call for all of us to make sacrifices in a time of war is no extreme measure but is patriotic. And just as in a time of war when families, communities, friends and churches pull together to get through the crisis, so this should be the same response to those who find themselves out of work. If we all pull together, in the end our collective security will be insured and that of our children as well. Obama must not be re-elected for the good of all.