Brian Riedl of the Heritage Foundation examines the new Congressional Budget Office finding that the stimulus package “saved or created” 1.5 million jobs and notes that CBO made a series of assumptions about the value of every dollar spent — for example, that “every $1 of government spending sent to state and local governments for infrastructure ultimately raises GDP by $1.75.” According to its calculations, the stimulus led to GDP growth of 2.6 percent.
There will be a great deal of debate and discussion about these numbers, all of which will have to do with the degree of credit that should attach to the stimulus package, those who voted for it, and President Obama for the economic growth it undoubtedly provided. But in fact, none of that debate and discussion will matter at this point except as an intellectual exercise. It will be very important in that respect for the future. But not now. Now the question is simply this: Will the voting public feel that a trillion dollars in government spending had the effect of improving things for the American people?
For the stimulus to have any political oomph, it will not be enough for the public to feel that things would have been worse without that trillion dollars. The price tag is simply too high for that, and the sense that the spending has burdened them with debt is too powerful. Without sustained economic growth and a resulting increase in employment, the stimulus will have felt like a failure, which is what it feels like today. And that feeling is the primary cause of the political crisis that Obama and his party find themselves in. They can try to argue their way out of it, or spin it — which is what Riedl accuses CBO of doing with the generosity of its assumptions — but it won’t do any good. People will make political choices based on how the world seems to them, and there will have to be a stunning acceleration of good news for those political choices to go any way but calamitously for Obama’s party for the foreseeable future.
Brian Riedl of the Heritage Foundation has an easy-to-read explanation of why Obama’s claim that the stimulus saved 2 million jobs is hooey. For starters, it’s a bait-and-switch:
On the stimulus’s first anniversary, keep in mind one number: 6.3 million. That is the Obama jobs gap — the difference between the 3.3 million net jobs President Obama said would be created (not just saved) and the 3 million additional net jobs that have since been lost. By the president’s own logic, the stimulus failed. So Obama has shifted his argument. Sure, the economy lost jobs, he now says, but without the stimulus it would have lost nearly 2 million more jobs. This “it would have been worse” theory is completely unprovable. No one knows how the economy would have performed without the stimulus.
But the more fundamental problem is that there’s no evidence we’ve done anything but mush the jobs around from the private to the public sector. Riedl calls this “faith-based economics. The White House’s new estimates of ‘saving’ nearly 2 million jobs are not based on observations of the economy’s recent performance. Rather, they are based on the Obama administration’s unshakable belief that deficit spending must create jobs and growth.” If the government borrowed $300B to “create” jobs, then “the private sector now has $300 billion less to spend, which, by the same logic, means it must lose the same number of jobs, leaving a net employment impact of zero.”
But one need not have a sophisticated understanding of the flaws of Keynesian spending schemes (sometimes analogized to taking buckets of water out of one end of the lake to dump into the other end) to sense that the Obami are making stuff up — again. The public can see that unemployment is much higher than it was a year ago and much higher than the 8 percent ceiling Obama promised if the stimulus were passed. A huge majority of voters simply don’t buy what Obama is saying.
Obama feels obliged to justify his spending binge. After all, it’s the only piece of significant legislation he’s gotten through Congress. But it’s also become a symbol of his out-of-touchness and his propensity to substitute spin for reasoned policy. Moreover, by reminding voters of just how much money we’ve thrown onto the pile of debt, his stimulus-harping, I suspect, actually lowers public confidence in his handling of the economy. Goodness knows his approval ratings on the deficit and economy are already putrid.
Once again, Obama is trapped. Nothing substitutes for results — and especially not fake stimulus figures. So the public’s confidence in him deteriorates, Congress becomes more gun-shy, and nothing much gets done. Not a bad result if you think that much of what government does is unhelpful. But it’s kind of scary if you’re an incumbent lawmaker trying to convince voters to give you another term.