The Biggest Economic Recovery Plan in History or the Biggest Economic Fraud in History?
by ALEXANDER G. MARKOVSKY
January 15, 2015
The American Recovery and Reconstruction hailed by the administration and the Democrats as one of the most significant pieces of economic policymaking in generations. Five years later speaking in Kansas City the president said, "The unemployment rate is at the lowest point since September 2008. It's dropping faster than any time in 30 years." "So the decisions that we made - to rescue the economy, the rescue the auto industry, the rebuild the economy on new foundation, to invest in research and infrastructure, education - all those things are starting to pay off." This is one of the most uninhibited examples of Obama's oratories, of which he made a perpetual rite, and as usually, filled with patent overstatements. This self-congratulatory analysis has little relation to documented facts. As Mark Twain observed, "Facts are stubborn things, but statistics are pliable." Here are the facts.
The president said that if we passed his first stimulus package, which turned out to be $862 billion, we would keep unemployment no higher than 8 percent. One important caveat: in 2009 the official unemployment numbers reflected actual unemployment, but after prolonged periods of economic downturn, as people began exhausting their benefits and were no longer registered on federal rosters, the real number of unemployed is far greater than the official numbers. Experts estimate that the real unemployment rate is around 15-18 percent. The administration also promised to create (not save) between three and four million jobs by the end of 2010, ninety percent in the private sector. That would come at a cost of $287,000 and $215,000 per job, respectively.
"I'm absolutely convinced, and the vast majority of economists are convinced, that the steps we took in the Recovery Act saved millions of people their jobs or created a whole bunch of jobs," Obama declared at a press conference in July 2011. Or, to quote National Economic Council chair Gene Sperling from an interview in July 2011, "There is no question that the evidence is showing that the type of things the president did to help state and local governments really mattered, were really helpful in pulling us from the brink of depression to a recovery." Sounds great, we have opinions, but where is the evidence? Opinions and wishful thinking are not evidence. As a university professor once said to his students, "If you can't express yourself in numbers, you know nothing about the subject." Here is a case in point.
This chart borrowed from Libertyworks.com and updated by the author was copied from Obama's report, published in January 2009 to persuade us that the "stimulus" or Recovery Plan would prevent millions of layoffs. Obama promised a maximum 8 percent unemployment rate if the recovery plan passed, or 9.1 percent without the recovery plan. Libertyworks.com added the red bars showing actual unemployment rates.
The recovery plan passed, the money was spent. The result: unemployment was above 8 percent during practically all of Obama's first term, the national debt skyrocketed, and the economy is still in the toilet. But even more to the point, as the president and his socialist supporters marked the five-year anniversary of the economic stimulus package, the unemployment rate as of February 2014 was 6.5 percent, and at the time of the president's speech in August 2014 was actually at 6.7 percent, which is significantly higher than what the president promised if we enacted the stimulus. As a matter of fact, according to the government chart the unemployment rate should be lower now without the stimulus, which points out to the very opposite of what the man and his economic team had predicted. This is the evidence, and it does not support the president's claim. We must conclude that at best the stimulus had no effect on the economy and at worst it had a negative impact. The country got the worst of both worlds - enormous debt and nothing to show for it. If a strategy does not accomplish its stated objectives, a reasonable observer may conclude that the strategy has failed. Not with this president. He has not finished with America.
Did the president tell the truth when he made those promises, or did he simply not know what he was talking about? The answer is in the January 9, 2009 report, "The Job Impact of the American Recovery and Reinvestment Plan," issued by the president's Council of Economic Advisers. The report stated:
It should be understood that all of the estimates presented in this memo are subject to significant margins of error. There is more fundamental uncertainty that comes with any estimate of the effects of a program. Our estimates of economic relationships and rules of thumb are derived from historical experience and so will not apply exactly in any given episode. Furthermore, the uncertainty is surely higher than normal now because the current recession is unusual both in its fundamental causes and its severity.
I used to tell my students that the accuracy of calculations reflects the accuracy of assumptions. The administration had no clue what it was projecting and probably did not care. The probability of winning in roulette when betting on red or black is 50 percent (47.4 percent in American roulette because of the green 00). The probability of winning in the president's roulette was even lower. The report was nothing more than an exercise in intellectual futility. Any discussion about whether the stimulus worked is strictly academic: as I noted in my earlier publications, the main purpose for the stimulus was to spend money on social programs. In this sense it did work.
Alexander G. Markovsky is a Russian émigré. He holds degrees in economics and political science from the University of Marxism-Leninism and an MS in structural engineering from Moscow University. He resides in Houston, Texas, with his wife and daughter, where he owns a consulting company specializing in the management of large international projects. Mr. Markovsky is a contributor to FamilySecurityMatters.org, and his essays have appeared on RedState.com, WorldNetDaily, Family Security Matters, Ruthfullyyours and other websites. He can be contacted at firstname.lastname@example.org