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Joblessness spikes in Obama 'recovery'

Created on July 8, 2009

Joblessness spikes in Obama 'recovery'

Time to Declare 'Stimulus' a Failure and Encourage Growth

By Ken McIntyre

President Obama's promised job gains from the $800 billion "stimulus" continue to elude detection.

Unemployment rose higher -- to a 26-year record of 9.5 percent for June -- than what Obama's economic advisers predicted would be the case if Congress passed a bold "stimulus" plan. Not only that, unemployment climbed higher than what the Obama team estimated if Congress did not approve massive new government spending.

By the president's own measure, then, the stimulus has failed, say Heritage Foundation senior policy analyst Rea S. Hederman Jr. and James Sherk, Heritage's Bradley fellow in labor policy.

"While less grim than at the start of the year, the economy continues to weaken and signs of a recovery remain distant," Hederman and Sherk conclude in a new paper. "If the stimulus has helped the economy, its benefits have not appeared in any economic report."

Two of Obama's top economic advisers, Christina Romer and Jared Bernstein, predicted unemployment would rise to 9 percent by 2010 if Congress didn't pass the stimulus. But with a stimulus, they said, unemployment not only would fall off but be held below 8 percent. (See page 5, The Job Impact of the American Recovery and Reinvestment Plan.)

However, Heritage's chart tracking the monthly unemployment rate alongside the White House's predictions -- with and without a big-spending recovery plan in place -- shows actual joblessness spiked far higher in five months than under either scenario. This despite Congress' rushed passage of $800 billion in new spending.

"The stimulus plan is a failure because governments cannot simply spend the economy out of a recession," Hederman, also assistant director of Heritage"s Center for Data Analysis, says in a blog post. "If Congress passes a third stimulus bill following the same policy prescriptions, that stimulus will be yet another failure that will add to the deficit and impede economic recovery.

"Congress could pursue an effective stimulus bill [by] repealing the remaining wasteful spending ... and focusing on policy proposals to encourage capital formulation and reduce tax rates on successful companies, both large and small."

Though his recovery plan largely consisted of more spending on liberal priorities, Obama pledged to business leaders and the public that it would "create or save" 3.5 million jobs by the end of 2010.

With employers shedding another 467,000 jobs in June and total employment falling again to 131.7 million jobs, however, the "jobs deficit" between reality and what the president pledged grew from 3.6 million jobs to 4.2 million jobs.

A month ago, Obama said the stimulus had "created or saved" 150,000 new jobs, and accelerated spending would create or save another 600,000 jobs by summer"s end.

"If the stimulus prevented jobs from being lost, the monthly job loss rate would be expected to decline," Hedermanand Sherksay, but "accepted measures show job loss rates increased sharply since the start of the recession, and have not fallen since President Obama signed the stimulus bill."

The Heritage analysts add: "Employed workers are just as likely to lose their jobs today. Nothing in the data shows the billions of dollars spent has saved jobs that otherwise would have been lost."

Asked June 29 on MSNBC"s "Hardball with Chris Matthews" when the public should begin to judge the effects of the stimulus, White House Press Secretary Robert Gibbs replied, "I think we should begin to judge it now."

Hello, 9.5 percent unemployment.

It's not only safe to judge the stimulus a failure, Hederman and Sherk conclude, it's imperative to postpone an increase in the minimum wage and "flatly reject" a third stimulus (don't forget President Bush's tax rebate) because the third time will not be the charm.

Ken McIntyre is the Marilyn and Fred Guardabassi Fellow in Media and Public Policy Studies at The Heritage Foundation.