Talk To Us Like Adults
The President returned from his overseas trip and came out fighting by defending the recovery package amidst signs that Republicans would attack it as a failure.
Nearly six months ago, my administration took office amid the most severe economic downturn since the Great Depression. At the time, we were losing, on average, 700,000 jobs a month. And many feared that our financial system was on the verge of collapse. The swift and aggressive action we took in those first few months has helped pull our financial system and our economy back from the brink. We took steps to restart lending to families and businesses, stabilize our major financial institutions, and help homeowners stay in their homes and pay their mortgages. We also passed the most sweeping economic recovery plan in our nation's history.
The American Recovery and Reinvestment Act was not expected to restore the economy to full health on its own but to provide the boost necessary to stop the free fall. So far, it has done that. It was, from the start, a two-year program, and it will steadily save and create jobs as it ramps up over this summer and fall. We must let it work the way it's supposed to, with the understanding that in any recession, unemployment tends to recover more slowly than other measures of economic activity.
And it's fine for him to defend that action - I generally agree with his assessment that it's ramping up, that unemployment lags behind economic growth, that this summer and fall should see more stimulus money pumped into the economy, that the package was necessary and even proper. It's fine for the White House to wrestle control of the debate away from Republicans on that score. But this does not address at all those critics who found the stimulus package too small, and who continue to find shortfalls in demand that need to be filled by public spending.
Last December the Obama administration to be decided on a fiscal stimulus package which they believed would have minor effects on the economy in the first two quarters of 2009 and major effects--would push unemployment down below what it would other wise have been by more than half a percentage point--starting in the third quarter of 2009. They believed that the economy was not that weak, and that with the fiscal stimulus package taking effect unemployment would be peaking now at a rate of 7.9%.
Instead, unemployment is now probably in the 9.5-9.7% range--and without the stimulus package it would right now have turned out to be above 10%:
The financial crisis of last fall hit the economy's levels of production, spending, and employment much harder than people thought at the time. If we had known then what we know now, it would have been prudent then to propose twice as large a fiscal stimulus program as the Obama administration in fact did propose.
It is interesting and important to note that the excess unemployment now forecast over 2009 relative to last December's forecast is of the same magnitude--1.2%--as the deficiency in real GDP [...] If I were running the government, I would be trying to make up that GDP shortfall right now: I would be rushing a clean $170 billion--$500 per citizen--aid-to-states-that-maintain-effort package through the congress this week. It would seem the right and the obvious thing to do.
The White House is simply not speaking straight with the public on this one. They have every right to defend their actions, but the evidence clearly shows that they did not go far enough back in February. That's an intellectually consistent stand, rather than this mish-mosh of "we misread how bad the economy was, but we would have done the exact same thing if we knew and it's working great." Continuing that incoherent course risks a loss of credibility.