Hume accuses Obama administration of “economic illiteracy”

Hume: “This is an administration that seems beset by kind of an economic illiteracy.” During the April 4 edition of Fox Broadcasting Co.'s Fox News Sunday, Hume stated:

HUME: This is an administration that seems beset by kind of an economic illiteracy. I don't think the president nor those immediately around him really have a grasp -- surprisingly -- have very little grasp of what the private -- how the private sector works, how incentives work, and how disincentives work.

Hume's accusation based on discredited and dubious economic analysis

Hume: "[S]o many of the jobs were these government jobs." Discussing March's unemployment numbers recently released by the Bureau of Labor Statistics (BLS), Hume commented: “Just as in the past, so many of the jobs were these government jobs which have either been saved, as they like to say, or created.” He continued, “This is, in jobs terms, an exceedingly feeble recovery.”

BLS: Private employers added 123,000 jobs in March. In the most recent monthly employment survey, BLS reported that total nonfarm payroll increased by 162,000 employees in March; private employers added 123,000 employees in March, the largest one-month gain since May 2007.

From a BLS news release on the March jobs report:

Hume: “I think the stimulus has been remarkably ineffective.” During the discussion, Hume also stated: “They talk about the effect of the stimulus. I think the stimulus has been remarkably ineffective.”

Independent analysts agree with White House: Unemployment would be higher, GDP lower without stimulus. In a quarterly report issued January 13, the White House Council of Economic Advisers (CEA) estimated: “As of the fourth quarter of 2009, the CEA estimates that the [American Recovery and Reinvestment Act] has raised employment relative to the baseline by between 1½ and 2 million. The CEA estimates for both the effects on GDP and employment are similar to those of respected private forecasters and government agencies.” From CEA's quarterly report:

In the same report, CEA stated: “The CEA estimates suggest that the Act contributed between 2 and 3 percentage points to real GDP growth in the second quarter; between 3 and 4 percentage points in the third quarter; and between 1½ and 3 percentage points in the fourth quarter. The estimates imply that as a result, it has raised the level of GDP at the end of 2009 by about 2 percent, relative to what otherwise would have been.” CEA noted that “private sector estimates” of the stimulus effects on GDP were “generally similar”:

Hume: White House ignores “the effect of what the Federal Reserve has been doing.” Hume further stated: “I think the stimulus has been remarkably ineffective when you -- you know their analyses never seem to include the effect of what the Federal Reserve has been doing -- unprecedented efforts to inject cash into the economy. A lot of it has gotten into the economy. That, I think, has provided whatever buoyancy we have.”

White House: "[T]he Federal Reserve's program ... surely contributed to the difference" in the economy. In its January 13 quarterly report, CEA wrote:

This projection methodology provides one way of estimating the impact of the ARRA on employment and the economy. It shows that using the past history of GDP and employment and actual data through the first quarter of 2009, one would have predicted that employment as of the middle of the fourth quarter would be about 2 million lower than it actually was. To ascribe much of this difference to the ARRA, the key policy action taken in the first quarter, is certainly plausible. However, other policy actions, such as the Financial Stability Plan, monetary policy, and the Federal Reserve's program of buying agency debt and long-term U.S. government bonds, surely contributed to the difference. Also, any other factors not captured by the past history of GDP and employment, such as unusual moves in foreign demand or asset prices, would also be captured in the difference.

Kristol criticizes White House for not extending Bush tax cuts -- which CBO says is less cost effective than the stimulus

Fox News contributor Bill Kristol: “Why doesn't he extend the Bush tax cuts again next year?” During the same Fox News Sunday panel discussion, Kristol stated:

KRISTOL: Taxes are going up next year, [Fox News contributor] Juan [Williams] -- that's a fact. He extended the Bush tax cuts this year. Think of the logic. Why did he do that? Because he knew that raising taxes is deflationary and recessionary. Why doesn't he extend the Bush tax cuts again next year?

CBO: Extending tax cuts less efficient than Recovery Act's tax credits. In February, Congressional Budget Office (CBO) director Douglas Elmendorf discussed the estimated effects that extending the Bush tax cuts would have on the economy and the federal budget and testified that “the effects of this policy per dollar of budgetary cost are smaller than the effects of extending [the stimulus] tax credits.”

CBO: Extending tax cuts “does not create much incentive ... to hire more workers.” Elmendorf also stated in his written testimony that "[d]eferring the scheduled increases in tax rates in 2011 would help some businesses" but that “increasing the after-tax income of businesses typically does not create much incentive for them to hire more workers in order to produce more, because production depends principally on their ability to sell their products.”