Right wing falsely accuses Obama admin. of "cooking the books" on stimulus job impact

››› ››› JOCELYN FONG

Right-wing media figures falsely accused the Obama administration of "cooking the books" on the stimulus package, arguing that the fact the administration has lowered its estimate of jobs that would exist without the stimulus package means that the administration dishonestly inflated its estimates of the numbers of jobs the stimulus created or saved. In fact, the estimate was revised after later economic data revealed that the recession was "far worse than" Obama's economic advisers "expected at the time," and private analysts and the Congressional Budget Office agree that the stimulus has raised employment by more than a million jobs.

Right wing accuses White House of "cooking the books" on stimulus job effect because baseline changed from January 2009

BigGovernment.com: "White House Caught Altering Stimulus Baseline Projection by 7 Million Jobs." An April 19 BigGovernment.com post claimed that "in order to make it look like their stimulus has 'created or saved' 2.8 million jobs, the Obama Administration first had to whack 7 million jobs from their previous estimates." BigGovernment states that the Council of Economic Advisers (CEA) now indicates that "there would be only 126.9 million jobs" without the stimulus, while in January 2009, Obama's economic advisers Christina Romer and Jared Bernstein said that, in BigGovernment's words, "without their stimulus there would be 133.9 million jobs."

Beck claimed they just "changed" the baseline number and "pretended like" the initial figure "didn't exist" so "they can say they've ... created or saved 7 million jobs." During the April 20 edition of his radio show, Glenn Beck stated: "Did you know that the government has -- we will show you, I hope, tonight -- the government has created 7 million jobs -- 7 million new jobs, did you know that?" Beck added: "What they did is they took the jobs number of the total number of jobs in America from 2009, and they downgraded that number and changed it in the latest report. They downgraded it, I think, by 8 million. So they can say they've lost a million jobs, but they've created or saved 7 million." Beck further stated: "They took the government number and then they just changed it. And so they -- and they pretended like that other number that was out there in 2009 that they used and said, OK, we got to have, you know, this number of jobs -- they just changed that and deleted it and pretended like it didn't exist. Believe it or not, that's true."

Hannity: "[T]his to me seems like they willfully, purposefully have distorted the numbers to lie to the American people." Sean Hannity stated on the April 20 edition of his Fox News show that "there is a new report that suggests the White House has been cooking the books on the job numbers. Now an analysis from BigGovernment.com reveals that the administration has been using some fuzzy math in order to sell its stimulus plan as a success." Hannity repeated BigGovernment's claim that "the administration conveniently slashed nearly 7 million jobs from its January '09 prediction in order to be able to claim that the stimulus, in fact, created those 2.8 million jobs" and asked Rep. Paul Ryan (R-WI): "Look, this to me seems like they willfully, purposefully have distorted the numbers to lie to the American people. Am I misreading it, or is this accurate?" Ryan responded, "No, you've got it right," and added, "Look, they came here to the Hill and said if you don't pass this, stimulus unemployment is going to go way up past 8 percent."

Hot Air: "Cooking the books on Porkulus effects?" In an April 20 Hot Air post, Ed Morrissey linked to BigGovernment.com and claimed that the Obama administration "simply subtracted seven million from their previous baseline in order to claim growth that has never materialized. 'Saved or created' has always been a fraud. Now we see how the three-card monty works."

But Obama's economic advisers have repeatedly explained that additional data on condition of economy led to change in baseline

Recent CEA report cited by BigGovernment notes that its baseline forecast incorporated data that wasn't available in January 2009. The April CEA report states that its "statistical baseline forecast" estimates "GDP and employment beginning in the second quarter of 2009 using actual data through the first quarter of 2009." By contrast, actual data from both the fourth quarter of 2008 and the first quarter of 2009 were not available when Romer and Bernstein completed their January 2009 estimate. In addition, CEA notes that it estimates the impact of the stimulus in more than one way: "One involves a comparison of the actual behavior of GDP and employment with a plausible, statistically-determined baseline. The second uses estimates of the effects of fiscal policy from standard macroeconomic forecasting models. ... We also examine the available direct job creation data provided by a fraction of [the American Recovery and Reinvestment Act] fund recipients and find that the results provide further corroboration of our estimates of the overall impact of the Act."

Macroeconomic Advisers: This argument "confuses the pre-stimulus baseline with the incremental effects of the stimulus." On February 19, Macroeconomic Advisers LLC, a prominent economic analysis firm, refuted the "demagoguery" of "partisan commentators" pointing to "projections prepared before ARRA was implemented" to claim that the stimulus has failed. In a blog post, Macroeconomic Advisers stated: "For the record, last spring, as the financial crisis that engulfed the economy worsened unexpectedly -- but before the stimulus could possibly have had any real effect on the economy -- the unemployment rate already had moved above the Administration's (and many others') last pre-stimulus projection":

Demagoguery: Baseline versus Incremental Effect

Frequently, partisan commentators -- and even some economists -- exclaim that the stimulus has failed because the unemployment rate now exceeds the peak shown in projections prepared before ARRA was implemented. This argument, which clearly -- and perhaps intentionally -- confuses the pre-stimulus baseline with the incremental effects of the stimulus, would be laughable if it was not taken so seriously in some quarters. For the record, last spring, as the financial crisis that engulfed the economy worsened unexpectedly -- but before the stimulus could possibly have had any real effect on the economy -- the unemployment rate already had moved above the Administration's (and many others') last pre-stimulus projection. So, this is simple: the baseline forecasts were optimistic, but unemployment would be even higher now without the benefit of the stimulus package.

Romer-Bernstein report was released before Obama took office and noted that the "analysis will surely evolve." The January 10, 2009, report explicitly stated that "[o]ur analysis will surely evolve" as "the actual package parameters are determined in cooperation with the Congress" and because "the uncertainty is surely higher than normal now because the current recession is unusual both in its fundamental causes and its severity":

A key goal enunciated by the President-Elect concerning the American Recovery and Reinvestment Plan is that it should save or create at least 3 million jobs by the end of 2010. For this reason, we have undertaken a preliminary analysis of the jobs effects of some of the prototypical recovery packages being discussed. Our analysis will surely evolve as we and other economists work further on this topic. The results will also change as the actual package parameters are determined in cooperation with the Congress. Nevertheless, this report suggests a methodology for ensuring that the package contains enough stimulus that we can have confidence that it will create sufficient jobs to meet the President-Elect's goals.

[...]

There is the obvious uncertainty that comes from modeling a hypothetical package rather than the final legislation passed by the Congress. But, there is the 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.

Bernstein: "When we made our initial estimates, that was before we had fourth-quarter results on GDP." In a June 8, 2009, press briefing, Bernstein stated that "when 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 stated that "[o]ur forecast at that time was right in the middle of every other forecast" and "the point is that the contraction of the economy in the fourth quarter -- you should recall back then that was -- the magnitude of that contraction was far larger than was expected. And so at the time our forecast seemed reasonable. Now, looking back, it was clearly too optimistic." Romer similarly stated in a July 7, 2009, appearance on Fox News that the economy "was worse than we anticipated" and that the continued job losses are "evidence that this is a very severe recession."

Goolsbee: "What we missed, and what everyone missed, was the depth of the baseline that was in place as the president came into office." During a February 17 interview on Fox News' America's Newsroom [accessed via Nexis], Obama economic adviser Austan Goolsbee stated, "[I]f you remember in that same projection they said if we didn't pass the stimulus it would only go to 9 percent and it was above that before the stimulus even came into effect. What the administration and everyone else missed was the depth of the recession that was in place at the end of 2008 and the beginning of 2009, when the president came in to office." Goolsbee added: "What I'm saying is that the impact of the stimulus is very much exactly what they predicted it to be. What we missed, and what everyone missed, was the depth of the baseline that was in place as the president came in to office, yes."

Leonhardt: "[T]he patient is not as sick as he would have been without the medicine he received. But he is a lot sicker than doctors realized when they prescribed it." On June 30, 2009, The New York Times' David Leonhardt wrote that before Obama took office, his economic advisers said that with the stimulus "unemployment would probably peak at 8 percent late this year. We now know that this forecast was terribly optimistic." He added:

There are two possible explanations that the administration was so wrong. And sorting through them matters a great deal, because they point in opposite policy directions.

The first explanation is that the economy has deteriorated because the stimulus package failed. Some critics say that stimulus just doesn't work, while others argue that this particular package was too small or too badly constructed to make a difference.

The second answer is that the economy has deteriorated in spite of the stimulus. In other words, the patient is not as sick as he would have been without the medicine he received. But he is a lot sicker than doctors realized when they prescribed it.

To me, the evidence is fairly compelling that the second answer is the right one. The stimulus package does seem to have helped. But its impact has been minor -- so far -- compared with the harshness of the Great Recession.

Independent and private analysts agree stimulus significantly raised employment over what would have happened otherwise

CEA: ARRA raised employment "by between 2.2 and 2.8 million." In its third quarterly report on the American Recovery and Reinvestment Act of 2009, CEA stated: "The CEA estimates that as of the first quarter of 2010, the ARRA has raised employment relative to what it otherwise would have been by between 2.2 and 2.8 million. These estimates are similar to those of other analysts, and are broadly consistent with the direct recipient reporting data available for 2009:Q4."

CBO estimates job impact of between 1.2 and 2.7 million. The nonpartisan Congressional Budget Office (CBO) estimated in February that as of the fourth quarter of 2009, "ARRA added between 1.0 million and 2.1 million to the number of workers employed in the United States." The CEA report stated that CBO estimates that as of the first quarter of 2010, the Recovery Act raised employment by between 1.2 and 2.7 million.

IHS/Global Insight estimates job impact of 1.7 million. PolitiFact.com stated on February 17 that "[u]sing updated estimates provided to PolitiFact, IHS/Global Insight estimates that 1.7 million jobs will be created or saved by the first quarter of 2010." The CEA report also cites this estimate from IHS/Global Insight.

Moody's economy.com estimates job impact of 1.9 million. The PolitiFact.com post further stated that "[u]sing updated estimates provided to PolitiFact ... Moody's economy.com estimated that 1.9 million jobs will be created or saved" by the first quarter of 2010. The CEA report also cited this estimate from Moody's economy.com.

Macroeconomic Advisers estimates job impact of 1.5 million. The CEA report stated that Macroeconomic Advisers estimates that the Recovery Act raised employment by 1.46 million as of the first quarter of 2010, citing an analysis provided to CEA.

Posted In
Economy, Jobs, Wages, & Unemployment
We've changed our commenting system to Disqus.
Instructions for signing up and claiming your comment history are located here.
Updated rules for commenting are here.