The Wall Street Journal editors write:
Yesterday, President Obama’s chief economist announced that the plan had “created or saved” between 2.5 million and 3.6 million jobs and raised GDP by 2.7% to 3.2% through June 30. Don’t you feel better already?
Christina Romer went so far as to claim that the 3.5 million new jobs that she promised while the stimulus was being debated in Congress will arrive “two quarters earlier than anticipated.” Yup, the official White House line is that the plan is working better than even they had hoped.
We almost feel sorry for Ms. Romer having to make this argument given that since February 2009 the U.S. economy has lost a net 2.35 million jobs. Using the White House “created or saved” measure means that even if there were only three million Americans left with jobs today, the White House could claim that every one was saved by the stimulus.
There is an economic and a political aspect to this. As for the politics, no one is buying the White House spin. Each time the administration trots out the argument about how wonderful the stimulus has been, I suspect they lose votes and do further damage to their already waning credibility.
And the voters are right to roll their eyes. The economics on which the Obami rely is the equivalent of alchemy. The editors explain:
All of these White House jobs estimates are based on the increasingly discredited Keynesian spending “multiplier,” which according to White House economist Larry Summers means that every $1 of government spending will yield roughly $1.50 in higher GDP. Ms. Romer thus plugs her spending data into the Keynesian computer models and, presto, out come 2.5 million to 3.6 million jobs, even if the real economy has lost jobs.
The reality is that the multiplier is less than 1. Fifty years of spending research shows “a multiplier effect of between 0.4 and 0.7. This means that government spending shrinks the private economy, because it ‘crowds out other components of GDP, particularly investment.’”
So it’s no surprise that we have unemployment at historically high levels. What is surprising is that a political operation so deft during the campaign is now so utterly tone-deaf. Even if they are economically illiterate, they should at least be able to read the polls and know that their argument is doing more harm than good. Sort of like the stimulus plan itself.