by Jon Sanders
Research Editor and Senior Fellow, Regulatory Studies, John Locke Foundation
You remember the graph, right? The chart that proved the incoming Obama administration had the plan to save the economy (which received the coveted White House Press Corps Prize for economics!), and all it needed was nearly a trillion dollars in “stimulus” funds? The chart that showed how with the stimulus, unemployment would not exceed 8 percent, but without the stimulus, unemployment would reach the extremely painful level of 9 percent?
James Pethokoukis remembers, calling the July jobs report “an important milestone and metric for judging the Keynesian fiscal experiment known as Obamanomics.” He explains:
In January 2009, Team Obama economists put together a report – half quantitative analysis, half sales pitch — outlining the potential economic impact of the proposed $800 billion stimulus. (See above chart from that report.) If Congress passed the plan, the report forecasted, the economy would generate enough additional demand, output, and employment that two big things would happen:
First, the unemployment rate would never reach 8%. Unfortunately, we hit 10% unemployment in October 2009. Failure number one.
Second, the unemployment rate would return to its long-term “natural rate” of 5% by July 2013 (a jobless rate, it should be noted, above the low points of the Bush and Clinton presidencies). Labor markets would be back to peak health. The Great Recession would truly and finally be over.
Incidentally, Obama now projects the economy will achieve an unemployment rate below 5.4 percent. Obama sees that happening after 2023. He’s just off by a decade, so far.
Of course, we now know conclusively that this prediction — based as it was on the pixiedust magic of Keynesian fiscal multipliers — was a total failure, one even beyond what the July job numbers suggest.
This is important: Obama economists assumed the unemployment rate would return to 5% even without a stunning collapse in labor force participation. Why? Government stimulus would reignite the private economy, causing a return to 4% GDP growth or higher, growth not seen since the late 1990s.
The failure may be total, but it is not done. It is still ongoing, and it is about to be compounded with the manifold unforeseen negative consequences of an even greater failure, a Betelgeuse to its Dog Star, i.e., Obamacare.