American Crossroads attacks President Obama’s economic record by grossly misrepresenting a “preliminary analysis” of a theoretical stimulus bill, which the president’s economic advisers conducted before his inauguration – and before the unexpected rise in unemployment soon thereafter. The analysis included disclaimers about the possibility of an unusually severe recession, which unfortunately came to fruition. Nonetheless, it’s clear that the devastating conditions Obama inherited would have become even worse without the Recovery Act, which created jobs and cut taxes for millions of working Americans. Since the recession officially ended, the private sector has steadily added jobs, including 4.7 million new jobs in the last 31 consecutive months of growth.
American Crossroads Distorts “Preliminary Analysis” Of Prospective Stimulus Conducted Before Severity Of Crisis Was Known
January 2009: “Preliminary Analysis” Described Goals Of “Some Of The Prototypical Recovery Packages Being Discussed.” According to an analysis by economists Christina Romer and Jared Bernstein: “A key goal enunciated by the President-Elect concerning the American Recovery and Reinvestment Plan is that it should save or create at least 3 million jobs by the end of 2010. For this reason, we have undertaken a preliminary analysis of the jobs effects of some of the prototypical recovery packages being discussed. Our analysis will surely evolve as we and other economists work further on this topic. The results will also change as the actual package parameters are determined in cooperation with the Congress.” [Romer & Bernstein, 1/9/09]
January 2009 Analysis Projected 5.6 Percent Unemployment Rate At The End Of 2012. According to an analysis by Christina Romer and Jared Bernstein: “First, the likely scale of employment loss is extremely large. The U.S. economy has already lost nearly 2.6 million jobs since the business cycle peak in December 2007. In the absence of stimulus, the economy could lose another 3 to 4 million more. Thus, we are working to counter a potential total job loss of at least 5 million. As Figure 1 shows, even with the large prototypical package, the unemployment rate in 2010Q4 is predicted to be approximately 7.0%, which is well below the approximately 8.8% that would result in the absence of a plan.” The following chart indicates a projected 5.6 percent unemployment rate of 5.6 percent in the third quarter of 2012:
[Romer & Bernstein, 1/9/09]
PolitiFact: Analysis Included “Heavy Disclaimers.” According to PolitiFact: “But what we saw from the administration in January 2009 was a projection, not a promise. And it was a projection that came with heavy disclaimers. ‘It should be understood that all of the estimates presented in this memo are subject to significant margins of error,’ the report states. ‘There is the more fundamental uncertainty that comes with any estimate of the effects of a program. Our estimates of economic relationships and rules of thumb are derived from historical experience and so will not apply exactly in any given episode. Furthermore, the uncertainty is surely higher than normal now because the current recession is unusual both in its fundamental causes and its severity.’ There’s also a footnote that goes with the chart that states: ‘Forecasts of the unemployment rate without the recovery plan vary substantially. Some private forecasters anticipate unemployment rates as high as 11% in the absence of action.’” [PolitiFact.com, 2/17/11]
Independent Analysts Vastly Underestimated The Severity Of Job Losses In Early 2009. According to PolitiFact: “In January 2009 the nonpartisan Congressional Budget Office projected the unemployment rate would climb to 8.3 percent in 2009 and peak at 9 percent in 2010.” The unemployment rate jumped to 8.3 percent the next month (February 2009), exceeded 9 percent in May 2009 (9.4 percent), and peaked at 10 percent in October 2009. [PolitiFact.com, 2/17/11; BLS.gov, accessed 10/2/12]
Recovery Act Created Jobs, Boosted GDP, And Protected Economy From More Severe Downturn
Recovery Act “Succeeded In…Protecting The Economy During The Worst Of The Recession.” From the Center on Budget and Policy Priorities: “A new Congressional Budget Office (CBO) report estimates that the American Recovery and Reinvestment Act (ARRA) increased the number of people employed by between 200,000 and 1.5 million jobs in March. In other words, between 200,000 and 1.5 million people employed in March owed their jobs to the Recovery Act. […] ARRA succeeded in its primary goal of protecting the economy during the worst of the recession. The CBO report finds that ARRA’s impact on jobs peaked in the third quarter of 2010, when up to 3.6 million people owed their jobs to the Recovery Act. Since then, the Act’s job impact has gradually declined as the economy recovers and certain provisions expire.” [CBPP.org, 5/29/12]
At Its Peak, Recovery Act Was Responsible For Up To 3.6 Million Jobs. According to the nonpartisan Congressional Budget Office:
CBO estimates that ARRAs [sic] policies had the following effects in the third quarter of calendar year 2010
- They raised real (inflation-adjusted) gross domestic product by between 1.4 percent and 4.1 percent,
- Lowered the unemployment rate by between 0.8 percentage points and 2.0 percentage points,
- Increased the number of people employed by between 1.4 million and 3.6 million, and
- Increased the number of full-time-equivalent (FTE) jobs by 2.0 million to 5.2 million compared with what would have occurred otherwise. (Increases in FTE jobs include shifts from part-time to full-time work or overtime and are thus generally larger than increases in the number of employed workers). [CBO.gov, 11/24/10]
Recovery Act Included $288 Billion In Tax Cuts. From PolitiFact: “Nearly a third of the cost of the stimulus, $288 billion, comes via tax breaks to individuals and businesses. The tax cuts include a refundable credit of up to $400 per individual and $800 for married couples; a temporary increase of the earned income tax credit for disadvantaged families; and an extension of a program that allows businesses to recover the costs of capital expenditures faster than usual. The tax cuts aren’t so much spending as money the government won’t get — so it can stay in the economy.” [PolitiFact.com, 2/17/10]
Massive Monthly Job Losses Obama Inherited Have Turned Into Steady Private-Sector Growth
Note: This ad check has been updated to reflect the latest monthly report from the Bureau of Labor Statistics.
Recession Officially Ran From December 2007 To June 2009, Making It The Longest Since World War II. From the National Bureau of Economic Research: “The Business Cycle Dating Committee of the National Bureau of Economic Research met yesterday by conference call. At its meeting, the committee determined that a trough in business activity occurred in the U.S. economy in June 2009. The trough marks the end of the recession that began in December 2007 and the beginning of an expansion. The recession lasted 18 months, which makes it the longest of any recession since World War II. Previously the longest postwar recessions were those of 1973-75 and 1981-82, both of which lasted 16 months. In determining that a trough occurred in June 2009, the committee did not conclude that economic conditions since that month have been favorable or that the economy has returned to operating at normal capacity. Rather, the committee determined only that the recession ended and a recovery began in that month.” [NBER.org, 9/20/10]
- Recession Resulted In 8.3 Million Job Losses. According to the Associated Press, “the Great Recession killed 8.3 million jobs, compared with 1.6 million lost in the 2001 recession.” [Associated Press via Yahoo! News, 5/4/12]
Bush Recession Was So Severe That Economy Was Still Shedding Over Three-Quarters Of A Million Jobs Per Month Through First Few Months Of President Obama’s Term. According to the Bureau of Labor Statistics, the economy shed 839,000 jobs in January 2009, 725,000 in February 2009, 787,000 in March 2009, and 802,000 in April 2009, for a four-month average of 788,250 lost jobs per month. [BLS.gov, accessed 5/3/12]
Since The Recession Ended In June 2009, The Private Sector Has Added 3.5 Million Jobs While Public-Sector Employment Has Fallen By 569,000. According to the Bureau of Labor Statistics, there were 107,933,000 private-sector jobs in June 2009, and 111,499,000 private-sector jobs in September 2012, an increase of 3,566,000 jobs. The BLS also reports that there were 22,570,000 Americans working in the public sector in June 2009, and 22,001,000 working in the public sector in September 2012, a decrease of 569,000 jobs. The private-sector gains and public-sector losses add up to a total increase of 2,797,000 jobs.
The following chart shows the cumulative private-sector job gains and public-sector job losses since the recession officially ended in June 2009:
- Conservative AEI: The Public Sector Is Shrinking, But Private-Sector Growth Is Above Average. From American Enterprise Institute scholar Mark J. Perry: “In the second quarter of 2012, ‘public sector GDP’ decreased -1.44%, and that was the eighth straight quarter of negative growth for total government spending, averaging -2.88% per quarter over the last two years. In contrast, there have been 12 consecutive quarters of positive growth for private sector GDP averaging 3.07% per quarter in the three years since the recession ended, which is slightly higher than the 2.8% average growth rate in private real GDP over the last 25 years.” [AEI-Ideas.org, 7/31/12]
- GOP-Favored “Government Downsizing” Has Been “A Drag” On Job Growth. From the Associated Press: “Conservative Republicans have long clamored for government downsizing. They’re starting to get it — by default. Crippled by plunging tax revenues, state and local governments have shed over a half million jobs since the recession began in December 2007. And, after adding jobs early in the downturn, the federal government is now cutting them as well. States cut 49,000 jobs over the past year and localities 210,000, according to an analysis of Labor Department statistics. There are 30,000 fewer federal workers now than a year ago — including 5,300 Postal Service jobs canceled last month. By contrast, private-sector jobs have increased by 1.6 million over the past 12 months. But the state, local and federal job losses have become a drag on efforts to nudge the nation’s unemployment rate down from its painfully high 9.1 percent.” [Associated Press, 10/25/11]
The Private Sector Has Added 4.7 Million Jobs Over 31 Consecutive Months Of Private-Sector Growth. The following chart shows the monthly change in private-sector jobs dating back to January 2008.
New Data Shows Positive Net Job Growth Under Obama – Even Including Job Losses In Early 2009
Latest BLS Benchmark Shows “Net Job Growth…During Obama’s First Term.” According to the Huffington Post: “The Labor Department on Thursday morning quietly released a new benchmark for payroll employment in the U.S. It turns out that with the revision, there has been net job growth — not much, but more than nothing — during Obama’s first term. According to the revision, total non-farm payrolls stood at 133.686 million jobs in August, up from 133.561 million in January 2009, when Obama’s first term began. Before the revision, payrolls were at 133.300 million in August. In other words, 125,000 jobs have been created, in total, during Obama’s first term, compared with a prior estimate of a loss of 261,000.” [Huffington Post, 9/27/12]
Bush Policies And Recession – Not “Obama’s Spending” – Drove Up The Debt
Prior To President Obama’s Inauguration, President Bush Had Already Created A Projected $1.2 Trillion Deficit For Fiscal Year 2009. From the Washington Times: “The Congressional Budget Office announced a projected fiscal 2009 deficit of $1.2 trillion even if Congress doesn’t enact any new programs. […] About the only person who was silent on the deficit projection was Mr. Bush, who took office facing a surplus but who saw spending balloon and the country notch the highest deficits on record.” [Washington Times, 1/8/09]
NYT: President Bush’s Policy Changes Created Much More Debt Than President Obama’s. The New York Times published the following chart comparing the fiscal impact of policies enacted under the Bush and Obama administrations:
[New York Times, 7/24/11]
Recession Added Hundreds Of Billions In Deficits By Increasing Spending On Safety Net While Shrinking Tax Revenue. The Center on Budget and Policy Priorities (CBPP) explains: “When unemployment rises and incomes stagnate in a recession, the federal budget responds automatically: tax collections shrink, and spending goes up for programs like unemployment insurance, Social Security, and Food Stamps.” According to CBPP: “The recession battered the budget, driving down tax revenues and swelling outlays for unemployment insurance, food stamps, and other safety-net programs. Using CBO’s August 2008 projections as a benchmark, we calculate that the changed economic outlook alone accounts for over $400 billion of the deficit each year in 2009 through 2011 and slightly smaller amounts in subsequent years. Those effects persist; even in 2018, the deterioration in the economy since the summer of 2008 will account for over $300 billion in added deficits, much of it in the form of additional debt-service costs.” [CBPP.org, 11/18/10; CBPP.org, 5/10/11, citations removed]
Over The Coming Decade, The Bush Tax Cuts Are The Primary Cause Of Federal Budget Deficits. The Center on Budget and Policy Priorities prepared a chart showing the deficit impact of the Bush tax cuts (orange), the Iraq and Afghanistan wars, the recession itself, and spending to rescue the economy:
CBPP: Bush Tax Cuts And Wars Are Driving The Debt. According to the Center on Budget and Policy Priorities:
The complementary chart, below, shows that the Bush-era tax cuts and the Iraq and Afghanistan wars — including their associated interest costs — account for almost half of the projected public debt in 2019 (measured as a share of the economy) if we continue current policies.
[Center on Budget and Policy Priorities, 5/20/11]
Spending Growth Under Obama Is Low
January 2009 (Pre-Obama): Federal Spending Projected To Spike To $3.5 Trillion Without Any Policy Changes. In January 2009, the Congressional Budget Office projected: “Without changes in current laws and policies, CBO estimates, outlays will rise from $3.0 trillion in 2008 to $3.5 trillion in 2009.” [Congressional Budget Office, “The Budget and Economic Outlook: Fiscal Years 2009 to 2019,” January 2009]
Accounting For Inflation And President Obama’s Impact On FY 2009, Spending Will Have Grown By Just 1.7 Percent From 2009 To 2012. According to Michael Linden, Director of Tax and Budget Policy at the Center for American Progress:
[I]n January 2009, before President Obama had even taken office, the Congressional Budget Office projected that federal spending would exceed $3.5 trillion for fiscal year 2009, half a trillion more than the government spent in 2008. Again, that was BEFORE President Obama event took office. It’s reasonable to use that number as our best guess at what spending would have been in FY2009 under ANY president. […]
Of course, the CBO’s projections aren’t perfect. They change as the economy changes and as laws change. Fortunately, CBO also tells us in subsequent reports how and why its previous estimates have changed. We can use that to understand how much of the total federal spending in fiscal year 2009 was attributable to legislative changes that occurred AFTER President Obama took office.
The answer is that out of a total of $3.5 trillion actually spent in FY09, only $165 billion, less than 5 percent, was the result of policy changes signed into law by President Obama.
In other words, probably the best baseline against which to judge spending under Obama is $3.5 trillion (the amount actually spent in 2009) minus $165 billion (the added amount Obama himself actually approved): $3.35 trillion. This year, the CBO expects that the federal government will spend $3.6 trillion. After accounting for inflation, that’s a growth rate of just 1.7 percent. By comparison, and using the exact same methodology, spending in President Bush’s first term was up nearly 15 percent. [ThinkProgress.org, 5/25/12]
PolitiFact: Spending Growth Under Obama Is “Second-Slowest” In Recent History. According to PolitiFact: “Obama has indeed presided over the slowest growth in spending of any president [in recent history] using raw dollars, and the growth on his watch was the second-slowest if you adjust for inflation.” [PolitiFact.com, 5/23/12]
Republicans Have Opposed President Obama’s Deficit-Reduction Efforts
Obama Proposed $3 Trillion In Deficit Reduction; “Republicans Swiftly Responded … With Opposition.” According to the Los Angeles Times: “President Obama on Monday made an aggressive pitch for his $3-trillion deficit-reduction strategy, promising to veto any proposal that fails to raise revenues by asking wealthy Americans to ‘pay their fair share.’ […] His plan for lopping $3 trillion from the deficit is on top of the approximately $1 trillion in spending cuts that he signed into law in August, after reaching a deal with Republican congressional leaders to lift the nation’s debt ceiling. On Monday, Republicans swiftly responded to the president’s proposal with opposition. [Los Angeles Times, 9/19/11]
GOP Rejected Obama Proposal To Reduce Deficits By $4 Trillion. According to the Boston Globe: “President Obama pledged yesterday to pare the projected deficit by $4 trillion in the next 12 years, vowing to protect the nation’s most vulnerable while pushing again for higher taxes for its richest citizens. […] His call for the end of the Bush tax cuts for incomes above $250,000 for couples reignites a ferocious debate from the fall midterm elections. That element of the speech triggered the most vociferous and immediate opposition from Republicans.” [Boston Globe, 4/14/11]
[NARRATOR:] This is what President Obama said the jobless rate would be if we passed his stimulus: 5.6 percent. But this is what the jobless rate actually is: 8.1 percent. The difference? About 3.7 million jobs. Obama’s spending drove us $5 trillion deeper in debt, and now we have fewer jobs than when he started. What Obama promised versus what he delivered. American Crossroads is responsible for the content of this advertising. [American Crossroads via YouTube.com, 9/28/12]