Frank: Obama admin 'dumb' to predict no higher than 8% unemployment

[The Northerner]

It was "dumb" for President Obama and his aides to promise that unemployment would not surpass 8 percent if the stimulus act passed, a top House Democrat said on Tuesday.

Rep. Barney Frank (D-Mass.), the chairman of the House Financial Services Committee, called into question the wisdom of projections issued by the Obama administration during the congressional fight over the stimulus bill that argued it would prevent higher levels of joblessness.

"President Obama, whom I greatly admire ... when the economic recovery bill — we're supposed to call it the 'recovery bill,' not the 'stimulus' bill; that's what the focus groups tell us — he predicted or his aides predicted at the time that if it passed, unemployment would get under 8 percent," Frank said on Tuesday evening during an appearance on the Fox Business Network. "That was a dumb thing to do."

The administration famously released a chart during the fight over its signature $787 billion American Recovery and Reinvestment Act (ARRA) showing that, if that package were enacted, unemployment would not exceed 8 percent. The projection, authored by Council of Economic Advisers (CEA) Chairwoman Christina Romer, argued that without the stimulus, unemployment would reach a high of 9 percent in the third quarter of 2010.

The current unemployment rate, according to the Bureau of Labor Statistics, stands at 9.6 percent.

Read more: http://thehill.com/blogs/blog-briefing-room/news/114753-frank-obama-admin-dumb-to-predict-no-higher-than-8-unemployment

[Common Sense Party]

1. It's supposed to be: UNDERpromise and OVERdeliver.

The administration just got it backwards.

[villager]

2. +1

n/t

[HiFructosePronSyrup]

3. Right, instead of relying on actual models...

they should just make a gut guess.

Or maybe use chicken entrails.

[daylan b]

4. Wouldn't be much of a difference.

[Kurt_and_Hunter]

5. Reasons for the dumb (which it was) soft-pedal approach

The Obama admin, at least in public, really did not "get" the economy.

This raises two possibilities.

Either they really did not get it, or they wanted to pretend everything was okay so they could get HCR through before everyone realized how serious *and intractable* the problem was.

If the later, I can see an argument to be made.

I would not, however, have agreed with that argument. It was plain from the start that there would be no V-shaped recovery. That means the economy has to be THE thing.

Since the WH didn't see it that way then maybe they really did not get the economy.

So both theories are probably right...

The WH knew the economy was bad but did not really "get" how bad. Because of that they thought that it was an acceptable risk to soft-peddle the thing for a greater good because they didn't realize quite how much they were soft-pedaling it.

[Common Sense Party]

6. They still don't "get" the economy, I'm afraid.

[Dawgs]

7. I thought the 8% "prediction" was based on the most optimistic model, not..

a prediction of what would happen if passed. The only guarantee I remember was that it would save or create 2.5 million jobs; which I think it did, no?

[Kurt_and_Hunter]

11. It was the base-line they put out

8% was the preferred WH number, not one particularly optimistic figure in a range.

What is damning about the infamous treasury chart is not that they predicted that the stimulus would old unemployment to 8% but that the prediction without the stimulus was in the 10% range.

8% was way too optimistic, but it is understandable to overstate the good effect of legislation you are pushing.

What is striking is that the WH was grossly understating the seriousness of the situation in general... soft pedaling the danger of not passing the stimulus.

[Coyote_Bandit]

8. So.................?

Obama's ability to predict and/or control the future is flawed? Color me surprised. Not.

Yeah, it was a dumb prediction. But I never believed Obama was the brightest bulb in the closet. He's just another frickin politician who will say what is necessary in an effort to get what he wants. And sometimes he continually revises what he's shoveling saying.

[BootinUp]

9. Yeah, thats obvious. nt

[dkf]

10. Maybe this is why Romer is leaving?

According to her numbers the stimulus not only didnt work but made things worse than if we did nothing.

[Kurt_and_Hunter]

12. Really?

"According to her numbers the stimulus not only didn't work but made things worse than if we did nothing."

I have not heard anyone (pugs excepted, of course) say the stimulus made things worse than doing nothing.

What was her reasoning on that?

Thanks.

[daylan b]

13. "The Chart"

It predicted a lower unemployment rate without the stimulus than we ended up with after the stimulus.

edit:Figure 1 on Page 4

http://otrans.3cdn.net/ee40602f9a7d8172b8_ozm6bt5oi.pdf

[Kurt_and_Hunter]

18. I see what you are saying

[dkf]

15. We are at 9.6% which is worse than the 9% projected if we did nothing.

[OHdem10]

14. I heard two different reporters explain how the 8% got out there,

Back when the first stimulus was in early planning
Christine Romer and the Financial Team were working
on the plan.

Romer said the 8% could be possible with a MUCH LARGER
Stimulus but not with the 790 Billion we finally got.
(Remember Krugman and others said we needed a much
larger stimulus.

As reported on 2 different occasions, other members of
the financial team and Democrats on the Hill shot down
the larger stimulus. There is a question as to how
hard Obama pushed for the much larger stimulus. In the
end, this was what he could get=--is the official line.

When Obama had the Press Conference, he lined the 8%
and 790 Billion. Did anyone point out the discrepancy
to Obama before he went on the air??? I do not know. Where
were his advisors??? Romer is gone. She said the 8%
could only happen with much larger stimulus. Strange
she is the one not around when she was correct.

Now it is obvious we should have had the larger stimulus.
Thank our Democrats on the Hill.

[daylan b]

16. Her own report contradicts that.

Who were the reporters you heard claim that? It's pretty damn shoddy reporting considering the fact that her own report is there for everyone to see.

"Estimating the aggregate employment effects of the proposed American Recovery and Reinvestment Plan involves several steps. The first is to specify a prototypical package. We have assumed a package just slightly over the $775 billion currently under discussion. It includes a range of measures, all of which have been discussed publicly. Among the key components are:"

http://otrans.3cdn.net/ee40602f9a7d8172b8_ozm6bt5oi.pdf

She actually based the 8% number on a smaller stimulus than what eventually passed.

[Kurt_and_Hunter]

17. At the time Krugman cited Christina Romer and Jared Bernstein

http://krugman.blogs.nytimes.com/2009/01/10/romer-and-bernstein-on-stimulus/


In his on-the-fly analysis the day that chart came out Krugman said that it actually appeared to under-state the effect of the stimulus but was way too optimistic in its assumptions about where the economy was in general.

That is exactly opposite of what you would want in selling a plan. (But every much what you would want if trying to tamp down any call for a larger stimulus.)

It does sound like that famous chart was the product of a bunch of jumbly compromises.

[JoePhilly]

21. This 8% discussion is total nonsense.

The charts referenced were based on ESTIMATES of where they thought unemployment was at the time, they did not have the actual numbers yet.

They thought unemployment in Jan 2009 was about 6.5%. And they were expecting unemployment to be about 7.0% by the end of February 2009. Those were the estimates.

In reality, we now know that they unemployment rate was already 7.7% by the end of January 2009. And the actual unemployment rate at the end of Feb 2009 was 8.2%. Or ~1.2% HIGHER than anyone anticipated.

The stimulus passed around Feb 20th 2009. And the unemployment rate was ALREADY higher than 8%. By the end of March, far too soon for the stimulus to do anything, it hits 8.6%.

So, the stimulus passes with an unemployment rate at 8.2%. The stimulus never had a chance of keeping it under 8%, because the situation was far worse than anyone knew.

Here is the actual data.

http://www.tradingeconomics.com/Economics/Unemployment-Rate.aspx?Symbol=USD

[hughee99]

19. That's okay, though...

My plan is to quickly forget this, trust the next round of predictions until they also turn out to be way off, and then act surprised again.

[kentuck]

20. They underestimeated the depth of this recession from the beginning...

and they continue to underestimate it.

[EC]

22. I remember him saying it would go into 2 figures...

I also remember that unemployment was already at 8.2 or so when the stimulus passed...so it should have been evident that it wouldn't stay under 8.