Sometimes magic tricks just aren’t that great, and even the most innocent, wide-eyed child can’t be fooled by the illusionist’s flourish. Such is the case with the rabbit the White House is trying to pull out of its magic hat by claiming that President Barack Obama’s stimulus has created or saved 2.4 million jobs at a cost of $666 billion, all while the United States continues to suffer 9.1 percent unemployment. If you do the math, that comes out to around $278,000 per job.
That information comes from a White House Council of Economic Advisers (CEA) report released last Friday that desperately tries to maintain the illusion that Obama’s stimulus has saved the day for struggling Americans.
If you take the CEA at its word, you might be a bit confused. Two quarters ago, it claimed that the stimulus added or saved just under 2.7 million jobs. That’s 288,000 more jobs than it claims the stimulus has created or saved today. (The Congressional Budget Office has downgraded its claim of the stimulus’ “success,” too.) Compare that to the President’s promise to create 3.5 million jobs by 2010—the economy, instead, lost millions of jobs, leaving Obama 7.3 million jobs short of his goal.
As critics slam the report—and the high cost of the jobs the stimulus supposedly created—White House officials are scurrying to offer up a defense of an economic policy gone wrong. They claim that the President’s critics are using disingenuous calculations that don’t take into account other factors. ABC’s Jake Tapper reports:
Then, as now, White House officials note that the spending didn’t just fund salaries, it also went to the actual costs of building things — construction materials, new factories, and such. So the math is flawed, White House officials say, since reporters are not including the permanent infrastructure in the computation, thus producing an inflated figure.
In reality, the White House is probably better off fighting over those numbers than over the unemployment statistics staring the President in the face. Those stats are based on real-world facts—a tally of the millions of unemployed Americans—not “mainstream estimates of economic multipliers” that are the stock-in-trade of the CEA’s rosy predictions.
The facts are these: Last month, the average length of unemployment stood at 39.7 weeks, the longest since the Department of Labor began tracking it. The unemployment rate increased from 9.0 to 9.1 percent, 13.9 million Americans are unemployed, the economy added only 54,000 jobs, and the labor force participation rate remained flat at 64.2 percent, an all-time low for the fifth straight month.
According to yesterday’s Wall Street Journal, “the economy’s improvement since the recession’s end in June 2009 has been the worst, or one of the worst, since the government started tracking these trends after World War II.” And things aren’t getting better anytime soon. In short, the stimulus did not work. Jobs were lost, not created, and the economy is suffering the effects.
The Heritage Foundation’s James Sherk writes that a slow recovery is likely, despite the White House’s much-vaunted claims. At an average of 260,000 net jobs added per month, unemployment will not return to its natural rate until August 2014. At an average of 216,000 new jobs per month, it will take until October 2015 to return to normal. But, Sherk warns:
These are optimistic assumptions. The late 1990s was a period of unusually strong economic growth. During the 2003–2007 expansion, employers added an average of 176,000 jobs per month. If the recovery takes that more recent pace, unemployment will not return to normal rates until January 2018.
What if the economy continues at its current pace? In that case, Sherk says, we’ll be stuck with high joblessness into the distant future—the unemployment rate in January 2021 would stand at 7.4 percent.
The stark reality of America’s unemployment picture aside, there remains the notion that stimulus spending on infrastructure could have “created or saved” jobs in the first place, whether the price tag is $50,000 per job or $700,000. Brian Riedl, formerly of The Heritage Foundation, disputes that theory:
[M]any lawmakers claim that every $1 billion in highway stimulus can create 47,576 new construction jobs. But Congress must first borrow that $1 billion from the private economy, which will then lose at least as many jobs. Highway spending simply transfers jobs and income from one part of the economy to another.
As Heritage Foundation economist Ronald Utt has explained, “The only way that $1 billion of new highway spending can create 47,576 new jobs is if the $1 billion appears out of nowhere as if it were manna from heaven.”
Manna has not descended from heaven, and a rabbit is not emerging from the White House’s hat anytime soon. But like an incompetent fire department trying to save the basement of a building burnt beyond recognition, the White House is trying to salvage the remains of an economic policy gone wrong.
History should be the President’s guide. According to Riedl, in the 1930s, New Deal lawmakers doubled federal spending—yet unemployment remained above 20 percent until World War II. Fast-forward to Japan’s 1990 recession, in which the country passed 10 stimulus spending bills over eight years, which resulted only in a stagnant economy. And in 2001 and 2008, President George W. Bush attempted to stimulate the economy with tax rebates, neither of which generated economic results.
President Obama would do better by the American people if he gave up the fiction he is trying so desperately to maintain and recognize that it’s the private sector, not government, that creates jobs and keeps the country running—without costing the taxpayers hundreds of billions of dollars.