Summary
We’re always alert for signs that the president (any president) is overselling his programs. Here’s what we heard in President Obama’s speech on Tuesday announcing new efforts to create jobs:
- He highlighted a Congressional Budget Office estimate that "up to" 1.6 million jobs resulted from stimulus spending, but was silent about CBO’s estimate that the total could be as small as 600,000.
- He said stimulus spending was "only a very small part" of the deficit. CBO has put it at $190 billion of last year’s $1.4 trillion shortfall.
- He said 10,000 infrastructure projects have been "funded," which is true. But relatively little has actually been spent for projects supposedly deemed "shovel ready" eight months ago.
- Obama slightly exaggerated the average number of jobs lost from December through March.
Analysis
The president gave his economic address Tuesday morning at the Brookings Institution in Washington, D.C. His remarks were televised live on some cable networks.
Weasel Words
We listen for qualifiers that suck the meaning out of a phrase, qualifiers like "up to" and "as many as" when speaking of numbers. Think of those stores that advertise savings of "up to" 50 percent. The president used that same technique when he claimed that "up to" 1.6 million jobs had been created or saved by the stimulus spending, "according to the Congressional Budget Office."
Obama: [W]e learned on Friday that the unemployment rate fell slightly last month. This is welcome news, and news made possible in part by the up to 1.6 million jobs that the Recovery Act has already created and saved according to the Congressional Budget Office.
He could have just as accurately referred to "as few as" 600,000 jobs. CBO, admitting to a large degree of uncertainty and widely diverging estimates by economists, said Nov. 30 that the number of jobs in September was somewhere between 600,000 and 1.6 million more than it would have been without the stimulus spending, or just about what CBO had originally predicted.
"Indisputably" Disputed
At one point Obama said the Troubled Assets Relief Program (TARP) had "indisputably helped prevent a collapse of the entire financial system." It may be indisputable that TARP helped to some degree, but the degree of help, and whether TARP worked as promised, are disputed hotly in some quarters. "Yes, it saved some banks from going under," says Jerry O’Driscoll, a former vice president of the Dallas Federal Reserve and a senior fellow at the Cato Institute, as quoted in a recent Newsweek article, "but did it restore the health of the banking system? Absolutely not."
"A Very Small Part?"
Obama stretched the facts when he said that the American Recovery and Reinvestment Act is "only a very small part" of the current deficit.
Obama: Despite what some have claimed, the cost of the Recovery Act is only a very small part of our current budget imbalance. In reality, the deficit had been building dramatically over the previous eight years. We have a structural gap between the money going out and the money coming in.
Folks passed tax cuts and expansive entitlement programs without paying for any of it — even as health care costs kept rising, year after year. As a result, the deficit had reached $1.3 trillion when we walked into the White House.
But what is "small"? After fiscal year 2009 ended Sept. 30, the Congressional Budget Office reported that the actual deficit for the year was $1.42 trillion. That was after the CBO said in March that the stimulus bill would add about $185 billion to the deficit figure. CBO amended the figure to $190 billion in November, or roughly 13.6 percent of the total deficit for last year (see page 3).
It’s true that Obama inherited large deficits. In January 2009, the Congressional Budget Office estimated that the fiscal 2009 deficit could reach $1.2 trillion. But that figure wasn’t entirely the result of "tax cuts and expensive entitlement programs." The figure also included $180 billion in funds for the TARP program approved by president Bush and later defended by Obama, plus another $240 billion for the government takeover of Fannie Mae and Freddie Mac.
Truth Hits a Pothole
Obama said 10,000 infrastructure projects — the ones we were once told were "shovel ready" — have been "funded."
Obama: Already, more than 10,000 of these [infrastructure] projects have been funded through the Recovery Act. And by design, Recovery Act work on roads, bridges, water systems, Superfund sites, broadband networks, and clean energy projects will all be ramping up in the months ahead.
That’s true in a bureaucratic sense. The Department of Transportation reports that $31.77 billion in stimulus bill funds have been made "available" as of Nov. 27. But "funded" is not the same thing as "underway." DOT also reports that only $6.52 billion had actually been paid out, more than eight months after Obama signed the stimulus measure.
"Shovel Ready," Then and Now
That slow rate of spending is not what Obama envisioned a year ago when he was pushing for passage of a huge stimulus bill:
Obama, Dec. 2008: We’ve got shovel-ready projects all across the country. And governors and mayors are pleading to fund it. The minute we can get those investments to the state level, jobs are going to be created.
But that was then. Now the president has dropped that sort of "shovel ready" talk. A few days ago he said at a White House "jobs summit":
Obama, Dec. 3 2009: The term ‘shovel-ready’ — let’s be honest, it doesn’t always live up to its billing.
Instead, in his speech Tuesday the president spun the relatively slow pace of infrastructure job creation as a positive thing.
Obama: [W]e’re going to see even more work – and workers – on Recovery projects in the next six months than we saw in the last six months.
That’s what old-timers used to call "making a silk purse out of a sow’s ear."
A March Too Far
The president was on target — mostly — when reminding listeners what an awful economy he inherited:
Obama: Our gross domestic product — the sum total of all that our economy produces — fell at the fastest rate in a quarter century. … We were losing an average of 700,000 jobs each month, equivalent to the population of the state of Vermont. That was true in December, January, February, March.
The first part is true and may even be an understatement. Bloomberg News reported April 29 that the economy had just posted "the weakest six months since 1957-58," which is more than 50 years ago, not just 25.
As for jobs, the Bureau of Labor Statistics reports that the economy lost 681,000 jobs in December, 741,000 in January and another 681,000 in February. That’s an average of 701,000 per month, well above Vermont’s population, which the Census Bureau estimates at 621,000.
But the president ad-libbed one month too many. By including March in his list of months (which was not in his prepared remarks), his statement was a bit off. Job loss in March was 652,000, pulling down the four-month average to 689,000. He would have been accurate if he had left March out, or just said the average was "nearly" 700,000 per month.
— by Brooks Jackson, with Joe Miller and Jess Henig
Correction, Dec. 11: In the section of this story titled "A Very Small Part?", we used the wrong figure when we wrote that the Congressional Budget Office predicted the American Recovery and Reinvestment Act would increase the deficit. The correct number is $185 billion (later amended to $190 billion), not $400 billion as we wrote. Our original figure included $150 billion for the Troubled Asset Relief Program and reduced tax revenues. We regret the error and have corrected the story.
Sources
Congressional Budget Office. “Estimated Impact of the American Recovery and Reinvestment Act on Employment and Economic Output as of September 2009.” Director’s Blog. 30 Nov 2009.
Phillips, Matthew. “TARP: One Year Later.” Newsweek.com. 12 Nov 2009.
Congressional Budget Office. "Monthly Budget Review; Fiscal Year 2009." 6 Nov 2009.
Congressional Budget Office. "A Preliminary Analysis of the President’s Budget and an.Update of CBO’s Budget and Economic Outlook." March 2009.
Congressional Budget Office. "The Budget and Economic Outlook: Fiscal Years 2009 to 2019." Jan 2009.
"Agency Reported Data – Department of Transportation." Recovery.gov Web site. accessed 8 Dec 2009.
The Associated Press. "Obama: Stimulus lets Americans claim destiny
President signs $787 billion program into law in Denver Tuesday." 17 Feb 2009.
CNN Transcript. "Anderson Cooper 360 Degrees." 18 Dec 2008.
MacGillis, Alec. "Obama skeptical about ‘shovel-ready’ projects’ long-term impact." Washington Post. 3 Dec 2009.
Willis, Bob. “Economy in U.S. Shrank at 6.1% Rate in First Quarter." Bloomberg.com. 29 Apr 2009.
“Employment, Hours, and Earnings from the Current Employment Statistics survey (National) .” Bureau of Labor Statistics Web site. Data for total nonfarm employment, accessed 8 Dec 2009.
“Vermont.” U.S. Census Bureau, 2006-2008 American Community Survey Web site. accessed 8 Dec. 2009.