On January 9, 2009, Christina Romer and Jared Bernstein published a report called The Job Impact of the American Recovery and Reinvestment Plan (PDF), which included a chart of the predicted “Unemployment Rate With and Without the Recovery Plan.” (Romer and Bernstein had recently been selected to serve in the upcoming Obama administration.) The report predicted a reduction in unemployment of 1.8% in fourth quarter 2010 (from a predicted peak of about 9%).
A few conservative outlets have (a little too gleefully?) taken this chart and overlaid on it actual unemployment numbers as they come out each month (e.g., the Heritage Foundation and Innocent Bystanders). One of these was even taped to the supply cabinet where I work.
The edited chart shows that actual unemployment has been higher than the estimates both “with” and “without” the stimulus bill. (Unemployment reached 9.7% in August.) The implication being that the plan has either had no effect or has actively made things worse.
But are these conclusions valid? I don’t think so, and here’s why:
- Comparing the estimates in the report to actual unemployment data only shows the original estimates were wrong, not that the the Plan had an adverse effect.
The report authors had already admitted to the large uncertainty in their estimates. In a footnote to the chart they wrote:
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.When it was released, Paul Krugman also commented on how optimistic the report was.
- The Plan had not yet taken effect when unemployment data started outpacing the estimates.
The report was published on January 9, 2009 (the same day employment data was released for December 2008). President Obama assumed office on January 20, and the stimulus plan was enacted on February 17. By that time, unemployment had already reached 8.1%, about half a percent above Romer and Bernstein’s predictions.
- The Plan still has largely not been enacted. It is very difficult to track actual stimulus spending, but ProPublica has the best data I’ve seen.
As of September 14, only 16% of the $581 billion authorized has been spent. Only 30% of the authorized tax cuts have been issued. In total, less than 20% of the stimulus plan has been enacted.
My conclusion: While it’s impossible to know what would have happened if the stimulus bill had not been enacted (or if a stronger one had taken its place), it seems obvious that the original estimates of unemployment were too low. Furthermore, so little of the plan has been enacted, that no conclusion can be drawn based on employment data for half of a year.
