On Monday night I tuned to PBS and found the President speaking to reporters at the White House. The President pre-empted Antiques Roadshow (it’s hard for me to imagine PBS doing that for Bush) as well as other 8 o’clock EST network and cable news fare to campaign for the spending bill currently awaiting reconciliation between House and Senate versions. During the news conference I counted three his stating three times that he inherited the national debt, along with the occasional “8 years of failed policies” to imply that the whole economic mess was former president George W. Bush’s fault.
He did not mention that according to the Constitution Congress is responsible for spending. In the 1998 Supreme Court decision Clinton vs. City of New York the Court ruled that the Line Item Veto Act of 1996 gave the Executive branch powers reserved by the Constitution for the Legislative. Considering that Congress the House went to Democratic control in 2004 followed by the Senate two years later, I have yet to see Obama blame Congress for the mess that he’s inherited – or the media point this fact out. I suppose it’s easier to continue blaming Bush for America’s problems.
President Obama spent much of the time before questions arguing for a “stimulus package” that would “save or create 4,000,000 jobs.” In answer to a question from the press he stated that he will judge the success of the “stimulus” on whether it creates or saves 4,000,000 jobs. He repeated that figure at least four times during the press conference.
There are several problems with using the figure of 4,000,000 jobs as the sole criteria to judge the success or failure of a trillion dollar program. First and foremost, it’s relatively easy to determine when new jobs are created or lost but how does one determine whether a job is saved? Payroll firms like ADP release figures about added or lost jobs which are then compared and reconciled with Labor Department statistics to come up with a relatively accurate portrait of the labor market. But “saved jobs”? This strikes me as a bit of smoke and mirrors politics brought over from Illinois whereby the President can say in four years that he saved 4,000,000 jobs even if the economy craters and 8,000,000 jobs are lost.*
Second, the president made no mention of the quality of those jobs. Would the saving or creation of 4,000,000 part time jobs qualify the trillion dollar spending package as a success – or should the jobs created be high quality jobs with full benefits?The Senate version of the “stimulus package” is around $800,000,000,000. Dividing that figure by 4,000,000 means that Obama is willing to spend $200,000 per job.
Third, according to liberal Paul Krugman even George W. Bush created 5,000,000 jobs after 6 years in office. President Clinton managed the same feat in a year and a half. According to the Bureau of Labor Statistics, there were 154,000,000 jobs in the US at the end of January 2009 and 11,600,000 unemployed. Divide the latter by the former and you get 7.6% - the current unemployment rate. Boosting the employed ranks by 4 million to 158,000,000 lowers the number of unemployed to 7,600,000 - an unemployment rate of 4.8%.
That is a pretty low bar to measure success by. The unemployment rate was at 4.8% as recently as a year ago.
Source: data360.org, BLS - Note: interactive chart here.
The question is: is it worth boosting the federal national debt by 7.5% (from $10.7 trillion to $11.5 trillion) to lower the unemployment rate from 7.6% to 4.8%? At $200,000 per job I would have to say no – and that’s even if the money that Congress proposes to spend actually has the intended effect. If we are going to saddle future generations with even more debt, it’s important that the dollars we spend today do more than lower the unemployment rate by 2.8%.
*UPDATE: Greg Mankiw noticed the “create or save” semantics too.
The expression “create or save,” which has been used regularly by the President and his economic team, is an act of political genius. You can measure how many jobs are created between two points in time. But there is no way to measure how many jobs are saved. Even if things get much, much worse, the President can say that there would have been 4 million fewer jobs without the stimulus.