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Read an excerpt from Grover G. Norquist and John R. Lott Jr.'s new book -- 'Debacle'

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 (John Wiley & Sons)

Editor's note: FoxNews.com is pleased to present an excerpt from "Debacle: Obama's War on Jobs and Growth and What We Can Do Now to Regain Our Future " the new book by Grover G. Norquist and FoxNews.com contributor John R. Lott Jr. 

Chapter 3: The Stimulus Made Things Worse

What Was Promised


Matt Lauer: At some point will you say, “Wait a minute, we’ve spent this amount of money. We’re not seeing the results. We’ve got to change course dramatically?” . . .

President Obama: Look, I’m at the start of my administration . . . And . . . and, you know, a year from now, I think people . . . are gonna see that . . . we’re starting to make some progress. But there’s still gonna be some pain out there. If I don’t have this done in three years, then there’s gonna be a one-term proposition.

—Interview on NBC’s Today Show, February 2, 2009

The overall impact on jobs saved or created is just about what was predicted.
Austan Goolsbee, the head of President Obama’s Council of Economic Advisers, December 3, 2010

Even before the 2010 midterm elections, with Democrats controlling massive supermajorities in both the House and Senate, President Obama had passed five stimulus and jobs bills. If you add up the promises, he boldly promised well over 5.5 million jobs “created or saved.” But reality turned out very differently: There were 2 million fewer people working in September 2011 than when Obama took office. On top of that, population growth by itself should have generated more than 3 million new jobs.

President Obama claims that instead of our economy being short more than 5 million jobs, things would have been even worse without his policies. According to him, we would have lost 10.5 million jobs without all of his spending. No matter how bad the job numbers get, Obama points to some hypothetical economic meltdown that was avoided by his policies. Thus, no evidence whatsoever, no matter how bad the news, can be used against him.

With the different Stimulus and jobs programs, it is hard to remember all the promises and to keep track of where the money has gone. There was the massive $825 billion Stimulus that was supposed to create or save 4.1 million jobs. The cost was originally supposed to be $787 billion, but the programs cost more than planned. Then there was a string of smaller ones: the $38 billion Hiring Incentives to Restore Employment (HIRE) Act of 2010, which was supposed to create 300,000 jobs, and the $26 billion Public Sector Jobs Bill of 2010 that was promised to create or save another 300,000 jobs.

And then there was the $42 billion Small Business Jobs Act of 2010, which was supposed to create or save another 500,000 jobs. Finally, the Disaster Relief and Summer Jobs Act of 2010 contained a hodgepodge of items, such as $24 billion to help keep teachers, police, and firefighters employed during the recession and $600 million to create 300,000 jobs for youth ages 16 to 24.

Even before Obama was sworn into office, Christina Romer, the first head of his Council of Economic Advisors, and Jared Bernstein, chief economist and economic policy adviser to Vice President Joseph Biden, released predictions touting the initial big Stimulus’ benefits. On January 9, 2009, they predicted that the unemployment rate was going to peak at 7.9 percent during July, August, and September in 2009 and then gradually fall to below 6 percent by April 2012 (Figure 3.1). Without the Stimulus, the unemployment rate would supposedly rise to 9 percent during most of 2010 and stay above 6 percent through most of 2012. These predictions have been a continual source of embarrassment for the White House, as the unemployment rate shot well past what it was supposed to be without the Stimulus.

Even the mainstream media made the administration defend this prediction. By July 2009, it was obvious that the Obama administration’s initial predictions were way off. ABC’s This Week host George Stephanopoulos asked Vice President Biden how the 9.5 percent unemployment rate in June squared with the administration’s prediction that if the Stimulus package was passed, “unemployment will peak at about 8 percent.” Biden replied, “We and everyone else misread the economy. The figures we worked off of in January were the consensus figures. . . .”

Biden’s answer was quite clear. The economy being much worse than ever predicted wasn’t Obama’s fault—rather, the Bush administration had left us a worse economy than anyone had realized. To Stephanopoulos there were only two alternatives: “either you misread the economy [that the economy was worse than Team Obama realized] or the stimulus package is too slow and too small.” And by the day after Stephanopoulos’s interview, there was already a headline in the Wall Street Journal reporting: “Calls Grow to Increase Stimulus Spending.”

The whole administration spun the claim after Biden’s interview. Economic adviser Jared Bernstein contended that the 8 percent unemployment estimate “was before we had fourth-quarter results on GDP, which we later found out was contracting on an annual rate of 6 percent, far worse than we expected at that time.” Even the president echoed the claim: “It was only after the [fourth]-quarter numbers came in, if you recall, that suddenly everybody looked and said the economy shrank 6%.”

But Biden, Obama, and others were factually wrong. The administration never just “worked off” data from January, and the economy was not much worse than they thought. On February 26th, after the 6.2 percent drop in GDP during the fourth quarter of 2008 was publicly released, the administration predicted only an 8.1 percent unemployment rate for 2009 and a 7.9 percent rate in 2010.

There was also plenty of warning before that GDP number was released. In a piece published by the Wall Street Journal on December 11, 2008, with the telling headline “Fourth-Quarter GDP: Worse and Worse” the paper estimated a drop in GDP of 6.2 percent at an annual rate for the fourth quarter.

Of course, other advocates of the Stimulus also failed to predict what was going to happen to unemployment rates and GDP growth. Paul Krugman, the New York Times columnist who touts his close “genuine contact” with the “smart” economists and others in the Obama administration and the Democratic congressional leadership, has been a staunch advocate of Keynesian policies. The day that President Obama signed the original Stimulus bill into law, Krugman predicted: “I am still guessing that we will peak out at around 9% [unemployment] and that would be late this year.” He assured listeners that double-digit unemployment was “not the most likely event.” With unemployment peaking at 10.1 percent and still above 9 percent two years after he predicted it would peak, Krugman was wrong on both counts.

Because of the stimulus, the Obama administration predicted a much milder drop in GDP in 2009 and strong economic growth after that (see Figure 3.2). The economy was only supposed to shrink by –1.2 percent in 2009 and then grow by 3.2 percent in 2010 and 4 percent in 2011—leaving the economy up over 6 percent from where it was in 2008. But the actual economy performed much worse each year. Far from growing a robust 4 percent in 2011, the growth was a very anemic 1.4 percent. Over the first three years of the Obama administration, instead of the economy growing by a total of 6 percent, it grew by less than 2 percent.

In March 2009, when Greg Mankiw, the chairman of George W. Bush’s Council of Economic Advisers, and some conservative economists questioned what they called Obama’s “overly optimistic” growth predictions, Paul Krugman questioned their honesty. In a New York Times blog post titled the “Roots of Evil,” Krugman attacked Mankiw as “more than a bit of deliberate obtuseness” and that “we can expect fast growth.” Krugman approvingly cited another liberal economics professor, saying that Mankiw had to know that his arguments were wrong. Mankiw challenged Krugman to a bet over whether the Obama prediction was right, but, after all his abusive rhetoric, Krugman never responded. Yet, Krugman must be glad that he never bet his money to back up his heated rhetoric.

It is also hard to believe that the state of the economy took Obama by surprise. He constantly warned of an economic Armageddon during the 2008 campaign and early 2009. At least once in each of the three presidential debates during September and October 2008, Obama claimed that we were in the “worst financial crisis since the Great Depression.” It was a constant theme of his campaign, and he made that claim again and again in many different speeches. Right after the election, he warned: “We’ve got an unprecedented crisis, or at least something that we have not seen since the Great Depression.”

The doom-and-gloom mentality continued after taking office. In his first radio address to the nation as president on January 24, Obama started his remarks by saying: “We begin this year and this administration in the midst of an unprecedented crisis that calls for unprecedented action.” And during Obama’s first national press conference on February 9, he talked about our being in a crisis 12 times and labeled it an “unprecedented crisis.” The day after Obama signed his Stimulus bill into law on February 17, the president rehashed that we were in a crisis 24 times, frequently describing in apocalyptic terms that the crisis would drag down the entire economy. The same language was used in his address to a joint session of Congress on February 24, with the word crisis mentioned 11 times, covering the “economic crisis, “credit crisis,” “housing crisis,” and “financial crisis.”

But even after the full extent of the poor economic showing during the end of 2008 was clear, the administration’s predictions at the end of February were much more optimistic and less accurate than those of most economists. While the administration was expecting an average annual unemployment rate of 8.1 percent for the year, business economists and forecasters surveyed in early March by the Wall Street Journal expected the June unemployment rate to be 8.2 percent and the December rate to be at 9.3 percent.

If the administration’s January and February forecasts were overly optimistic simply because they didn’t know how bad the economy really was in late 2008, why didn’t they quickly change their predictions? Instead, time after time, the Obama administration claimed that either success was already here or right around the corner. Some of these boasts started before the original Stimulus was passed, but they continued on for years. Larry Summers, who then served as Obama’s chief economic adviser, promised on January 25, 2009, with unemployment at 7.8 percent, that the economy would start improving “within weeks” of the Stimulus plan being passed. Indeed, Summers touted the “shovel-ready” nature of the jobs program as being “timely, targeted, and temporary.” It was supposedly targeted at quickly hiring the unemployed in 90 days or less and lasting until the private sector was able to get back on its feet. Since the Stimulus was signed into law on February 17, 90 days would be by mid-May.

Knowing how bad the economy was by the end of 2011, it is hard to believe that in March 2009, just five weeks after passing the Stimulus, President Obama was perceiving an upswing and started off a press conference by announcing:

"We’re beginning to see signs of progress. . . . This [Stimulus] plan’s already saved the jobs of teachers and police officers. It’s creating construction jobs to rebuild roads and bridges. And yesterday, I met with a man whose company is reopening a factory outside of Pittsburgh that’s rehiring workers to build some of the most energy-efficient windows in the world. . . . We’ve already seen a jump in refinancing of some mortgages, as homeowners take advantage of lower rates."

This newfound optimism over the effects of the Stimulus seemed unaffected by the continued bad economic news. Obama declared later in May that the massive spending program was “already seeing results” and had created or saved almost 150,000 jobs. He talked about how the Stimulus was “laying the foundation for a better economy,” and by September, Vice President Biden was declaring: “In my wildest dreams, I never thought it [the Stimulus] would work this well.” By April the following year, the unemployment rate still at 9.8 percent, but Biden thought that now, for sure, the economy was just about to boom: “Some time in the next couple of months we’re going to be creating between 250,000 jobs a month and 500,000 jobs a month.” The administration touted that the summer of 2010 would become known as the “Summer of Recovery.”

Of course, each time, they were wrong, and thus most past assertions of the Stimulus working were quickly forgotten. In 2010, Austan Goolsbee gave Fox News viewers a different explanation for why the January and February 2009 economic predictions never panned out: “Let’s remember, you’re citing the claim that the unemployment rate wouldn’t go above 8 percent, but if you remember in that same projection they said that if we didn’t pass the Stimulus it would only go to 9 percent, and it was above that before the Stimulus even came into effect.”

And he was still making this same claim a year and a half later. Yet, despite Mr. Goolsbee’s claim, the unemployment rate did not rise above 9 percent until May, two months after Obama’s press conference announcing that the Stimulus was already creating jobs. Nor does it explain that the unemployment rate continued to rise, not just above 9 percent, but to 10.1 percent.

Nevertheless, the administration remained undaunted. It still insisted its policies of government spending and deficits worked after more than two years of failure. In May 2011, with unemployment at 9.1 percent, Goolsbee boasted about “the solid pace of employment growth in recent months” and that “the overall trajectory of the economy has improved dramatically over the past two years.” The mainstream media did what it could to help. Headlines in the Los Angeles Times and the New York Times announcing the 9.1 percent unemployment rate somehow made such gloomy numbers out to be good news, trumpeting “solid growth” and “strong growth.”

By the end of the summer, in August 2011, the unemployment rate was still at 9.1 percent. It was no longer possible to claim the Stimulus had worked well. Obama claimed that the sluggish economic growth wasn’t the fault of his own economic policies; it was the fault of other circumstances that he had no control over. It was either events outside the United States or the irresponsible political behavior of others in Washington. Obama claimed:

"In the last few months, the economy has already had to absorb an earthquake in Japan, the economic headwinds coming from Europe, the Arab Spring and the [rise] in oil prices—all of which have been very challenging for the recovery. But these are things we couldn’t control. Our economy didn’t need Washington to come along with a manufactured crisis to make things worse. That was in our hands. It’s pretty likely that the uncertainty surrounding the raising of the debt ceiling—for both businesses and consumers—has been unsettling, and just one more impediment to the full recovery that we need."

There are a couple of problems with his argument. Economic growth had already ground to a halt during the first three months of 2011—with GDP growing by just 0.1 percent. This was well before the Arab Spring, the renewed debt crisis in Greece and other countries, and the July and August 2011 debate over the debt ceiling. And whatever the impact of the March 2011 earthquake, its initial impact during the first quarter in the United States would have been very limited. The president also blamed Republicans for not passing his new legislation when they took over the House of Representatives in January 2011. But with Democratic supermajorities in both the House and Senate for the two previous years, it is pretty hard to blame for the slow growth in the first half of 2011.

In addition, it seems a little hard to blame the Japanese earthquake for our poor unemployment rate when the Japanese unemployment rate fell and ours rose in the five months following the earthquake. Nor is it clear how we can blame “economic headwinds” from Europe when our unemployment rate from January to August 2011 rose while it fell for European countries such as Germany, Italy, and Sweden and stayed the same in France.

Goolsbee, in an interview on Sean Hannity’s radio show in late October 2011, justified Obama’s references to Japan and the Arab Spring this way: “It is not excuses that he is giving for across the board. The question was: Why did we slow down in 2011 when we were growing and adding millions of jobs in 2010?” But it wasn’t just a sudden slowdown in 2011. From December 2009 to December 2010, fewer than a million jobs were added, not “millions.” And Goolsbee’s argument was quite a change from his comments in June 2011, which was well after these events in March, when he dismissed the previous month’s 9.1 percent unemployment rate as an aberration, saying that things were headed in the right direction and that “one month is not a trend.”

Unfortunately, this wasn’t Goolsbee’s only extreme attempt to explain away their failed Stimulus policies. In that same interview, he told Hannity:


"Sean, you need to date the job creation from when the free fall ends. You can’t date it from the middle of the free fall, which is what you are doing. The job losses that you are describing were 5 million jobs lost of the 8 million lost in the recession. He comes in at the middle of the free fall. Since the end of the recession, we have added about 3 million jobs."


No matter how you cut it, 3 million jobs have not been added since the recession ended. The recession officially ended in June 2009, and at that time 130.49 million people held jobs according to the Bureau of Labor Statistics’ Establishment Survey. The numbers for September 2011 show 131.33 million, an addition of just 840,000 jobs. But with the working-age population having grown by 4.6 million people in the same period, this should be viewed as a miserable failure. Furthermore, out of the 840,000 additional jobs, the vast majority—540,000—were merely “temporary help” service jobs. With just 300,000 permanent jobs added over 27 months, it is understandable why Goolsbee would want to claim 3 million jobs had been added.

It should be pretty obvious: The Stimulus made things worse. Indeed, this is exactly what we predicted on February 3, 2009, when one of us wrote a piece for Fox News.com declaring: “President Obama and the Democrats’ ‘stimulus’ package will increase the unemployment rate.” While the administration was claiming in January and February that unemployment would stop rising once the Stimulus was passed, that prediction was obviously wrong to us then.

The notion that the stimulus package is too slow and too small implies that massive government spending in the various Stimulus packages actually helped the economy. It seems implausible to have unemployment rise above all administration predictions after a trillion-dollar set of packages and believe that something much larger would have helped. But the resources the government spends has to come out of someone else’s pocket. Spending almost a trillion dollars on various stimulus projects means moving a lot of resources from the private sector, eliminating the jobs many people currently have.

Excerpted from "Debacle: Obama's War on Jobs and Growth and What We Can Do Now to Regain Our Future" by Grover G. Norquist and John R. Lott, Jr. Copyright 2012 by Grover G. Norquist and John R. Lott, Jr. Published by John Wiley & Sons. Used with permission.