Media figures ignore facts to claim unemployment rate proves stimulus is "failing"

››› ››› JEREMY HOLDEN & JOCELYN FONG

Numerous media figures have advanced the attack that because the current unemployment rate is higher than initial administration predictions, in the words of Newt Gingrich, Obama's "policies are failing." But supporters of a stimulus bill had warned before it was passed that it would not result in an immediate decrease in unemployment.

Since President Obama announced a proposal to accelerate economic recovery efforts and create or save 600,000 jobs in the next 100 days, several media figures have advanced the attack that because the current unemployment rate is higher than initial administration predictions, in the words of Fox News contributor Newt Gingrich, Obama's "policies are failing." But supporters of a stimulus package, including the administration, had warned before the stimulus bill was passed that while they expected the bill to speed economic recovery and lessen the impact of the recession, unemployment would continue to rise in the short term.

Moreover, the claim that higher-than-expected unemployment rates mean that the stimulus plan is failing is undermined by the fact that administration projections in January were made without fourth-quarter 2008 GDP results, which were not yet available. In a June 8 press briefing, White House economic adviser Jared Bernstein stated: "[W]hen we made our initial estimates, that was before we had fourth-quarter results on GDP, which we later found out was contracting on an annual rate of 6 percent, far worse than we expected at that time." Bernstein also said at the briefing that the unemployment rate will still be lower than it would have been had the bill not passed.

Both the administration and economists asserted before the stimulus bill passed that, even with the bill, conditions would likely worsen before they improved. In a February 13 press briefing, White House press secretary Robert Gibbs said: "The president's confident that this is a plan that will save or create those jobs, but obviously I don't think there's any doubt that with the simple passage of this plan, the bad news isn't going to be over. I think there will -- there are going to be continued hard times and it's going to take a while to get out of this mess, because it took us a while regrettably to get into it." The New York Times reported on January 9:

Economists fell over themselves in describing the dire nature of the jobs report, which they said was alarming confirmation that the economy was in the midst of a sharp contraction in which consumer spending and business investment bordered on free fall. Many say that the economy contracted in the fourth quarter at a 5 or 6 percent annual rate and that steep contraction will continue at least through the first quarter, letting up only if Congress approves a sizable stimulus, one that kicks in soon and is at least as big as the $775 billion that the Obama camp has proposed.

''It will add massively to the budget deficit,'' said Stuart G. Hoffman, chief economist at the PNC Financial Services Group in Pittsburgh, who counts himself as an advocate of balanced budgets. ''But I am not against running deficits in these circumstances, not with so many people losing their jobs.''

Mr. Hoffman expects the unemployment rate, which jumped to 7.2 percent last month from 6.8 percent in November, to rise to 8.5 percent by July and plateau there for the rest of the year.

Others are less sanguine. They see 9 or 10 percent unemployment by early next year, and a jobless recovery that continues for about six months even after the economy ceases to contract.

By comparison, the unemployment rate reached 10.8 percent in the 1981-1982 recession, its highest level since World War II. In those years, unemployment and economic growth rose and fell more or less in tandem. But in the early 1990s that changed. In the 1990-1991 recession and again after the 2001 recession, employers continued to shed jobs for months. In the case of the 2001 recession, employment did not return to its prerecession level for four years.

''Even with the help of a stimulus,'' said David A. Levy, chairman of the Jerome Levy Forecasting Center, ''the unemployment rate is going to keep rising for the rest of the year, or longer.''

Indeed, New York Times columnist and Nobel laureate Paul Krugman noted in a January 27 blog post:

It's not a problem if some or even most of the stimulus arrives after the official recession, as determined by the NBER [National Bureau of Economic Research], is over. Why? Because in modern recessions, unemployment keeps rising long after the NBER has determined, based on things like industrial production, that the recession proper is over. You can see that the need for stimulus doesn't end with the recession by the simple fact that in each of the last two recessions the Fed continued to cut interest rates long after the official cycle trough. if it's good enough for the Fed, it's good enough for fiscal policy.

Krugman, who argued for a larger stimulus, further noted in his February 20 New York Times column that participants at the Federal Reserve's open market committee "anticipated that unemployment would remain substantially above its longer-run sustainable rate at the end of 2011, even absent further economic shocks," and that "the Obama administration is taking action to help the economy, but it's trying to mitigate the slump, not end it. The stimulus bill, on the administration's own estimates, will limit the rise in unemployment but fall far short of restoring full employment."

Media figures citing the unemployment figures as evidence that the stimulus is not working include:

  • During the June 8 edition of Fox News' Special Report, senior political analyst Brit Hume claimed that "[t]he stimulus is not working," and that the Obama administration "made some extravagant predictions about the effect of their stimulus spend-fest, claiming it would keep the unemployment rate from ever getting above 8 percent as was noted earlier. It is now nearly 9 and a half percent and climbing." During a subsequent discussion, host Bret Baier asserted, "They projected that unemployment was not going to go above 8 percent. Now it's at 9.4 percent, and it looks like it's going even higher." Syndicated columnist Charles Krauthammer later claimed, "Now, apart from the fictional 8 percent, which as you indicated was the number the administration had said was unemployment that he we would hit if we did not have this package -- and of course we're already at 9 and a half percent and rising -- is the idea that we talked about a little earlier about the saved and created jobs."
  • During the June 8 edition of Fox News' Hannity, host Sean Hannity claimed, "Well, to get the American people to embrace the stimulus package, they said at the worse we'd have unemployment at 8 percent, but if we didn't implement it, it would be at 9 percent. Well, now we went from 8-point -- what, 8.9 percent to 9.4." Fox Business correspondent Tracy Byrnes subsequently stated, "And the worst is, the majority of the jobs will be lost in the first half of the year so you're going to see a lot of unemployed people by the end of June, basically, in this country, so nothing is working."
  • During the June 9 edition of Fox News' Fox & Friends, Gingrich claimed, "Look, the president is desperately trying to spin a bad story, and the weakest White House press corps in modern times is letting him get away with it. The fact is the Obama administration promised that if the stimulus package was passed without having been read so that they had the money immediately, that we would peak at 8 percent unemployment. Well, we're already past that; we're at 9.4 percent. There's a very grave danger it's going to go above 10 percent. And the administration, of course, doesn't want to admit that their policies are failing, even though we have objective evidence that their policies are failing."

In addition, during the June 8 edition of CBS' Evening News with Katie Couric, CBS News chief White House correspondent Chip Reid asserted of the administration's proposal to create 600,000 jobs in the next 100 days, "Some congressional Republicans say it's yet another rosy prediction from an administration that said unemployment would level off at 8 percent. It's now 9.4 percent. Since the stimulus was signed, the economy has lost 1.5 million jobs." After then airing Rep. Jeb Hensarling (R-TX) stating, "The administration has a failing plan, and so they want to do it in -- with greater speed. I mean, that's not a recipe for success," Reid stated, "A top administration official today said that despite all that government spending to create jobs, the White House believes the unemployment rate is going to continue to go up even higher than the sky-high 9.4 percent that it is now." Reid did not report either that economists had projected rising unemployment in the short term even with a stimulus package or that the administration said that it lacked fourth-quarter results when it made its projections in January.

Also, a June 9 FoxNation.com graphic asked, "Why isn't the stimulus working?"

From the June 9 edition of Fox News' Fox & Friends:

GRETCHEN CARLSON (co-host): So I'm looking at these figures, and here are the hardcore numbers that I can come up with: 9.4 percent unemployment, 1.6 million jobs lost. Those are the hard facts. Can you quantify jobs that have been saved, as the president claims you can?

GINGRICH: Look, the president is desperately trying to spin a bad story, and the weakest White House press corps in modern times is letting him get away with it. The fact is the Obama administration promised that if the stimulus package was passed without having been read so that they had the money immediately, that we would peak at 8 percent unemployment. Well, we're already past that; we're at 9.4 percent. There's a very grave danger it's going to go above 10 percent. And the administration, of course, doesn't want to admit that their policies are failing, even though we have objective evidence that their policies are failing.

CARLSON: So the former deputy White House spokesperson, Tony Fratto -- I know that you alluded to him when we interviewed you a few days ago -- but he says that this number of saved jobs is pure fiction. Is there a way to quantify it?

GINGRICH: No. I think you'd have to say, what was the trajectory of the economy? Did the trajectory change for the better? Then you could say there was a difference. The challenge for the president -- and I'm really amazed that nobody at the White House press corps has asked this question, since they promised us that it would peak at 8 percent unemployment, and it's now at 9.4 percent -- higher, substantially higher, almost 20 percent higher than he said it would be -- why are they not admitting that their policy hasn't succeeded at the rate they hoped it would? I just find it amazing that their budget is already blown to pieces because their budget only anticipated 8 percent unemployment. They're going to have less revenue and more federal spending on people who are unemployed. It's clear that their budget is in shambles, and yet the president's out trying to spin this, rather than deal with it as a problem.

From the June 8 edition of Fox News' Special Report with Bret Baier:

HUME: Hi, Bret. President Obama's order to his Cabinet secretaries today to spend that stimulus money faster was an acknowledgement of reality: The stimulus is not working.

The complaint against government spending as an antidote to a recession is that by the time the money finally gets spent, the recession is usually over. As of now, only 44 billion of the $787 billion in stimulus cash has actually gone out. No wonder the president wants the money spent faster.

The other problem Mr. Obama faces is that unemployment historically takes a lot longer to improve than the economy itself. That's because companies are reluctant to lay off people until things get really bad, and are also hesitant to hire them back until things get really good again. Unfortunately for Mr. Obama, he and his team made some extravagant predictions about the effect of their stimulus spend-fest, claiming it would keep the unemployment rate from ever getting above 8 percent as was noted earlier. It is now nearly 9 and a half percent and climbing.

And make no mistake about it: The most sensitive economic indicator in political terms is always the unemployment rate. People sometimes don't feel good about the economy when the unemployment rate is low, but they never feel good about it when it is high. At the current pace, it is hard to imagine it will not continue to climb for some time, and there's a congressional election next year. Hence, the administration's need for speed -- Bret.

[...]

BAIER: Well, some called it the "re-launch" today of the stimulus package. The White House assembling the Cabinet there. The president speaking in front of two flat-panel TV's with an elaborate presentation about the stimulus projects that they have ongoing in the second 100 days of their administration, saying 600,000 jobs are expected to be saved or created, among those, as you heard, some summer jobs, 125,000.

What about all of the math here? Let's bring in the panel -- Steve Hayes, senior writer for The Weekly Standard; Juan Williams, news analyst for National Public Radio; and syndicated columnist Charles Krauthammer -- Steve?

HAYES: Well, remember back when the White House was pressing especially hard for passage of the stimulus bill? We heard that if the stimulus weren't passed and weren't passed quickly, we would be on the verge of economic collapse, catastrophe. They refused even to give members of Congress 48 hours to read the bill.

And I think the most interesting number in light of that little bit of history that we have seen come out in the past week is that they spent only 5 and a half percent of this vast sum, $787 billion. What were they doing? Why is it that we can only spend that little amount of money and yet they're taking credit for having created all these jobs?

BAIER: Or saved them.

HAYES: Or saved. Or saved. Now, there's a disconnect there. And I think what's interesting now looking forward is that they're talking about creating -- or projecting creating 600,000 new jobs by the end of this next 100 days. And as a Republican aide pointed out to me today, how is it that they can say with such certainty that they're going to create the 600,000 new jobs, but they haven't been able to project how much money will be spent in the next 100 days? That's something that they have full control of, how much money the federal government actually is going to disburse over the next 100 days.

They can't tell us that number, but they can tell us how many jobs will be created by spending that amount of money. I think it sounds political.

BAIER: Juan, this is a tough story for this administration to tell. They projected that unemployment was not going to go above 8 percent. Now it's at 9.4 percent, and it looks like it's going even higher. This created-or-saved job number seems a little seems soft, doesn't it?

WILLIAMS: It is soft. I don't think anybody would argue that it's a hard and fast number. And it's a function of the fact that if you say you saved a job, there's no way to prove it. There's no way to say, "Here is a job we specifically saved." President Obama said today in response to his critics, let them go out there and talk to people who have been called back to work or someone who has had a job saved. But, again, how are you going to do it? It is all anecdotal at this point, Bret.

So what we're dealing with here, I think, is a soft spot. I think of it as an Achilles' heel for the Obama administration, and you can see it in the poll numbers where if there is one area where the administration gets low marks, or President Obama personally gets low marks, it's in his handling of the economy. Mitch McConnell, though, the Republican leader in the Senate, said today, he said, you know, if it's a matter of recovery from the recession, he thinks the economy can do it on its own. And why did we need this spending, because the economy seems to be ginning back up?

Now, I will say this in defense of President Obama: If you look at the last month's unemployment numbers, there has been a decline in the rate of job loss in the last month. And he's talking, also, about in these coming months helping young people who, of course, in a recessionary market are less likely to get summer jobs. So he sees some of this money going in and helping those young people stay afloat during this difficult time. Will the American people buy it? I don't know. And, of course, it plays big in terms of how long the American people have patience with him on the economy.

BAIER: And before you weigh in there, Charles, of the 600,000, the 125,000 summer jobs are counted in there.

WILLIAMS: Counted as part of the 600,000.

BAIER: Of course, they will be going away --

WILLIAMS: In the fall.

BAIER: -- when the summer is over. OK -- Charles?

KRAUTHAMMER: This is a mathematical fantasia. Apart from the distortion introduced into the economy by taking stimulus money from the general fund of taxation and distributing it to favored constituencies like teachers' unions, government workers, especially in blue states and swing states, is the damage the administration is doing to economics itself. I mean, economics is the one social science that we imagine has real numbers, hard numbers that you can actually look at and believe.

Now, apart from the fictional 8 percent, which as you indicated was the number the administration had said was unemployment that he we would hit if we did not have this package -- and of course we're already at 9 and a half percent and rising -- is the idea that we talked about a little earlier about the saved and created jobs. That is a complete invention. That's based on nothing. The Bureau of Labor Statistics says that you can't measure a saved job. And yet the president's throwing out precise numbers of how many are saved or created.

As he said, 150,000 already created or saved, and this absurd prediction of 600,000 in the next 100 days. Whenever you hear "saved or created," you are hearing a fiction. It's an attempt to slap a number onto something as a way of making something appear empirical which is, at best, aspirational and, at worst, cynical. The only hardened number in any of this is the trillion or so that will be created in real debt, real bonds held by real governments with numbers on them that we are going to have to repay. That is not a fictional number. It is a real one, and it's already raising our interest rates, and it could end up in hyperinflation.

From the June 8 edition of Fox News' Hannity:

HANNITY: And tonight in "Your America": As the unemployment rate continues to soar, President Obama convened a Cabinet meeting today and announced plans to ramp up the implementation of his economic stimulus plan over the summer. But is spending more of your hard-earned money the answer?

Joining me now is Stuart Varney and Tracy Byrnes, both of the Fox Business Network. Now, is this an admission by -- you know, accelerating the spending? Is this an admission, Stuart, that --

VARNEY: In my opinion, yes, it is.

HANNITY: -- that they --

VARNEY: The stimulus plan is not working. First and foremost, the stimulus plan was never an economic policy plan. It was a political document --

HANNITY: Yeah.

VARNEY: -- designed to ensure federal control over the states. I mean, there's no job creation in this stimulus plan. I won't keep you long, but listen to this: $40 billion aid to schools, $87 billion Medicaid assistance, $17 billion student aid, $27 million jobless benefits. Where are the jobs in that?

[...]

HANNITY: In our next segment, we're actually going to show the audience -- guys, hang in there, because we're going to show this in our next segment, what the predictions of the Obama administration were when they were using all these fear tactics --

VARNEY: Fantasy.

HANNITY: Well, to get the American people to embrace the stimulus package, they said at the worse we'd have unemployment at 8 percent, but if we didn't implement it, it would be at 9 percent. Well, now we went from 8-point -- what, 8.9 percent to 9.4.

BYRNES: And we will probably hit 10. Hands down, we'll hit 10 before the end of the year.

HANNITY: That's frightening.

BYRNES: And the worst is, the majority of the jobs will be lost in the first half of the year so you're going to see a lot of unemployed people by the end of June, basically, in this country, so nothing is working. And the best in that stimulus breakdown, there's an $8 billion line of "other."

[...]

BOB BECKEL (Democratic strategist): That stimulus bill will work. They talked about the money they gave to the banks. You know, the --

KAREN HANRETTY (Republican strategist): When is it going to work?

BECKEL: The banks are going to pay back -- the big six banks are paying back money, and the United States government and taxpayers are going to make money because they're paying interest on it.

HANRETTY: When is the stimulus bill going to work? Because it's not working now. Unemployment numbers continue to go up, the stimulus money is not going to the states with the highest unemployment --

BECKEL: Unemployment numbers went up a lot less than people thought they were going to go up.

LOU HOLTZ (former football coach): Hey, Bob, but you know, sometimes you try to solve the immediate problem and you jeopardize your long-range goals. Yes, we can solve the immediate problem with labor, et cetera, but, boy, it jeopardizes the children and the grandchildren of the future. How do you pay the interest on a couple trillion dollars?

From the June 8 edition of CBS's Evening News with Katie Couric:

[begin video clip]

REID: The president today took credit for keeping the economy out of a tailspin, but said he's still not satisfied with the pace of the recovery.

OBAMA: Now we're in a position to really accelerate.

REID: He said the stimulus -- which he claims created 150,000 jobs in the first 100 days -- will create four times that number of jobs in the second 100 days. There was even a PowerPoint presentation in the briefing room by a White House economist, with maps intended to show that job-creating projects are sprouting up all across the nation.

The goal is to get as much money as possible into shovel-ready projects fast. For example, the White House says over the next 100 days, work will begin on more than 1,500 highway projects and 98 airports; 5,000 police officers will be hired or protected from layoffs; 125,000 young people will get summer jobs; and work will begin on improvements in the national parks, from Yellowstone to the Statue of Liberty. Administration officials say they used a tried-and-tested formula for predicting the number of jobs, but critics say it's nothing more than guesswork, all smoke and mirrors.

PETER MORICI (economist, University of Maryland): Instead of talking about 600,000 saved or created jobs, tell us how many jobs you're actually creating, and point to them. Show me the guy with the shovel in his hands.

REID: Some congressional Republicans say it's yet another rosy prediction from an administration that said unemployment would level off at 8 percent. It's now 9.4 percent. Since the stimulus was signed, the economy has lost 1.5 million jobs.

REP. JEB HENSARLING (R-TX): The administration has a failing plan, and so they want to do it in -- with greater speed. I mean, that's not a recipe for success.

[end video clip]

REID: A top administration official today said that despite all that government spending to create jobs, the White House believes the unemployment rate is going to continue to go up even higher than the sky-high 9.4 percent that it is now. Katie.

COURIC: Chip Reid reporting from the White House tonight. Thank you, Chip.

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