Early Economic Projections Could Haunt Obama in 2012 - Business

A year out from election day: an eon in political time, is sufficient to substantially change the circumstances for or against either party. But Friday, the report brings a new job warm reminder of the stubbornness of the difficulties of President Obama and his team face in overcoming one of their most enduring errors, it was even before he took office .

Ten days before Obama take the oath of office in January 2009, his economic team released a report outlining the estimated benefits of the plan of 775 billion stimulus package he sought. The projections were quite specific. The stimulus bill passed just a few weeks later about the size of the White House had requested. Had all disappeared, as promised by the report, the unemployment rate right now would have been about 6.5 percent, down about 6 percent by the end of this year and just over 5 per cent at the end of next year.

The Labor Department said Friday that the unemployment rate was 9 percent in October, down 9.1 percent a month earlier, and that job growth for the month was just 80,000, far in the rate of unemployment required to drive to something like six percent. The Federal Reserve has already scheduled the unemployment rate will be at least 8.5 percent by the end of next year, which means the next presidential term would start with a higher rate than the 7.3 percent Obama inherited when he took office.

The gap between the projections of his team did in early 2009 and the sad reality of the past three years has produced a questionable argument but almost politically powerful Republicans. He helped rally the conservative opposition to most of the subsequent agenda of Mr. Obama, and is in the thick of the presidential race, it became the main base for the case not only Republicans against a second term of Obama, but for the most intense storm in decades of conservative Keynesian economics and the role of government.

Sometimes exaggerated the facts, the Republicans during the campaign are using the projections say that erupted in the stimulus package failed, the government can not create jobs and it is time for less spending rather than more.

"It proved once and for all that government spending will not create jobs," Governor Rick Perry of Texas said Obama at a Republican presidential debate, adding: "The Keynesian policy and Keynesian theory is now been completed. We will never have this experience on America again. "

The economic plan Mitt Romney said the picture in the 2009 report of Obama showing the projected path of the unemployment rate following the stimulus and an additional line indicating the rate (higher) actual unemployment. Other than his caution about the significant margins of error, Mr. Romney's plan states, projections of Obama "did not follow the predictions of the authors and their sponsors from the White House" and make clear that the approach Mr. Obama has not worked.

Both sides would probably be engaged in an ideological debate on economic policy right now in early 2009 if the report had got exactly that.

And for those interested in the underlying economy, there are convincing arguments that the report did not get it all wrong. Although the report seriously underestimated the severity of the recession and job losses so the nation would suffer in 2009, it has been proven right in his basic points that the stimulus would yield substantial job creation compared to doing nothing. In other words, it was right to plan a significant and positive impact on employment of the stimulus package, but wrong in its assumptions of the depth of the hole of job loss was the stimulus trying to fill.

Despite repeated claims Republican, on the contrary, the stimulus package has created at least hundreds of thousands of jobs, according to almost all non-partisan analysts, including the Congressional Budget Office.

But it is impossible to compress the shade on a sticker. As a political matter, Republicans have used on the deficit projections to establish a narrative that the stimulus has failed, and with it the chairmanship of Mr. Obama. To the intense frustration of the White House, the table showing the early 2009 projections has become the centerpiece of the closing argument Republicans against Obama re-election and against the economic policies of his party represents, including the jobs package Congress debated and mostly rejected now.

"This is the most destructive non sequitur in the history of economic policy," said one of the authors of the report, Jared Bernstein, who was the economic advisor to Vice President Joseph R. Biden Jr. up earlier this year. "In a way, because we got the forecast wrong, they do not have to do something to help the unemployed."

"The fact that the recession was deeper than we and most other forecasters made at that time is not a reason for Congress to give to help the unemployed," he said. "If anything the figures suggest that we should do more. "

Christina Romer, who served as president of the Council of Economic Advisers and others in the report lead author, has also called for additional stimulus measures, and the White House worked to produce counternarratives to compensate for damage projections for 2009.

But so far, the arguments of the White House, while its substance, have been largely defensive in nature and not politically motivated: The state of the economy three years ago was much worse than n ' matter produced. Without the loss of jobs stimulus would have been much worse. If nothing is done to solve the problem is the fault of Republicans.

The best hope now for the White House can convince voters not to judge Obama based on the projections of nearly three years of how the stimulus might work, but rather whether the economy is substantial improvement over a year ago, when unemployment peaked at 10.1 percent.

The unemployment rate is down more than a full percentage point since, not a small improvement. Friday jobs report given conflicting signals about the strength of the economy. But there is not many months left for Obama to persuade the nation to measure its performance by a different reference.