Andrew Ross Sorkin (New York Times, 4/28/16) presented a confused account of the state of the economy and economic policy under President Barack Obama. The account repeated many self-serving comments from Obama without comment and offered little useful context to readers.
The confusion started early, when Sorkin reported Obama’s complaint that he doesn’t get sufficient credit for the economy’s strength, pointing out:
His economy has certainly come further than most people recognize. The private sector has added jobs for 73 consecutive months—some 14.4 million new jobs in all—the longest period of sustained job growth on record. Unemployment, which peaked at 10 percent the year Obama took office, the highest it had been since 1983, under Ronald Reagan, is now 5 percent, lower than when Reagan left office.
The economy has also seen close to 3 million prime-age workers (ages 25–54) drop out of the labor force. No one had predicted this back in 2009 when President Obama took office. The number of people who are working part-time involuntarily is still close to 1.7 million above its pre-recession level. No one had expected this back in 2009, either.
The 73 consecutive months of private-sector job growth, “the longest period of sustained job growth on record,” is kind of a joke. This is sort of like a weak-scoring basketball player telling a reporter about the number of consecutive games in which he scored points; it is an utterly meaningless statistic. It is the average job growth, GDP growth and improvement in living standards that matter, not the monthly job creation streak. (And President Obama wonders why people don’t feel better.)
Sorkin then turned to mind-reading on the Wall Street bailout, telling readers: “But Obama, convinced that anything short of a major bailout could lead to economic catastrophe, said Democrats should back Paulson’s plan. They did.”
Sorkin didn’t indicate how he knew that Obama was “convinced.” No one has ever given an argument as to why the government could not have boosted the economy with massive spending after the market had been allowed to work its magic in putting Citigroup, Goldman Sachs and the rest out of business. Elite types call people names who raise this point, but that doesn’t mean it is not valid.
The piece then turned to the stimulus, but the discussion was very badly confused. It tells readers:
A January 2009 report from the president’s Council of Economic Advisers projected that the stimulus would keep unemployment below 8 percent. Instead, it climbed to 10 percent in 2009 and only fell back below 8 percent in 2012, leading to criticism that the stimulus was ineffective.
Actually, the problem with this report was not the projected impact of the stimulus, but rather in underestimating the impact of the recession. It projected that the unemployment rate would not cross 10 percent even without any stimulus, not recognizing the full severity of the downturn.
The piece then justified the limited stimulus that President Obama was able to get, saying, “In truth, of course, the political headwinds against stimulus were extraordinary.” While there were extraordinary political headwinds, President Obama encouraged them. In early April 2009, he began talking about the “green shoots of recovery.” He also spoke of the need to “pivot to deficit reduction,” and appointed the Bowles/Simpson commission for this purpose. This is an important part of the story of the lack of political support for further stimulus.
Sorkin got the whole issue enormously confused:
If you add up all of his administration’s classic stimulus measures, including the many tax breaks the administration extended, you get $1.4 trillion, a figure that is nearly twice the original figure. The anti-stimulus, then, was counteracted by a stealth stimulus.
What matters on stimulus is not just the total, but the time frame. Spending $1.4 trillion over eight years comes to less than 1 percent of GDP annually. This is not much stimulus for an economy that has faced the collapse of an enormous asset bubble.
It would helpful if the New York Times would assign lengthy pieces on the economy to people who are more familiar with the data and economics.
Economist Dean Baker is co-director of the Center for Economic and Policy Research in Washington, DC. A version of this post originally appeared on CEPR’s blog Beat the Press (4/28/16).
