Rove echoed GOP distortion of top Obama adviser's research on stimulus effectiveness
Research ››› ››› DIANNA PARKER
On This Week, Karl Rove echoed House Republicans' distortion of research by CEA chairwoman Christine Romer in claiming that their alternative stimulus bill "produced 50 percent more jobs at half the cost" of President Obama's economic recovery plan. In fact, according to the White House, "Romer's view is that the House analysis is absolutely incorrect" and "the plan the President supports would result in substantially greater job creation than the House Republican plan."
On the March 1 broadcast of ABC's This Week, Fox News contributor Karl Rove echoed House Republicans' distortion of research by White House Council of Economic Advisers (CEA) chairwoman Christine Romer and her husband in claiming that the GOP's alternative stimulus bill "produced 50 percent more jobs at half the cost" of President Obama's economic recovery plan. Rove claimed: "[T]he House Republicans took their plan and ran it through the Obama chairman of the economic advisers' econometric model -- Romer. And it produced 50 percent more jobs at half the cost, according to the economic model used by the Obama White House." In fact, Republicans' claim that the Romers' economic model predicts that the GOP plan will produce 6.2 million jobs has been criticized as a distortion of the Romers' research. As the blog Think Progress noted, according to the White House, "Romer's view is that the House analysis is absolutely incorrect" and "the plan the President supports would result in substantially greater job creation than the House Republican plan."
How did Republicans arrive at their 6.2 million figure? The Web site of Rep. Dave Camp, the ranking Republican member of the Committee on Ways & Means and a sponsor of the substitute, explains that the GOP's estimate is based on a 2007 paper by economists Christina and David Romer, a husband-wife team at the University of California, Berkeley. Yep, that's the same Christina Romer who is now chair of Obama's Council of Economic Advisers. The Romers' analysis of tax changes since World War II concluded that "tax changes have very large effects" on the economy. Specifically, they said their data suggested that a "tax increase of one percent of GDP [gross domestic product] lowers real GDP by about three percent" or lower, but at least by 2.2 percent. Flipping the Romers' calculations, GOP staffers figured that a tax cut of 1 percent of GDP would produce growth of 2.2 percent. Then, using a different report (Christina Romer's analysis of Obama's plan), the Republicans further calculated that their own party's proposed cuts would yield 6.2 million jobs over two years.
Republicans point to Romer's position in Obama's administration, as if to prove their figures are justified. However, these aren't her calculations. Plus, the Romers stressed in that 2007 report that their estimates were larger than other economists had come up with and "are not highly precise." (Indeed, in the CBO's analysis, which it says gives a range that "encompasses a majority of economists' views," the nonpartisan group gives a high and low multiplier for several government measures; the tax cut multiplier ranges from 0.5 to 1.7.) More recently, Christina Romer, in a Jan. 9 paper estimating the effects of the Democratic plan, didn't use the 2.2 multiplier even though that meant a lower job estimate for the tax cuts in Obama's plan. Instead, she used a 1 percent multiplier.
We were unable to contact Romer directly, but a White House spokesperson told us the GOP analysis "makes a fundamental error" by assuming that added jobs from tax cuts would show up by the end of next year. "It fails to take into account the fact that tax changes affect the economy with delays," the spokesperson said. Actually, even if the 2.2 multiplier were correct, the number of jobs added due to the GOP's proposed tax cuts would be only 1.7 million by the end of next year, according to White House calculations. GOP leaders themselves acknowledged in a document detailing their calculations that any such projections "are largely speculative, and the conclusions are generally dictated by the assumptions made by the authors."
In a January 31 blog post, University of California-Berkeley economist Brad DeLong posted "White House talking points" responding to, in his words, "House Republican claims that their stimulus is better":
CEA Director Romer's view is that the House analysis is absolutely incorrect. The CEA estimates that the Republican plan would create only 1.7 million jobs, compared to 4.2 million for the Democratic plan.
Question: The House claims that based on the research of CEA Chair Christy Romer, their plan would create 6.2 million jobs. Isn't that a more effective way of jumpstarting the economy?
Answer: The Republican House analysis is flat wrong in its claim that the House Republican stimulus is more effective. No matter what your analytical assumptions, as long as they are consistent the plan the President supports would result in substantially greater job creation than the House Republican plan.
Independent groups that have analyzed the President's plan -- from Macroeconomic Advisors to former McCain advisor Mark Zandi -- have confirmed that the President's plan will create between 3-4 million jobs -- twice the number of the House plan. The President supports takes [sic] a broad, comprehensive approach. It includes substantial tax cuts -- many of which mirror the provisions in the House Republican plan. But it also includes new spending programs that many economists across the spectrum believe will help create jobs and give our economy a kickstart right now.
Additionally, during the discussion, Rove claimed: "Every House Republican voted for an alternative stimulus measure. It included expansion of the unemployment insurance. It included expansion of food stamps, and it included expansion of COBRA health benefits." However, nine House Republicans voted against the Republican alternative to the stimulus bill. Moreover, the bill does not include an "expansion of COBRA health benefits" or an "expansion of food stamps."
ROVE: You know, with all due respect, to suggest that adding $2.9 trillion to the deficit in eight years with two wars, Katrina, 9-11, and a tech bubble bursting makes us somehow -- the Republicans unable to talk about fiscal responsibility, when this president, in his own budget document right here, says he's going to add $3.2 trillion to the deficit in the first 20 months and 11 days. He's going to -- he is going to double it in the first four years and triple it if he gets another term.
STAN GREENBERG (Democratic pollster and strategist): Well, it's a remarkable lecture, given the performance. But the --
KATRINA VANDEN HEUVEL (editor and publisher of The Nation): Yeah.
GREENBERG: -- fact is, this is --
ROVE: You're going to do heck of a lot better than we did if a judgment is added to the deficit.
GREENBERG: This is the problem. If you look at the ABC poll, you have 70 percent -- three-quarters of the country watching their family, themselves losing jobs, losing income. At that moment, we have the passage of an economic renewal plan that provides unemployment benefits with health care being -- for people being laid off. And at that moment, the Republican Party is defining itself both by its opposition to that, as well as its continued push of the same kind of top-end tax cuts that produced this economic situation.
GEORGE WILL (syndicated columnist): Everybody wants this to work. We want the economy to recover. And, you know, you argue who's better, the Red Sox or the Yankees. At the end, someone says, "Well, that's why they play the game." And in the next four years, we're going to find out.
I don't think George Bush, when he was elected, intended to spend his time on Iraq. I don't think Mr. Obama plans to spend his time on what may be his biggest problem, which is inflation, two years from now. We're talking about $1.7 trillion. You know how to spend a hundred point -- $1.7 trillion? A million dollars an hour, 365 days a year for 200 years to spend that.
VANDEN HEUVEL: George, most economists are worried about deflation at this point. You can do the Red Sox and other team. I don't think for millions of Americans hurting out there, seeking answers, that they think of this as a game. And I also think that there are Republicans -- the de facto head of the Republican Party right now, Rush Limbaugh, does want Obama to fail. That is very destructive for those in this country, as I said, who seek jobs, who are losing their pensions, who don't have health care. Fourteen thousand Americans lose their health care every day. This cannot be sustained.
ROVE: Let me set the record straight on something. Every House Republican voted for an alternative stimulus measure. It included expansion of the unemployment insurance. It included expansion of food stamps, and it included expansion of COBRA health benefits. The core of it was a cut in the tax rates, the bottom two tax rates. If you're paying taxes at a 10 percent rate, it went to 5. If you were paying at 15, it went to 10. It also included a lot of small-business tax cuts. And --
STEPHANOUPOLOUS: But you don't dispute that President Obama --
ROVE: Let me finish.
STEPHANOUPOLOUS: -- will lower taxes for 95 percent of working people, do you?
ROVE: No, no. Well, look, I'll come back to that in a second. But the House Republicans took their plan and ran it through the Obama chairman of the economic advisers' econometric model -- Romer. And it produced 50 percent more jobs at half the cost, according to the economic model used by the Obama White House. Now, does Obama cut taxes for 95 percent of taxpayers? Yes. Including the 45 percent of taxpayers who do not have a federal income tax liability.