Error-Filled Republican Analysis Misleads On Recovery Act

Today Rep. Boehner released an error-filled paper on the Recovery Act that is full of half-truths and mistakes. 

Leading independent economists, the nation’s governors and the millions of Americans on the job thanks to the Recovery Act all say it’s helped rescue the economy, so it’s ironic that the very critics who refuse to acknowledge it’s working are those whose economic policies led us into this crisis in the first place.  Republicans in Congress may have made a cynical bet to deem the Recovery Act a failure before it even began, but even they can’t ignore the facts: after years of failed policies, the Recovery Act has helped us go from losing over three million private sector jobs in the first five months of last year to adding 495,000 in the first five months of this year, and from an economy shrinking by six percent to an economy growing three percent.

Among the biggest errors in Representative Boehner’s report are:

“[T]he ‘stimulus’ isn’t working as promised.”

• In fact, the nonpartisan Congressional Budget Office says the Recovery Act is already responsible for as many as 2.8 million jobs and on track for about 3.5 million by the end of the year – exactly the projected target at the time the Recovery Act was signed.  [CBO Report, May 2010]

“Despite massive amounts of deficit-fueled ‘stimulus’ spending, the construction sector…has continued to reel from the recession.”

• While the construction industry has certainly been hard-hit by eight years of failed economic policy, it’s beginning to recover in-part due to the Recovery Act.  In the last month of the previous Administration, the construction industry lost 153,000 jobs [BLS, January 2009].  President Obama signed the Recovery Act into law a month later and the construction industry has now gained jobs two of the last three months.  And Recovery Act infrastructure projects are still ramping up – this summer will be the most active season for them yet.

“Washington Democrats have spent the last 18 months racking up record deficits and debt, spending money with reckless abandon while claiming that their programs will create jobs for the millions of Americans who are unemployed or underemployed.”

• The previous Administration left behind a legacy of a projected $1.3 trillion dollar deficit which today is more than 90 percent of the federal deficit.
• Because of its targeted, temporary nature, the Recovery Act will add less than half a percent to the deficit-to-GDP ratio by 2012 and nothing to the growth of the debt-to-GDP ratio over the rest of the decade.
• Both public and private economists say that the Recovery Act is already responsible for more than 2.5 million jobs.  According to IHS Global Insight chief economist Nariman Behravesh, “Without the stimulus, 3 million more Americans would be out of work and the national unemployment rate, just below 10 percent, would be 12 percent - or higher [The Boston Globe, 3/7/2010] and Stuart Hoffman, chief economist at PNC Bank agrees, saying, "The stimulus worked. Without it, the unemployment rate would probably be closer to 11 percent and the economy might not have grown at all last year. [ABC News, 2/18/10]

It’s clear that the Recovery Act is working:

1. In the first quarter of 2009, the economy lost 750,000 a month on average—over 2 million jobs lost in one quarter; in six of the past seven months, net job growth was positive, including 495,000 private sector jobs in the past five months alone.. 
2. When President Obama took office, GDP was plummeting at an annual rate of -6.4%.  But now GDP has grown three straight quarters at an average rate of 3.5%.
3. In the first five months of 2009, the economy lost over 900,000 manufacturing jobs
    

Jared Bernstein is Chief Economic Advisor to the Vice President