On July 14, 2010, the president’s Council of Economic Advisers (CEA) released its fourth quarterly report on spending from the Democrats’ $862 billion “stimulus” (including the $347 billion CBO estimated for interest payments on the borrowed money, the cost of the stimulus is actually $1.2 trillion). Vice President Biden echoed the chorus of the administration, touting the success of the bill and stating that “The economic initiatives that we took, they are working ... they are working.” White House spin aside, the facts show that the stimulus has failed to create jobs in the economy and that CEA’s deceptive report is preposterous.
CLAIM: “As of the second quarter of 2010, we estimate that the Recovery Act has raised employment by 2.5 to 3.6 million relative to what it otherwise would have been.”
FACT: The stimulus has not created net jobs in the economy. According to the Bureau of Labor Statistics (BLS)—the official government agency responsible for tallying employment stats—there have been 3.42 million gross jobs lost since the stimulus was passed and 2.53 million net jobs lost.
CLAIM: “A key way that the CEA estimates the effects of the Recovery Act on GDP and employment is to use existing estimates of the macroeconomic effects of fiscal policy. That is, one can use mainstream estimates of economic multipliers for the effects of fiscal stimulus.”
FACT: The White House determines the impact of government stimulus spending by plugging numbers into a Keynesian “Multiplier Model.” This system simply multiplies the amount of dollars spent by the number of jobs the administration thinks the money should produce. This voodoo math doesn’t consider actual employment statistics, and thus allows the White House to claim that the stimulus is creating jobs as the economy sheds them.
CLAIM: “For example, the Act, by stabilizing the economy and restoring confidence, may have played a role in healing the financial sector and jump-starting private demand.”
FACT: The private sector has not been “jump started.” To the contrary, 3.2 million private sector jobs have been lost and total private sector employment has decreased by 2.5 million jobs since the passage of the stimulus. In fact, researchers at Harvard Business School released a study in May, 2010, which “suggests that federal spending in states appears to cause local businesses to cut back rather than grow.”
CLAIM: “Following implementation of the [stimulus], the trajectory of the economy changed dramatically.”
FACT: Since the stimulus was passed the economy has remained sluggish and employment has declined dramatically. According to the Bureau of Economic Statistics (BEA), GDP growth has averaged a lethargic 1.4 percent since the stimulus. Following a recession, growth rates are typically much higher. In the ten quarters following the 1982 recession, for instance, growth averaged 9.3 percent each quarter. Unfortunately, after the stimulus passed, unemployment rose to 10 percent and has hovered there for months. And, according to the National Federation of Independent Businesses, confidence amongst small businesses fell in June 2010 at the sharpest level since October 2008.
No matter how they spin their numbers, the administration can’t hide the fact that the stimulus has failed. The truest fact included in the CEA’s report is this: “The CEA model will obviously not yield exact figures for the effects of the Recovery Act.” Obviously.