On February 13, 2009, President Obama signed into law the American Recovery and Reinvestment Act, which his administration promised would “create or save” 3.5 million jobs over two years, mostly in the private sector. The administration also claimed that without ARRA unemployment could increase to 8.8 percent, but with ARRA would drop to 7.25 percent by the end of 2010.
Unfortunately, the stimulus failed to live up to those promises. As I noted yesterday, the president doesn’t have a good track record when it comes to predicting the impact of his policies on unemployment rates.
The president wasn’t the only person to turn out to be completely wrong. Here is a blast from the past from Paul Krugman, writing in January 2009 about the unemployment predictions made by the administration’s economists:
Still picking over the Romer/Bernstein official evaluation of the Obama economic plan. Again, kudos to the team for producing such a clear, honest assessment. . . .
By my calculations, the Obama plan is supposed to reduce average unemployment over the next two years from 8.7% to 7.6%; over the next three years, it reduces average unemployment from 8.4% to 7.3%.
As we all know, these predictions didn’t materialize. They weren’t accurate.
Krugman seemed to think that the administration’s estimates were reliable, if only because they were similar to his. In this previous post, he wrote about the same report:
Kudos, by the way, to the administration-in-waiting for providing this — it will be a joy to argue policy with an administration that provides comprehensible, honest reports, not case studies in how to lie with statistics.
That said, the report is written in such a way as to make it hard to figure out exactly what’s in the plan. This also makes it hard to evaluate the reasonableness of the assumed multipliers. But here’s the thing: the estimates appear to be very close to what I’ve been getting.
One possible explanation is that Krugman’s models, and those of the Obama administration’s economists, are wrong. Another is that their assumptions/estimates are wrong.
Either way, they were sure of their predictions back then, and yet they were wrong. So why should we listen to them now?