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May 26, 2010

Our View: Stimulus did help economy

The Free Press

— Lies about the economic stimulus bill of 2009 continue as Mark Twain would say “making their way halfway around the world while the truth is still putting on its shoes.”

A recent report by the Congressional Budget Office is helping the truth put its shoes on.

CBO recently reported that the economic stimulus bill passed in 2009 with bipartisan support created the following economic activity: increased the number of people employed by between 1.2 million and 1.8 million; lowered the unemployment rate by between 0.7 percentage points and 1.5 percentage points and increased the number of full-time jobs by between 1.8 million and 4.1 million.

It also raised the level of Gross Domestic Product by between 1.7 percent and 4.2 percent.

Says CBO director David Elmendorf “The effects of the American Reinvestment and Recovery Act on output and employment are expected to increase further during calendar year 2010.” The effects will fade in 2011 and end in 2012, according to Elmendorf.

CBO’s estimates are based on economic modeling and reports of jobs created from required government reports. CBO notes that it did not simply take the numbers from the jobs reports, which it said can understate and overstate jobs created. It did a more thorough analysis of the programs and estimated the stimulus package’s jobs created and their multiplier effects.

It would seem almost academic that one has to doubt how pouring $787 billion into an economy would  create jobs. But it’s the creation of confusing information, being repeated and summarized over and over again that has led the American public to the “belief” that “no” jobs were created by economic stimulus.

So how did this lie get half way around the world? It was, at least in part, fueled with a very specific report from the Associated Press that got repeated and summarized inaccurately.

The AP story released in February said specifically that spending on road construction projects alone did not have an affect on “unemployment rates,” and that five economists reviewed their findings to verify their authenticity.

Of course, we don’t doubt this study, but people should remember not having an affect on the “unemployment rate” is not the same thing as not “creating jobs.” Jobs can grow at the same time unemployment rates grow because unemployment rates factor in the growth of the labor force. In other words, if you create 10 percent more jobs, but 11 percent more people enter the workforce, the unemployment rates will go up.

Unfortunately, even usually credible think tanks like the conservative Heritage Foundation put bad headlines on the AP story when they repeated the facts in a commentary piece.

The Heritage Foundation had the headline “$787 billion in stimulus, Zero Jobs, Created or Saved.” The title leads one to believe that of the total $787 billion stimulus, no jobs were created. When in fact, the article contends, though it doesn’t give data to back it up, that it was only $20 billion in road funding that the AP showed didn’t affect the unemployment rate. Even with that, Heritage described the no impact idea on “unemployment” and not the “unemployment rate.” Those are two very different things.

Even the AP story is somewhat misleading in its logic, again, creating an impression no jobs had been created, when in reality, it was the unemployment rate the news service was measuring.

It’s not surprising average folks get confused about this. But news organizations and commentators should be more honest and direct about the real deal.

The stimulus created jobs and growth and helped our economy. Period.

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