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Monday, June 8, 2009

Fun With Numbers: The Stimulus and the Economy

If you love numbers like I do, then analyzing the stimulus as well as the economy as a whole gives you plenty to look at. For instance, the stimulus cost $787 billion. So far, about $55 billion has actually been spent. About 1.6 million jobs have been lost since the stimulus was passed, and about 6 million jobs have been lost since the recession began at the end of 2007. Meanwhile, the president claims that the stimulus has created or saved 150,000 jobs. Now, he claims that the stimulus will save or create another 600,000 jobs over the summer. Meanwhile, the economy lost 345,000 jobs in the month of May. This was the 4th straight month in which job losses had narrowed.

There are even more numbers to consider. First, when President Obama took over in January the unemployment rate was just below 7%. It's now at 9.4%. The president predicted that the unemployment rate would climb to 9% or more WITHOUT the stimulus. Finally, the budget deficit is projected to be about $1.9 trillion this year. The dow jones industrial average has jumped from 6700 to 8600 since March. At about the same time, the 10 year U.S. treasury rate has jumped from 2.8% to 3.8%.

They say that numbers don't lie, but often, they can be used to tell a lot of different stories. In this case, everyone on all sides is using the numbers to spin the story. The Republicans are using the latest jobs report to claim that the stimulus is a failure. The Democrats are using the very same report to claim it is a success. The same numbers are used to tell two different stories.

Politically, I believe both sides are jumping the gun in making proclamations. Fiscal policy can take as long as 18 months to really have its full effect in the economy. So, four months in is not nearly long enough to make a determination either way.

I also believe that the president has been far too conservative in selling the plan. For several weeks he has been touting the fact that the stimulus has saved or created 150,000 jobs. In that time, we've had two different jobs reports and our economy lost nearly 800,000 jobs in that time. Even if he could prove that 150,000 jobs really were "created or saved", it's far outweighed by the 800,000 jobs that have been lost in the meantime. The president's policy appears miniscule in comparison to the weight of the recession.

Claiming that 600,000 jobs will be saved or created won't be much better. By the end of the summer we will have another three jobs reports. We'll lose somewhere in the neighborhood of 1 million jobs. Again, even if he can convince someone that he really did "create or save" 600,000 jobs, that will seem minute compared to the jobs really lost in the economy.

Finally, the president has claimed that by its end the stimulus will have created or saved 3.5 million jobs. This also seems to be a conservative number. After all, the economy has already lost 1.6 million jobs since its inception. By the time the recession is over, the economy will likely lose more jobs in the same time frame as what the president will have claimed to "saved or created". By that assumption, we will only back where we started at 7% unemployment.

All of this is evidence that the president underestimated the intensity of the recession. All his numbers are far too conservative for a recession this severe.

3 comments:

Anonymous said...

I'd ask if you're referring to Paul Krugman's assertion that the stimulus wasn't big enough, but apparently the media doesn't want us to think critics attacking Obama from the left exist.

mike volpe said...

I wasn't. I think that Obama has overestimated what a stimulus could do. He underestimated how deep the recession is. Spending anymore money is even more rdiculous. $787 billion was plenty big enough.

Anonymous said...

Obama should have gone for 2 trillion instead of 787 billion. 2 trillion would have been enough to bail out all the states and all businesses. Then everything could just start over.It don't matter about the so called debt. The debt can be hidden by just raising the tax on everything when the economy gets back on it's feet. All people will make more money from a recovered economy and they won't pay any attention to the higher taxes. They will just be happy that they are making money.