Revisiting administration unemployment projections

Wow. Just, wow:

Back in January 2009, Christina Romer and Jared Bernstein produced a report estimating future unemployment rates with and without a stimulus plan. Their estimates, which were widely circulated, projected that unemployment would approach 9% without a stimulus, but would never exceed 8% with the plan.


In May 2011, using the latest figures available from the BLS, the unemployment rate reached 9.1%. In contrast, the Romer and Bernstein projections estimated that the unemployment rate would be around 8.1% for this month without a recovery plan, or 6.8% with a stimulus plan (which was ultimately passed). The actual unemployment rate has been consistently below Romer and Bernstein's worse case scenario for the economy - and by a considerable margin. They projected that the unemployment rate would never climb above 9%. As time has passed, it turns out that only two months out of the last two years have seen an unemployment rate lower than 9%.

And the unemployment trajectory appears to be getting worse, not better. The last two months have seen unemployment grow; again, against projections that unemployment would decline every single month after August 2009 with a stimulus in place.

The stark unreality of the Administration's estimates is actually not that surprising in retrospect given the nature of the estimates. Romer and Bernstein simply assumed that a dollar of spending would increase GDP by $1.55. If this assumption proved to be wrong, then all of the knock-on effects of the stimulus would simply not follow.

Romer and Bernstein defend their estimates with the argument that the economic situation turned out worse than they had anticipated; and so the economy would have done even worse without a stimulus. That may or may not be the case - but at this point, a more thorough explanation is certainly warranted.

The administration claims to have created 3 million jobs with the stim bill. Even if we accept that fantastical number, it pencils out to the stim bill costing $266,000 per job.

Besides, new research shows that the stim bill actually cost the economy half a million jobs in the aggregate.

Democrats are fond of calling for the indictment of Wall Street bankers, blaming them for the financial meltdown. Not a bad idea that.

But maybe a criminal investigation should be opened to discover how $800 billion in taxpayer dollars could have been so callously, and negligently wasted.