What does President Barack Obama know about the economy and what the government can and cannot do to create jobs?
A fair measure is the economic stimulus plan Obama pushed through Congress in his first month in office. Did it work?
On Jan. 9, 2009, less than two weeks before Obama's inauguration, Christina Romer, who would chair Obama's Council of Economic Advisers, and Jared Bernstein, an adviser to Vice President-elect Joe Biden, published the incoming administration's analysis of the "job impact" they expected from Obama's stimulus.
At the time, according to the Bureau of Labor Statistics, the national seasonally adjusted unemployment rate was 7.8 percent. In their analysis, Romer and Bernstein said that if Congress approved Obama's plan, unemployment would not rise above 8.0 percent -- and they published a chart predicting it would drop below 6.0 percent sometime in 2012.
Well, Congress approved Obama's stimulus plan (which the Congressional Budget Office estimates cost $831 billion), and we are now in the second quarter of 2012. What has happened to unemployment?
In February 2009, when Obama signed the stimulus, unemployment spiked to 8.3 percent. Since then, it has never dropped below 8.0 percent.
We are now into the second quarter of 2012, the year Romer and Bernstein predicted unemployment would be drop below 6 percent. It now stands at 8.1 percent.
A standard line in President Obama's current stump speech attacks those who advocate "we go right back to the policies that created this mess." The president's implication is that the economic situation in America today, insofar as it has been caused by government policies, has not been caused by his government's policies.
But, in reality, Obama is implicitly admitting his economic policies have failed.
After all, three years ago Obama's top economic adviser told the country that if Congress approved Obama's plan unemployment would never top 8 percent and would drop below 6 percent this year. It did top 8 percent. It is nowhere near 6 percent today.
Obama's blaming the sad state of our economy on someone else's policies is not only an implicit admission of failure but an attempt to deflect debate from his failure.
Lawrence Lindsey, who served as economic adviser to President George W. Bush, argued in a Weekly Standard essay last year that the proposition made by Obama's stimulus was absurd on it face.
"Everyone except flacks for the White House knows that the 2009 stimulus package failed miserably to produce the promised results," Lindsey wrote. "But even if you buy the White House's argument that the $800 billion package created 3 million jobs, that works out to $266,000 per job. Taxing or borrowing $266,000 from the private sector to create a single job is simply not a cost effective way of putting America back to work. The long-term debt burden of that $266,000 swamps any benefit that the single job created might provide."
As time passes, the math on Obama's stimulus plan gets worse -- even if you accept the most optimistic analysis of how many jobs it has created.
In February, the Congressional Budget Office published its latest report on the "estimated impact" of the stimulus. Although it had originally estimated the stimulus would cost $787 billion, CBO now says it will cost $831 billion.
In the second quarter of 2012, CBO estimates, somewhere between 200,000 to 1.2 million people have jobs they otherwise would not have were it not for the stimulus. Assuming, optimistically, that the number is 1.2 million, that means each of those jobs cost taxpayers $692,500.
As time goes on, the maximum number of jobs sustained by Obama's stimulus will decline rapidly. By the first quarter of 2013, it will sustain between 100,000 and 600,000 jobs, says CBO. If it is 600,000, each of those jobs will have cost taxpayers $1,385,000. By the fourth quarter of 2013, the maximum number of jobs it sustains will be 400,000 -- at a cost to taxpayers of $2,077,500 per job.
It is true that Obama entered office in the midst of a deep recession. But, according to the National Bureau of Economic Research, that recession ended in June 2009, almost three years ago. Since then, America has been in a "growth" cycle, but a pathetic one. Real gross domestic product growth peaked at 3.9 percent in the first quarter of 2010, and Obama is now in real danger of being the first U.S. president since World War II not to see at least one quarter of economic growth at 4 percent or higher in a first term.
As times passes, the number of jobs that can be attributed to Obama's stimulus will dwindle to none. In the long run, of course, we will all be dead. But Obama will have one lasting legacy: Our children, grandchildren and great-grandchildren will be paying the interest on the money he borrowed to keep unemployment from rising above 8 percent.
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