Stimulus Swagger vs. Reality

Summary
In recent weeks, in his pitches to Congress and the public on the need to pass the economic stimulus bill, Obama has made several claims about what it would do. (Republicans, too, have made stimulus boasts of their own.) But these pronouncements are not a sure thing:

Obama repeatedly said the plan "will save or create up to 4 million jobs." Obama downgraded that estimate to 3.5 million once the House and Senate agreed on a less-expensive compromise bill. The projections come from at least three economists, but all say there is great uncertainty in their estimates.

Republican House members claimed their substitute legislation tops that, creating "6.2 million jobs." But their calculation is even more fraught with uncertainty and is not backed up by independent economists.

Obama said the bill doesn't contain "a single earmark." But whether one calls them "earmarks" or not, the Senate certainly added items that will benefit particular states. For example: $50 million for programs under the California-Bay Delta Act and $500 million for National Institutes of Health facilities in Bethesda, Md.

Obama claims that funds in the bill will result in "every American" having health records computerized "within five years." But experts doubt it can be done that quickly.

The president also says electronic health records will save billions of dollars. But the Congressional Budget Office says that even a decade of expected savings are unlikely to pay back the government what the government will spend on health IT.

The president said the bill will modernize the nation's electricity grid, reducing consumption by 2 percent to 4 percent. That's optimistic. Industry reports say that a new grid could reduce energy consumption by up to 4 percent, but not until 2030 and at a cost much greater than the stimulus bill would cover.

Analysis
Amid much debate and disagreement over an economic stimulus package, President Barack Obama has been pushing a bill that he says will help the economy and American workers in all sorts of ways. The two chambers of Congress have agreed on compromise legislation that comes close to what Obama backed. In his prime-time press conference Feb. 9, an op-ed that was published in the Washington Post and in speeches to both the public and government employees, Obama has made his case again and again, citing various claims about what the bill would do. We take a look at a few of his not-so-certain pronouncements.

Jobs, Jobs, Jobs
In the Feb. 9 press conference, Obama said: "And that is why the single most important part of this Economic Recovery and Reinvestment Plan is the fact that it will save or create up to 4 million jobs – because that's what America needs most right now."

The president, along with stimulus supporters, has made this claim several times, stating that the House bill would create either 3 million or 4 million jobs by the end of 2010. On Feb. 11, Congress agreed on compromise legislation, which is $20 billion to $40 billion less expensive than bills passed by the two chambers; Obama said that bill would create 3.5 million jobs. The numbers are based on projections made by several economists – but those economists aren't completely sure. They can't be. As we pointed out recently on The FactCheck Wire, economic modeling is relatively new, and largely untested, particularly with the kind of recession figures we're seeing today. Obama would do better to say "could create" or "experts estimate," rather than making such a definitive claim.

Mark Zandi, chief economist at Moody's Economy.com, told the House budget committee on Jan. 27 that the House bill would lead to 3 million more jobs by the end of 2010 than there would be without the stimulus. A week earlier, he put the number at 4 million. But, as he told the Associated Press, there's no guarantee.

Zandi, quoted by the AP: The models are based on historic experience. And we're outside anything we've experienced historically. We're completely in a world we don't understand and know.

The nonpartisan Congressional Budget Office gave a significant range in its job creation figures, saying that the bills would create anywhere from 1.2 million to 3.6 million jobs by the end of next year. Christina Romer, chair of the Council of Economic Advisers, and Jared Bernstein, from Vice President Biden's office, published a report in early January that said between 3.3 million and 4.1 million jobs would be created as the result of a slightly smaller recovery plan. But, they acknowledged, "[T]here is considerable uncertainty in our estimates: both the impact of the package on GDP and the relationship between higher GDP and job creation are hard to estimate precisely." They called their range "reasonable."

Yet another economist, Allen Sinai, founder of Decision Economics Inc, has said the stimulus could save 3 million to 4 million jobs as well. But, he told the New York Times, "I'm not sure I believe my own models. We're in uncharted waters here."

With several economists coming up with similar figures, Obama seems to be on fairly safe ground. Still, Nobel laureate economists can't agree on whether the stimulus bill contains the right kind of measures to aid the crisis-plagued economy or how much help spending and tax relief will bring. Nor can the economists the president relies on present their projections with a high degree of certainty. Obama might be right about the job-creation ability of the plan, but it's also possible the effect of the stimulus will be more in line with the low end of CBO's range –or, in fact, it could have no effect at all.

Jobs, Jobs, Jobs, the Republican Version
House Republican Leader John Boehner and Republican Whip Eric Cantor have repeatedly claimed that a GOP alternative stimulus plan would create "twice the jobs as the House Democrats' plan at half the cost" – that's 6.2 million jobs, according to Boehner. Sounds even better, right? If only someone could be certain of that number.

The figure comes from the House Republicans' own calculations. When we asked whether any independent economists endorsed the Republican claims, a spokesman for the Republican staff of the Ways & Means Committee produced none. CBO did not analyze the GOP's substitute, which failed by a vote of 170 - 266 on Jan. 28.

How did Republicans arrive at their 6.2 million figure? The Web site of Rep. Dave Camp, the ranking Republican member of the Committee on Ways & Means and a sponsor of the substitute, explains that the GOP's estimate is based on a 2007 paper by economists Christina and David Romer, a husband-wife team at the University of California, Berkeley. Yep, that's the same Christina Romer who is now chair of Obama's Council of Economic Advisers. The Romers' analysis of tax changes since World War II concluded that "tax changes have very large effects" on the economy. Specifically, they said their data suggested that a "tax increase of one percent of GDP [gross domestic product] lowers real GDP by about three percent" or lower, but at least by 2.2 percent. Flipping the Romers' calculations, GOP staffers figured that a tax cut of 1 percent of GDP would produce growth of 2.2 percent. Then, using a different report (Christina Romer's analysis of Obama's plan), the Republicans further calculated that their own party's proposed cuts would yield 6.2 million jobs over two years.

Republicans point to Romer's position in Obama's administration, as if to prove their figures are justified. However, these aren't her calculations. Plus, the Romers stressed in that 2007 report that their estimates were larger than other economists had come up with and "are not highly precise." (Indeed, in the CBO's analysis, which it says gives a range that "encompasses a majority of economists' views," the nonpartisan group gives a high and low multiplier for several government measures; the tax cut multiplier ranges from 0.5 to 1.7.) More recently, Christina Romer, in a Jan. 9 paper estimating the effects of the Democratic plan, didn't use the 2.2 multiplier even though that meant a lower job estimate for the tax cuts in Obama's plan. Instead, she used a 1 percent multiplier.