In January 2009, then President-elect Obama published an analysis by his economic advisers, Christina Romer and Jared Bernstein. The analysis estimated that a $775 billion stimulus/recovery plan would create 3.5 million jobs over the next two years.
Since the report, the stimulus/recovery plan has grown to over $800 billion. To measure its success, the Administration has changed the metric to 4 million “jobs created or saved.” Economist Greg Mankiw calls this rhetorical flourish an “act of political genius.” Even if one can measure how many jobs are created, there is no way to measure how many jobs are saved.
Romer & Bernstein to the Rescue
Romer & Berstein provide a way to circumvent the act of political genius. Their report provides a figure that projects the unemployment both with and without the recovery plan. This figure provides a handy benchmark for grading the Administration and Congress’ efforts. Here is how the grading works:
- A: Actual unemployment is below the “with recovery plan” line—actual unemployment is lower than Administration’s expectations.
- B: Actual unemployment is on the “with recovery plan” line—actual unemployment matches the Administration’s expectations.
- C: Actual unemployment is between the “with recovery plan” and “without recovery plan” line—actual unemployment is worse than expected by the Administration, but the Administration would argue that it would be worse without the recovery plan.
- D: Actual unemployment is on the “without recovery plan” line—the recovery plan is doing nothing to reduce unemployment; no jobs are “created or saved.”
- F: Actual unemployment is higher than the “without recovery plan” line—the recovery plan is worsening unemployment.
1st Quarter Recovery Report Card: Obama Administration and Congress earn a “D minus”
Using Romer & Bernstein’s benchmark, the Administration and Congress earn a “D–.” Actual unemployment is worse than Romer & Bernstein’s “without recovery plan,” which should earn an “F.” However because the gap is relatively small, they will get a first quarter benefit of the doubt, bumping them up to a “D–.” Since this is only the first quarter, they still have plenty of time to improve their grades before the final exam better known as the 2010 elections.