Frustration with the Obama Administration
Posted on August 3, 2009
Frustration With the Obama AdministrationA friend of mind dropped me a line, expressing his frustration with the double-talk from the Obama Administration. This friend works in the business in town, and he asked me not to use his name in expressing his thoughts. But he makes some valid points and I thought I would share them with you:
A talking point that Barry and his economic team have been using repeatedly over the past few weeks is that they have averted Great Depression II b/c of the stimulus and other policies that they’ve implemented. Another talking point is that they underestimated the severity of the recession and specifically the significant rise in unemployment.
On one hand they say, “all of the economic forecasters” were predicting a second Great Depression when Obama took office, yet on the other, they say “all of the economic forecasters” underestimated the severity of the recession/growth in unemployment. See Summers’ comments from MTP yesterday.
"Six months ago, the economy was in a nose dive, people were talking about the possibility of another depression, the statistics all suggested a vertical decline," said Lawrence H. Summers, the top White House economic adviser, on "Meet the Press." "None of that is the situation right now," he said.
"There was a surprise in the unemployment statistics," Summers said on "Meet the Press," "but that didn't have to do with the impact of the stimulus. That had to do with the baseline that we were dealing with."
I personally think it’s more the latter but it can’t be both. See an excerpt below from a paper written by a senior fellow at Brookings (Gary Burtless), which highlights this.
The administration was not alone in publishing a forecast that turned out to be too optimistic. In its January 2009 forecast, the Congressional Budget Office predicted that the unemployment rate would average 8.3 percent in 2009 and 9.0 percent in 2010, assuming no economic stimulus package was passed. As CBO pointed out in that report, its outlook was more pessimistic than that of private forecasting firms. Under the more pessimistic CBO forecast prepared in March 2009, after Congress passed the stimulus package, the annual unemployment rate at the trough of the recession was still predicted to be 9.0 percent, a rate that is one-half percentage point below the 9.5 percent monthly unemployment rate actually recorded in June 2009. The administration and the CBO can defend their winter forecasts by pointing to the predictions of other professional forecasters, few of whom foresaw the severity of the current recession.
Point being, no one was predicting Great Depression II in January so Obama and his team shouldn’t be allowed to get away with saying that they’ve completed item 1 on their To Do list when taking office in January—prevent a second Great Depression.
Another interesting item is that Biden predicted on MTP on June 14 that 600,000 jobs would be created in the next 100 days. So, when it was announced that the economy lost 300,000+ jobs in June and is expected to lose another 300k in July when the numbers are announced this Friday. In other words, Biden was completely wrong.
David Gregory asked Biden on the show: "A hundred days after it was signed, the president said 150,000 jobs had been created or saved. Can you explain where that number comes from?"
Biden responded: “Yes, look, there's an econometric model that economists have been using for decades to correlate the economic circumstances of the nation with the creation of jobs. It is a model no one has questioned. It's a model the Council of Economic Advisers have used to come up with that 150,000 jobs. But in fact -- and by the way, I think we're going to create another 600,000 jobs in the next 100 days, because, now, this thing is beginning to roll out. We actually have let these contracts, the governors with -- who have money for road contracts and so on, they're now just putting spades in the ground, just hiring people. And so, I don't know anybody who's argued with the model that we've used. But the key here for us is not whether or not we're going to argue about how many jobs, you know, there are out there; it's whether or not are we, in fact, producing employment for people? And it's undeniable.”
Well, Mr. Vice President, it is very much deniable. Jobs have been lost not created. You are and continue to be wrong. And to the Obama Administration, be consistent. You can’t say that you saved the world from the depression and that you underestimated how bad the recession was going to be. Nice try, though.