As the actual course of the American economy continues to take a remarkably worse path than the estimates used by the White House to pass its $800 billion stimulus package earlier this year, a critical credibility gap widens at a time when public opinion on proposals for even larger measures to intervene in the nation’s economy – healthcare and cap and trade – will be affected by Chicken Little-esque prognostications similar to those made during the stimulus push.
The latest unemployment figures released Friday by the Bureau of Labor Statistics reported a sharp rise in overall unemployment from 9.8% in September to 10.2% in October. Hit hardest were the construction and manufacturing sectors, and although stimulus funds were supposed to promote “shovel-ready” projects, the heavy construction sector lost another 13,700 jobs. Although an increase in overtime work indicated in the recent numbers might be seen as a seen as bright spot by some business analysts who look at an increase in raw dollars in the economy as a positive factor, it could also reveal that employers are making decisions to increase the burden placed on existing employees instead of hiring additional workers. That’s good news for the jobholder who benefits from a little time and half, bad news for the jobseeker. It is also bad news for the creditors who continue to suffer because of high rates of late payments and default stemming from the lost income many households are experiencing.
The Heritage Foundation plotted the actual unemployment data since the stimulus package was passed alongside the Romer/Bernstein curves that were held aloft by members of the Obama administration in their push to pass the pork-laden stimulus bill earlier this year. Although projections are estimates, nothing more, their use by the White House as incontrovertible bases for embarking on a program of extreme spending make them slightly more important than the garden variety prediction about what teams might or might not play in the Super Bowl. The accuracy of the White House’s projections is a legitimate criteria for judging the President’s job performance.
On all counts, White House projections have been wildly off the mark, and the promises made for what the spending would accomplish have almost universally been unfulfilled. The Heritage Foundation’s blog threw even longer shadows on the promises made about TARP, that a plentiful garden of economic renewal would be the result of the largest banking bailout in US history.
TARP supporters offered frantic and panicked assurances that buying troubled assets (primarily mortgages in default and for which the underlying collateral was insufficient to back the loan) would accomplish two critical goals – the prevention of an all-out banking collapse and increasing liquidity so that banks could begin lending money again, a vital element of any recovery. Businesses that had endured the preceding months of slim revenues and been forced to lay off workers sometimes for reasons beginning and ending at cash flow would be forced to rely on life-giving lines of credit to accelerate the process of rehiring and meeting market demands if and when the market began to demand more goods and services. The reality is that, according to data released by the St. Louis Federal Reserve Bank, the number of commercial and industrial loans being made by all commercial banks is on a precipitous decline.
Reasons for the sharp drop in lending to private businesses could include competition with the government for access to capital. The recent action by banks to bailout the State of California (despite its sagging credit rating) drained a little more money from the credit pool, resources that might have been available to the private sector.
These recent economic numbers represent only one facet of the effect of false projections on policy. Obama’s approval numbers are traveling on a parallel downward track with public opinion about the effectiveness of recovery policy. As the Obama administration’s credibility gap increases the implications for how waning public trust in the White House may affect other high priority agenda items such as healthcare and cap and trade looms larger. For now, White House predictions of a healthcare catastrophe should Congress fail to pass comprehensive healthcare “reform” legislation should be prudently taken with a spoonful of salt.
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