Sunday, November 22, 2009

Boehner Wins

John Boehner must surely have permitted a contented smile to crease his spray-tanned face on news that recent polling says blame for the nation's economic woes is shifting to the Democrats.

From practically the moment the ink was dry on the new stimulus bill (signed into law less than a month after President Obama's inauguration), the House Minority Leader has been complaining that the stimulus "isn't working." The evidence? The ever rising unemployment rate.

Boehner well knows that employment is a lagging indicator, and is one of the very last conditions to turn around in an economic recovery. After a recession, the economy as a whole always starts growing well before job creation resumes and the unemployment rate begins to improve. This being the deepest recession since the Great Depression, it was always understood that job creation would be anemic well into 2010 and likely beyond. The grim truth is it could take half a decade for the unemployment rate to return to its pre-recession level.

Indeed, economists on the left have worried from the beginning that the government's stimulus package was not nearly big enough. Since the beginning of the year, many economists said it was all but inevitable that we'd see 10% unemployment before year's end, and they were right. And the official unemployment rate far understates the real level. This was all pretty much preordained, and not because the stimulus didn't work.

What is undeniably true is that the administration's early prediction of unemployment topping out at a little over 8% was a silly fantasy. Administration apologists have pointed out that it was made before the full measure of economic devastation was understood, but that only serves to underscore a point that is so obvious as to be unremarkable. Namely, economic predictions are almost always fraught with uncertainty and even peril; this one especially so. Even granting the best of intentions, the administration should have fought off the pressure to make a jobs prediction, particularly without a profuse amount of hedging. Missing a difficult target just hands a dishonest opponent a political club with which to administer a drubbing.

Dishonest? Oh, yes. How else can you describe Boehner's constant criticism of the rising unemployment rate, even before the stimulus money was flowing? It was no more possible to instantly reverse the mounting job losses than it is to turn on a dime a fully steaming battleship. It just can't be done. Economies, like battleships, have great momentum, which can no more be ignored than can gravity.

Conceding that a bloodbath was inevitable doesn't mean the stimulus was just a useless exercise conducted at great expense. Things surely could have been much worse. It's remarkable how quickly we forget—especially those of us lucky enough to still have our jobs—that less than a year ago there was a very real fear of complete economic collapse and ensuing depression. It is quite possible that we walked an exceedingly thin line between a severe downturn and massive devastation.

Now comes a report by Jackie Calmes and Michael Cooper of a growing consensus among economists that the stimulus is working, and that things would have been much worse without it. And though economists on both the left and right have argued that the structure of the package wasn't what they would have preferred, many others are now saying the Congress and the administration got it about right.

Economist Mark Zandi of Moody's believes that were it not for the stimulus we'd still be in recession, with much worse unemployment.

Says the article:

The legislation, a variety of economists say, is helping an economy in free fall a year ago to grow again and shed fewer jobs than it otherwise would. Mr. Obama's promise to "save or create" about 3.5 million jobs by the end of 2010 is roughly on track, though far more jobs are being saved than created, especially among states and cities using their money to avoid cutting teachers, police officers and other workers.

Save? Create? What's the difference? With respect to the jobless rate, there is none. But to a demagogue like Boehner, the last ten months have presented irresistable opportunities. Who's Joe Sixpack going to listen to? The guy who points out the obvious, that things are horrible? Or the one who says that, but for our action, it could have been much worse? Misery endured trumps misery averted any day.

Despite the fact that this disastrous recession was inherited in full raging force from the previous administration, Boehner wins.

Regardless of how well the Democrats in Congress and the White House have handled this mess, Boehner wins.

A vast swath of voters is simply not sophisticated enough to understand that ten months in office isn't nearly enough time to turn the battleship. They don't want to hear about—wouldn't even understand—employment being a lagging indicator. They've already forgotten that this great recession had been long underway by the time Obama won the election, and that we were losing on the order of three quarters of a million jobs per month when he took the oath of office. They're clueless that the reviled Troubled Assets Relief Program (TARP) was launched in the fall of 2008 under the Bush Administration.

However unfair it may be, Obama and the Democrats increasingly own the nation's problems. It's hard to imagine that they won't suffer accordingly in next year's elections. To a cynical politician like John Boehner, that's what it's all about.

Update Nov 30, 2009: In a column in the online edition of The New York Times, economist and Nobel laureate Paul Krugman warns that an entrenched high unemployment rate will cause great harm to individuals and the economy for many years. Krugman has consistently argued that the stimulus was far too small; he now says we need additional government intervention targeted specifically at job creation. No doubt John Boehner would vehemently oppose any such intervention.

Update Sep 11, 2010: An analysis released last month by the non-partisan Congressional Budget Office says the stimulus package resulted in between 1.4 million and 3.3 million more persons employed than otherwise would have been, and in an unemployment rate that was between 0.7 percent and 1.8 percent lower. That means that at its highest point the unemployment rate could have been between 11 and 12 percent, instead of around 10 percent. It means that around 18 million persons could have been looking for work, compared to around 15 million. Regardless, Democrats are poised to suffer huge losses in this November's midterm elections.

Copyright (C) 2009 James Michael Brennan, All Rights Reserved