"Young Guns" Miss The Target With Recovery Act Falsehoods

September 13, 2010 2:19 pm ET

In their new book Young Guns, House Minority Whip Eric Cantor (R-VA), Rep. Paul Ryan (R-WI) and Rep. Kevin McCarthy (R-CA) repeat the same old dishonest talking points about the Recovery Act.  Cantor argues that the GOP's "alternative stimulus" would have created "twice the jobs at half the cost," while Ryan and McCarthy suggest that President Obama's bill "failed." In reality, the "twice the jobs" claim was based on a mathematical formula that Republicans admitted they didn't understand and the deficit would have remained nearly the same under the Republican proposal.  Meanwhile, the Recovery Act has created millions of jobs, boosted GDP, and put American on the path to recovery.

Claim: GOP Stimulus Plan Would Have Created "Twice The Jobs At Half The Cost"

Rep. Eric Cantor:

Not only was our plan fair, understandable, and more direct than the Democratic majority's bill, it delivered twice the bang for half the bucks spent in the Democratic plan. In fact, Ways and Means Ranking Member Dave Camp of Michigan and his staff used the Obama administration's own economic model to analyze our alternative stimulus bill that they determined would create twice the jobs at half the cost of the bill that was eventually passed. [Young Guns, p 49]

Fact: Jobs Estimate Was Based On Fuzzy Math

GOP Admitted Jobs Figure Was "Speculative" And "Dictated By Assumptions." In a document released to explain the mathematical reasoning behind the "6.2 million jobs" claim, Republicans on the House Ways & Means Committee wrote: "Efforts to quantify the extent to which even large spending increases or tax cuts will impact future economic growth and employment are largely speculative, and the conclusions are generally dictated by the assumptions made by the authors." [House Ways and Means Republican Staff via TPM, 1/28/09; emphasis added]

GOP Said Source Document Used "Lacks Critical Details Necessary To Fully Understand." In a document released to explain the mathematical reasoning behind the "6.2 million jobs" claim, Republicans on the House Ways & Means Committee wrote, "they use a multiplier that suggests tax cuts equal to 1% of Gross Domestic Product (or 'GDP' which is a measure of national output) have a less than 1% effect on output, while spending increases of the same size have a greater that 1% effect.  The Romer-Bernstein paper lacks critical details necessary to fully understand their reasoning..." [House Ways and Means Republican Staff via TPM, 1/28/09; emphasis added]

Fact: The Deficit Would Have Remained Nearly The Same Under GOP Plan

The GOP Budget Was Different In That, Despite Extreme Cuts, It Resulted In Nearly The Same Yearly Deficit.  The New York Times reported: "Even with the spending reductions and other changes proposed by the Republicans, their plan would still leave annual deficits of about $500 billion, not much lower than the Democratic plans." [New York Times, 4/02/09]

Claim: The Recovery Act "Failed"

Rep. Paul Ryan:

And from the enactment of the failed $1 trillion "stimulus" bill last year, to the pass-at-any cost government takeover of health care, President Obama and the Democratic -leadership have zealously followed this Progressivist strategy, taking us closer to the tipping point, closer to a European-style welfare state where high taxes, big government, and double-digit unemployment become a way of life. [Young Guns, p 132, emphasis added]

Rep. Kevin McCarthy:

When I look at an unemployment rate that has meant hardship to millions of American families and a failed "stimulus" that did not create the jobs promised, and then I listen to the president and the Democratic House leadership blame others by talking about how they inherited this economy, I see American leaders settling for mediocrity. [Young Guns, pp 152-3, emphasis added]

Fact: The Recovery Act Boosted The Economy

CBO: The Recovery Act Created Jobs, Lowered Unemployment, And Boosted GDP.  According to the nonpartisan Congressional Budget Office, through the second quarter of 2010, the American Recovery and Reinvestment Act:

  • Raised the level of real (inflation-adjusted) gross domestic product (GDP) by between 1.7 percent and 4.5 percent,
  • Lowered the unemployment rate by between 0.7 percentage points and 1.8 percentage points,
  • Increased the number of people employed by between 1.4 million and 3.3 million, and
  • Increased the number of full-time-equivalent (FTE) jobs by 2.0 million to 4.8 million compared with what those amounts would have been otherwise. [CBO, 8/24/10]

Reuters: The Recovery Act May Have "Prevented The Sluggish Economy From Contracting" Between April And June.  According to Reuters

The massive U.S. stimulus package put millions of people to work and boosted national output by hundreds of billions of dollars in the second quarter, the nonpartisan Congressional Budget Office said on Tuesday.

CBO's latest estimate indicates that the stimulus effort, which remains a political hot potato ahead of the November congressional elections, may have prevented the sluggish U.S. economy from contracting between April and June.

CBO said President Barack Obama's stimulus boosted real GDP in the quarter by between 1.7 percent and 4.5 percent, adding at least $200 billion in economic activity. [Reuters via ABC News, 8/24/10]

Job Statistics Trend Shows Recovery Act Is Working.  Below is a graph prepared by the Speaker's office showing net private sector job gains or losses per month since December 2007.

[Bureau of Labor Statistics via The Gavel, 8/6/10]

Princeton, Moody's Economists Say "Highly Effective" Government Response To Crisis Saved 8.5 Million Jobs.  According to the New York Times: "Like a mantra, officials from both the Bush and Obama administrations have trumpeted how the government's sweeping interventions to prop up the economy since 2008 helped avert a second Depression. Now, two leading economists wielding complex quantitative models say that assertion can be empirically proved. In a new paper, the economists argue that without the Wall Street bailout, the bank stress tests, the emergency lending and asset purchases by the Federal Reserve, and the Obama administration's fiscal stimulus program, the nation's gross domestic product would be about 6.5 percent lower this year. In addition, there would be about 8.5 million fewer jobs, on top of the more than 8 million already lost; and the economy would be experiencing deflation, instead of low inflation. The paper, by Alan S. Blinder, a Princeton professor and former vice chairman of the Fed, and Mark Zandi, chief economist at Moody's Analytics, represents a first stab at comprehensively estimating the effects of the economic policy responses of the last few years. 'While the effectiveness of any individual element certainly can be debated, there is little doubt that in total, the policy response was highly effective,' they write." [New York Times7/27/10, emphasis added]

Fact: President Obama Did Inherit Massive Monthly Job Losses

The Economy Shed Almost 8 Million Jobs Under Republican Policies Before The Recovery Act Was Passed.  According to economist Robert J. Shapiro:

From December 2007 to July 2009 - the last year of the Bush second term and the first six months of the Obama presidency, before his policies could affect the economy - private sector employment crashed from 115,574,000 jobs to 107,778,000 jobs. Employment continued to fall, however, for the next six months, reaching a low of 107,107,000 jobs in December of 2009. So, out of 8,467,000 private sector jobs lost in this dismal cycle, 7,796,000 of those jobs or 92 percent were lost on the Republicans' watch or under the sway of their policies. Some 671,000 additional jobs were lost as the stimulus and other moves by the administration kicked in, but 630,000 jobs then came back in the following six months. The tally, to date: Mr. Obama can be held accountable for the net loss of 41,000 jobs (671,000 - 630,000), while the Republicans should be held responsible for the net losses of 7,796,000 jobs. [Sonecon.com, 8/10/10, emphasis added]

Based on Shapiro's research, the Washington Post's Ezra Klein created the following chart showing net job losses before and after the Recovery Act was enacted:

[Washington Post, 8/12/10]

President Bush Oversaw "The Weakest Eight-Year Span For The U.S. Economy In Decades." According to the Washington Post: "President Bush has presided over the weakest eight-year span for the U.S. economy in decades, according to an analysis of key data, and economists across the ideological spectrum increasingly view his two terms as a time of little progress on the nation's thorniest fiscal challenges." [Washington Post, 1/2/09]