October 25, 2012

DID ECONOMISTS DOOM OBAMA’S PRESIDENCY?

If President Obama loses the election in November, economists may well end up taking a share of the blame – for good reason. Their models misled him into applying ambitious stimulus therapies to jump start the economy and boost employment that haven’t worked, vastly undermining his re-election prospects.

Back in January 2009, a now infamous study coauthored by Christina Romer, the future chair of the President Obama’s Council of Economic Advisors, and Jared Bernstein, the future chief economist for the Vice President, predicted that an $800 billion economic stimulus targeted toward boosting consumer demand would stave off a severe recession and hold unemployment below 8 percent by the end of 2009.

What was so compelling about their study was the illusion of precision. The Obama administration used their statistical analysis to aggressively promote specific policy proposals, including the package of tax cuts and discretionary federal spending embodied in the so-called stimulus package, the American Recovery and Reinvestment Act of 2009.

But little of what they predicted has panned out. . . . In short, in what is perhaps the most important exercise in economic policy modeling since the Great Depression, two of the nation’s foremost economists failed. And the failure was an epic one. They predicted that unemployment would peak at 8 percent after the stimulus. In fact it peaked at 9.9 percent. So it’s unclear whether trillions of dollars of stimulus spending bought the country any reduction in unemployment whatsoever. It’s also hard to escape the conclusion that it would have been better to do nothing and let the economy run its course.

Indeed. Here’s a reprise and update of that devastating graphic of what Obama promised vs. what he delivered.

And a look at the percentage of Americans who are employed, which still stinks: