Stimulus Watch: Follow along from home as Obama counts jobs toward 3.5 million stimulus goal

Stimulus Watch: Follow along as Obama counts jobs
Stimulus Watch: Follow along from home as Obama counts jobs toward 3.5 million stimulus goal

WASHINGTON (AP) -- Few things in President Barack Obama's economic stimulus plan have engendered as much skepticism or criticism as his oft-repeated promise to create or save 3.5 million jobs by the end of next year.
Republicans in Congress have labeled it fuzzy math. Former Republican House Speaker New Gingrich called it a "meaningless metric." And Tony Fratto, a former spokesman for President George W. Bush, said it was a political trick unrivaled in his 20 years in Washington.

The fight over Obama's promise has thrust a mundane economic formula responsible for the jobs estimate into Washington's political spin machine. The formula is being misused by the president, whose advisers acknowledge it was never intended as a way to count jobs. And it's being mischaracterized by Republicans, who previously have used such formulas to promote their own stimulus plans.

There's no black magic at the heart of the formula, just two economic assumptions.

The first is that every dollar the government spends ripples through the economy, causing more than $1 worth of effect, such as: The government builds a highway. Road contractors have more money. They pay for food, rent and entertainment. Grocers, landlords and movie theaters benefit. Now they have more money. And so on.
The White House estimated that $1 in stimulus spending would have about $1.50 in effect on the economy, and that $1 in stimulus tax cuts would have about a 99-cent effect. (Economists predicted workers wouldn't immediately spend their entire tax cut.)

The second assumption is that the U.S. work force expands by about 1 million jobs with every 1 percent increase in the overall economy. If Washington spends enough to send a 1 percent ripple through the economy, the formula says, there will be 1 million more jobs.

Hence the politically savvy term "created or saved."
There are dips and turns in the formula. The $1.50 and 99 cent numbers vary, for instance, depending on how the money gets spent and how quickly it's spent. But the formula is essentially stimulus money times a multiplier, divided by gross domestic product. Come up with 3.5 percent, create 3.5 million jobs.

"This was the right model for February," said economist Christina Romer, the Council of Economic Advisers chairwoman who helped come up with the estimate. "We needed to know: 'How big does this need to be? What's the best way to do it?'"
Conservative economists have argued that the multipliers are flawed. Obama's advisers conceded up front that it was just an estimate. Cutting $288 billion in taxes might create more jobs. Spending $499 billion might create fewer.

Mushy? Definitely. Unprecedented? Hardly.

Bush used essentially the same formula in 2001 when pitching his own stimulus proposal.
"The bipartisan agreement reached this week can save 300,000 American jobs that might otherwise be lost," Bush said in a radio address.
But the economic model was only intended to predict that jobs would be created, not count them. Think of the formula as a weather forecast. Obama is using it as a thermometer.

When White House officials say they've created 150,000 jobs they're arriving at that figure based on how much has been spent, plugging that dollar amount into the formula, and announcing jobs. Under that strategy, as long as the administration spends all the stimulus money, it will hit its job-creation target, regardless of what actually happens in the overall economy.

That's not how economists count jobs, and Romer says it's not how she's counting stimulus jobs. The formula was a prediction, she said, but counting requires actual numbers: unemployment figures, manufacturing and construction data, and county-by-county, state-by-state job reports.
"Once we've spent the money, we can't just assume the model was right," she said, adding, "The proof is going be whether or not the overall economy recovers."

But with unemployment expected to keep rising in the near future, it's not clear that Obama and Vice President Joe Biden plan to stop citing the formula's calculations any time soon. Obama has promised to create 600,000 jobs by the end of the summer, a goal he is certain to hit as long as the government keeps spending money at a speedy clip.
If the economy improves, none of this may matter to voters. But if the economy continues to falter, Obama can expect more criticism about the formula and the 3.5 million-job promise it created. http://finance.yahoo.com/news/Stimulus-Watch-Follow-along-apf-2360654488.html?x=0&sec=topStories&pos=4&asset=&ccode=

Obama's new stimulus plan same as the old

Obama's new stimulus plan same as the old
President Obama's new 'accelerated' recovery plan is neither new nor accelerated

WASHINGTON (AP) -- President Barack Obama is promising some exciting coming attractions for his stimulus plan. But it turns out they're just summer reruns.
Obama promised Monday to ramp up spending from the $787 billion stimulus fund and create or save 600,000 jobs by the end of the summer. It was an effort to shift the focus away from persistently rising unemployment and beat back criticism that the money isn't flowing quickly enough.

Those promises aren't new.

Stimulus spending had always been expected to rise sharply this summer, and the White House has been predicting that 600,000 job total for about a month.
Obama faces souring public opinion over his handling of the economy, which has shed 1.6 million jobs since the stimulus was signed in February. That total has far overshadowed White House announcements estimating the effort has saved 150,000 jobs, a figure that is so murky it can never be verified.
Monday's announcement sought to reposition Obama in the driver's seat of America's recovery. It portrayed the president as revving up the engine of the stimulus, but it was something federal agencies were already planning to do anyway.
Obama spoke about "modest progress" in the economy, citing fewer jobs lost last month than expected. He said he hopes to build on that in the months ahead with stimulus programs.
"We've done more than ever, faster than ever, more responsibly than ever, to get the gears of the economy moving again," he said. Read on...
http://finance.yahoo.com/news/Obamas-new-stimulus-plan-same-apf-15473100.html?sec=topStories&pos=4&asset=&ccode=

Obama expedites stimulus
(02:15) Report Reuters Video

Jun. 8 - President Obama is expediting the economic stimulus package that Congress passed in February in order to create 600,000 jobs over the next 100 days.

SOUNDBITES:
# U.S. President Barack Obama
# Dan Mitchell, senior fellow at the libertarian Cato Institute,Jon Decker reports.

Stimulus to Include Tax Credit to Buy Fuel Efficient Cars?

Stimulus to Include Tax Credit to Buy Fuel Efficient Cars?

The Wall Street Journal is reporting that legislators are likely to add a tax credit worth $4,500 to the stimulus bill for consumers that replace their older cars with more fuel efficient cars.
The problem for lawmakers, and Big Three lobbyists, is how to ensure that Americans don't trade in their old cars and purchase foreign car makers hybrids. Heaven forbid. There is also no indication of how long this "cash for clunkers" plan might last.
With auto sales plummeting and Obama's plan to force auto makers to get their emissions under control, the tax credit makes sense as a compromise. Unfortunately, with the ever ballooning stimulus package, the timing is a bit off, as it turns the program into another piece of pork. Then again, the time is ripe for pork.
If we're going to spend a trillion dollars on the economy, why not let everyone get something. Obama is close with Oprah, so this could be his, "You get a new car, you get a new car, you get a new car!!!" moment.

Obama: "This is not just another public works program,"

Obama: "This is not just another public works program,"

He said the overwhelming majority of the three million jobs he wants to "save or create" would be in the private sector. (Lawrence Summers, chief architect of the plan and Obama's National Economic Council chair, has promised that 80% of those jobs would be in the private sector.)
Obama promises an "unprecedented" routing of wasteful government spending and a transparency process that will put details of his new spending online for public review. On Wednesday, he appointed a McKinsey & Co. director, Nancy Killefer, as his top cop to monitor the hundreds of billions to be spent.
But the Obama plan is also defiantly long-term: doubling the production of alternative energy, outfitting public buildings with energy efficient windows and insulation, constructing a "smart grid," investing in science and research and schools, building and repairing roads and bridges. The broad sweep of his plan begs the question: Once the federal spigot is turned on for these projects, however worthy each may be, how does it get shut off?
As Washington veterans well know, "temporary" doesn't usually appear in Congress' vocabulary - since every program comes with a built-in, and generally noisy, constituency. It took Congress 108 years to eliminate a 3% excise tax on long-distance calls - a levy imposed on "the wealthy" in 1898 to help fund the Spanish-American War.

Keynesian-style stimulus
A wide range of economists - including conservatives who met with Republican senators Wednesday - agree that the U.S. economy needs a massive injection of Keynesian-style spending to avoid a freefall.