Earlier this week, President Obama repeated his claim that, while the current economy isn’t perfect, at least “we yanked an economy out of what could have been a second Great Depression.” To date, no one has contested the validity of this claim. They should, because that’s not what the Obama Administration said when they took office.
In January 2009 the new Obama Administration issued its now-infamous report titled “The Job Impact of the American Recovery and Reinvestment Plan,” more commonly known as the “Romer/Bernstein Report” after the President and Vice President’s economists who authored it. This report included estimates of what would happen if the Administration’s stimulus plan was enacted, and what would happen if it wasn’t – presumably casting the U.S. into “another Great Depression.” This chart displays the unemployment rates the Administration forecast in that January 2009 report if their stimulus plan passed (the “with stimulus” line), if their stimulus plan didn’t pass (the “without stimulus” line), and what actually happened:
Notice something important? The unemployment rate the Administration in January 2009 predicted the U.S. would have now without their “yank(ing) the economy out of another Great Depression” (about 8 percent in the “without stimulus” line) is less than the current official U.S. unemployment rate (9.1 percent in May 2011). Clearly, this data doesn’t support the President’s claim that the Administration “yanked the economy out of another Great Depression.”
But maybe the Administration didn’t know the true severity of the situation in January 2009, and only realized how bad things might get after releasing their January 2009 report. That argument doesn’t hold water, either. Senior Administration officials – including the President and his chief economists – knew how serious the U.S. economic situation was the month before the Administration’s January 2009 report. According to the Wall Street Journal, on December 16, 2008 “the economic team and Mr. Obama met in the Chicago transition offices to grapple with an economic crisis that was spiraling downward. Christina Romer, who would become the chairman of the Council of Economic Advisers, was chipper, but her message was dark: The U.S. recession was the worst since the Great Depression.”
The President can’t have it both ways. He and his Administration said without their stimulus plan unemployment would be 8 percent by now – bad, but hardly a Depression level. Now that their plan passed and unemployment turned out to be even worse, they can’t plausibly say they succeeded in “yank(ing) the economy out of another Great Depression.” They didn’t, and the President’s claim that they did shouldn’t be allowed to stand.