The Obama Administration was lying about the Success of the Stimulus Bill

Posted by PITHOCRATES - April 20th, 2013

Week in Review

President Obama promised us that if Congress passed his stimulus bill the unemployment rate wouldn’t rise above 8%.  Because million of people would go back to work immediately thanks to all of those shovel-ready jobs.  Well, the president signed it into law on February 17, 2009.  In October of that year the unemployment rate topped out at 10%.  And the president joked that those shovel-ready jobs weren’t as shovel-ready as they thought.  Still, they claimed it was a success.  And bragged about the millions of jobs they created or saved.  All the while the economy remained mired in one of the worst economic recoveries of all time (see Did Obama’s stimulus bill really work? Not even the gov’t knows by Sean Higgins posted 4/15/2013 on The Examiner).

Reason magazine’s Peter Suderman has a lengthy but eye-opening examination of President Obama’s 2009 American Recovery and Reinvestment Act — aka the stimulus bill — and why even after spending $833 million through it the economy continues to suck.

The article is a top-to-bottom dissection that exposes the many layers of folly involved. Several passages stand out but this one in particular is worth noting because it points out the central flaw in reports that argue the stimulus was a success: There is literally no way to measure those claims.

“According to the non-partisan Congressional Budget Office,” says Recovery.gov, the Obama administration’s stimulus website, “the Recovery Act supported as many as 3.5 million jobs across the country.” As the stimulus ran its course over roughly three years, the capital’s top newspapers kept printing similar, supportive-sounding figures from the budget office. “CBO Says Stimulus May Have Added 3.3 Million Jobs,” a Washington Post headline trumpeted in 2010. “CBO: Stimulus Added Up to 3.3 million Jobs,” declared a Politico headline in 2011. Senate Democrats touted the estimates as proof of ARRA’s success. So did the vice president…

The CBO estimated that the stimulus created or saved up to 3.6 million jobs. But CBO Director Douglas Elmendorf has also noted that if the real-world results were different — if the law created 5 million jobs, or if it created none at all — the agency wouldn’t know. At a March 2010 presentation, Elmendorf characterized the CBO’s follow-up reports as “repeating the same exercises we did rather than an independent check.” At the same event, Elmendorf was asked, “If the stimulus bill did not do what it was originally forecast to do, then that would not have been detected by the subsequent analysis?” His response: “That’s right. That’s right.” (Emphasis added.)

You may not be able to measure how many jobs you saved but you sure can measure one thing.  The labor force participation rate.  The percentage of those who could be working who are actually working.  Which shows the true economic picture unlike the official unemployment rate.  Which just doesn’t count people if they leave the labor force.  Because they can’t find a job.  You see, for them to count you in the unemployment rate you have to be looking for work.  And if you gave up looking for work after a year or so of not finding work they don’t count you.  Which lowers the unemployment rate.  Even though more people are unemployed.

So how did the labor force participation rate respond to the stimulus bill?  Not good.  It suffered its steepest decline the year they passed the stimulus.  And continued in the longest and steepest free-fall during the Obama presidency.  These numbers show the stimulus was an abject failure.  And any talk contrary to this was nothing but wishful thinking.  Or outright lies.

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