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Fact Check: Romney on the Recession

By JACKIE CALMES
February 2, 2012, 8:03 pm

Mitt Romney is back to saying that President Obama “made it worse” – the recession, that is – but his charge remains factually challenged.

Accepting the endorsement of Donald Trump, a former rival for the Republican presidential nomination, in Las Vegas on Thursday, Mr. Romney said of the president: “He’s frequently telling us that he did not cause the recession, and that’s true. But he made it worse.”

That statement echoed one that Mr. Romney, a former one-term governor of Massachusetts, used when he announced his candidacy in New Hampshire in June 2011, and that he repeated for weeks afterward until he was confronted by an NBC-TV producer and fact-checking organizations. He dropped the line for many months, but has recently revived it.

The consensus among nonideological economists since 2009 has been that the stimulus measures of the Obama administration and the Federal Reserve actually prevented the recession from becoming worse, even from turning into a second Great Depression. But, they say, the downturn was more severe than initially thought given its roots in a financial crisis (as opposed to the normal business cycle of ups and downs), which in turn has made for a slow recovery.

In the most extensive analysis of the government response [ http://www.economy.com/mark-zandi/documents/End-of-Great-Recession.pdf ], in mid-2010, the economists Alan S. Blinder and Mark Zandi used a Moody’s Analytics simulation of the economy and concluded that the effects on economic growth, job creation and inflation “are huge, and probably averted what could have been called Great Depression 2.0.”

While intervention in the financial markets by the independent Fed and the Treasury – including the much vilified banking bailout that Mr. Romney also condemns – had the bigger positive impact, the effects of Mr. Obama’s fiscal stimulus package of spending and tax cuts “appear very substantial,” the economists wrote.

For example, they said, economic growth in 2010 was raised about 3.4 percent, the unemployment rate was about 1.5 percentage points lower and almost 2.7 million more jobs were created, compared with what would have happened without the stimulus.

Mr. Blinder, an economics professor at Princeton University, is a former vice chairman of the Fed and a former economics adviser to President Bill Clinton. Mr. Zandi is chief economist of Moody’s Analytics and has advised members of Congress in the Democratic and Republican Parties, including Senator John McCain in his bid for president.

The Congressional Budget Office, in its latest periodic assessment of the stimulus measures’ effects [ http://www.cbo.gov/ftpdocs/125xx/doc12564/11-22-ARRA.pdf ], reported in November that in the third quarter of last year, those policies raised the gross domestic product by between 0.3 percent and 1.9 percent, lowered the unemployment rate by between 0.2 of a percentage point and 1.3 percentage points, and increased the number of people employed by between 400,000 and 2.4 million.

On Thursday, Mr. Romney also joined Mr. Trump in incorrectly citing another report from the Congressional Budget Office. Mr. Trump said the report this week [ http://www.nytimes.com/2012/02/01/us/politics/deficit-tops-1-trillion-but-is-falling.html ] projected that unemployment, now 8.5 percent, would go up to 9.2 percent by 2013. In fact, the office projected that the unemployment rate would remain above 8 percent this year and next year before slowly declining further.

Of the 8.4 million jobs lost in the recession, 4.4 million were lost before Mr. Obama took office in January 2009. About 2 million new ones have been created since that time, pushing the jobless rate down from its 10.1 percent peak in October 2009 but leaving it high.

When Mr. Romney was first challenged last summer about his charge that Mr. Obama made the economy he inherited worse, he told reporters, “I didn’t say that things are worse.”

He did then, and he has again.

© 2012 The New York Times Company

http://thecaucus.blogs.nytimes.com/2012/02/02/fact-check-romney-on-the-recession/ [no comments yet]


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Column: Doing the math on Obama’s deficits

Adding to the deficit: Bush vs. Obama
Since President Obama became chief executive, the national debt has risen almost $5 trillion. But how much of that was because of policies passed by Obama, and how much was caused by the ?nancial crisis, the continuation of past policies and other effects? For this analysis, we worked with the Center on Budget and Policy Priorities to attach a price tag to the legislation passed by Obama and his predecessor. George W. Bush’s major policies increased the debt by more than $5 trillion during his presidency. Obama has increased the debt by less than $1 trillion.

Source: Center on Budget and Policy Priorities. Todd Lindeman and Ezra Klein/The Washington Post.
[ http://www.washingtonpost.com/business/economy/adding-to-the-deficit-bush-vs-obama/2012/01/31/gIQAQ0kFgQ_graphic.html ]

Posted by Ezra Klein at 09:49 AM ET, 02/01/2012

The campaign trail can be a lonely place, so Mitt Romney frequently invites friends to accompany him. New Jersey Gov. Chris Christie is an occasional companion. So is Virginia Gov. Bob McDonnell. But more often, Romney brings [ http://www.washingtonpost.com/politics/mitt-romneys-new-sidekick-the-debt-clock/2011/08/25/gIQA71dieJ_story.html ] a large clock.

Romney’s people made the clock themselves. It has two giant flat-screen televisions pushed side by side. It’s surrounded by a green foam sign. And it’s hooked to two computers feeding it a live count of America’s rising debt burden, which stands well above $15 trillion. The clock represents President Obama’s economic failures. It’s there so Romney can point to it and tell the crowd that if he’s elected, he’ll “do a better job slowing down that clock.” But if you’re a deficit-obsessed voter, the clock doesn’t answer the key question: How much has Obama added to the debt, anyway?

There are two answers: more than $4 trillion, or about $983 billion. The first answer is simple and wrong. The second answer is more complicated but a lot closer to being right.

When Obama took office, the national debt was about $10.5 trillion. Today, it’s about $15.2 trillion. Simple subtraction gets you the answer preferred by most of Obama’s opponents: $4.7 trillion.

But ask yourself: Which of Obama’s policies added $4.7 trillion to the debt? The stimulus? That was just a bit more than $800 billion. TARP? That passed under George W. Bush, and most of it has been repaid.

There is a way to tally the effects Obama has had on the deficit. Look at every piece of legislation he has signed into law. Every time Congress passes a bill, either the Congressional Budget Office or the Joint Committee on Taxation estimates the effect it will have on the budget over the next 10 years. And then they continue to estimate changes to those bills. If you know how to read their numbers, you can come up with an estimate that zeros in on the laws Obama has had a hand in.

The Center on Budget and Policy Priorities was kind enough to help me come up with a comprehensive estimate of Obama’s effect on the deficit. As it explained to me, it’s harder than it sounds.

Obama, for instance, is clearly responsible for the stimulus. The health-care law, too.

When Obama entered office, the Bush tax cuts were already in place and two wars were ongoing. Is it fair to blame Obama for war costs four months after he was inaugurated, or tax collections 10 days after he took office?

So the center built a baseline that includes everything that predated Obama and everything we knew about the path of the economy and the actual trajectory of spending through August 2011. Deviations from the baseline represent decisions made by the Obama administration. Then we measured the projected cost of Obama’s policies.

In two instances, this made Obama’s policies look more costly. First, both Democrats and Republicans tend to think the scheduled expiration of the Bush tax cuts is a quirky budget technicality, and their full extension should be assumed. In that case, voting for their extension looks costless, and they cannot be blamed for the resulting increase in deficits. I consider that a dodge, and so I added Obama’s decision to extend the Bush tax cuts for two years — at a total cost of $620 billion — to his total. If Obama follows through on his promise to extend all the cuts for income under $250,000 in 2013, it will add trillions more to the deficit.

The other judgment call was when to end the analysis. After 10 years? After the first term? We chose 2017, the end of a hypothetical second term. Those are the years Obama might be blamed for, so they seemed like the ones to watch. But Obama’s spending is frontloaded, and his savings are backloaded. The stimulus bill, for instance, is mostly finished. But the Budget Control Act is expected to save $2.1 trillion over the next 10 years. The health-care law is expected to save more than a trillion dollars in its second decade. If our numbers were extended further, the analysis would have reflected more of Obama’s planned deficit reduction.

There’s also the issue of who deserves credit for what. In this analysis, anything Obama signed is attributed to Obama. But reality is more complicated. The $2.1 trillion debt-ceiling deal wouldn’t have happened without the Republicans. But a larger deficit-reduction deal — one including tax increases and spending cuts — might have.

In total, the policies Obama has signed into law can be expected to add almost a trillion dollars to deficits. But behind that total are policies that point in very different directions. The stimulus, for instance, cost more than $800 billion. So did the 2010 tax deal, which included more than $600 billion to extend the Bush tax cuts for two years, and hundreds of billions more in unemployment insurance and the payroll tax cut. Obama’s first budget increased domestic discretionary spending by quite a bit, but more recent legislation has cut it substantially. On the other hand, the Budget Control Act — the legislation that resolved August’s debt-ceiling standoff — saves more than $1 trillion. And the health-care reform law saves more than $100 billion.

For comparison’s sake, using the same method, beginning in 2001 and ending in 2009, George W. Bush added more than $5 trillion to the deficit. You can see the breakdown in the chart atop the post, or in a larger, more readable, chart here.

What is often assumed in this conversation is that all deficit spending is equal and all of it is bad. That’s not the case. Deficit spending when the economy is growing is different from deficit spending when the economy is in crisis.

Nor is all deficit reduction alike. Sometimes, cutting the deficit will expand the economy. Sometimes, cutting the deficit will shrink the economy. Which brings up some other questions Romney’s clock can’t answer: What number we should see on it now? And when, and how fast, should it start slowing down?

That will be the subject of next week’s column.

© 2012 The Washington Post

http://www.washingtonpost.com/blogs/ezra-klein/post/column-doing-the-math-on-obamas-deficits/2011/08/25/gIQALDBchQ_blog.html [with comments]


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Doing the math on Obama’s deficits, cont’d

Posted by Ezra Klein at 03:07 PM ET, 02/02/2012

Keith Hennessey, who led the National Economics Council in the final years of George W. Bush’s presidency, thinks [ http://keithhennessey.com/2012/02/01/response-chart/ ] my analysis [ http://www.washingtonpost.com/blogs/ezra-klein/post/column-doing-the-math-on-obamas-deficits/2011/08/25/gIQALDBchQ_blog.html (above)] of the deficits caused by Obama’s presidency should have included two further items: The likely extension of most of the Bush tax cuts, and everything else.

The Bush tax cuts were far and away the most difficult question we faced when preparing the analysis of Obama’s deficits. As I wrote in the original column, the underlying idea was to construct a comprehensive database of every policy Obama himself had passed. That meant creating a baseline that held everything that predated Obama constant. That’s easy enough to do for almost any policy you can think of. Any policy, that is, but the Bush tax cuts.

The problem is that the Bush tax cuts predate Obama but were set to expire on his watch. So is extending the status quo a new policy decision? Or is it sticking to the baseline, and thus budgetarily costless?

I chose to make it a new policy decision. In 2010, Obama chose to extend the Bush tax cuts for two years. Ignoring the $620 billion in debt that that decision incurred was, I thought, unacceptable. But Hennessey wants me to go further: He wants me to assume the extension of most of the Bush tax cuts through 2017.

The problem, however, is that no one really knows what will happen in 2012. Will the Bush tax cuts be fully extended? Partially extended? Will Republicans oppose anything but a full extension, and then Obama will use their opposition as an excuse to let them fully expire? Will they be used as an excuse to fast-track tax reform and the tax code will look entirely different beginning in 2013? Will Obama lose the election, and support a two-month patch so the Bush tax cuts are President Romney’s problem?

And if I were to begin adding Obama’s policy preferences to the baseline, where would I stop? Obama has also supported deficit-reduction packages that would cut as much as $4 trillion in debt. Since no such package has passed, I don’t think I can give Obama credit for reducing the deficit by $4 trillion, even though that is what he says he intends to do, and even though I think there’s a good chance that a significant deficit-reduction deal will be passed into law if he wins a second term.

Which is why the Bush tax cuts’ post-2012 fate doesn’t show up on the graph. But as I wrote in the accompanying column, “if Obama follows through on his promise to extend all the cuts for income under $250,000 in 2013, it will add trillions more to the deficit.”

Hennessey’s other point is that Obama deserves the blame for every dollar of debt that was amassed under his presidency, as once you become president, the federal government is yours to run. That’s a fair argument, though it seems a little self-serving: Obama entered office immediately after the administration Hennessey worked for pushed revenues far beneath spending and failed to effectively regulate the financial sector or the housing sector. In the quarter before Obama entered office, the economy shrank at an annualized rate of nine percent. Two weeks before he was inaugurated — but before Bush had left office — the Congressional Budget Office released a report forecasting a $1.2 trillion deficit for 2009. That was all due to policies and conditions predating Obama.

It has been convenient for the Republican Party to blame the resulting deficits on the Obama administration. But this is a bit peculiar: If a house catches fire and damage is done in the time it takes time to put out the blaze, should the blame go to the people fighting the fire or the people who allowed the fire to begin in the first place? The latter, I think. Which is why, in my column, I was trying to isolate the fires Obama’s administration had started.

But perhaps the more generous way to phrase Hennessey’s point is that Obama should have turned immediately to reduce the 2010 deficit. But that would have been an economic disaster, as Hennessey knows. So perhaps the argument is that he should have turned more quickly to long-term deficit reduction. The Obama administration could have spent, say, 2010 pursuing a long-term deficit-reduction package rather than financial regulation.

One answer is that the White House has, through 2011, tried to come to some sort of deficit-reduction deal with the Republicans, but has been unable to get them to accept higher taxes as part of a package. Perhaps you think they could have tried harder, or should have accepted one of the proposals they rejected. That’s a worthwhile argument to have, but it’s not really one I could include in the baseline.

But there’s also a larger point here that will figure more fully into next week’s column: This discussion implicitly suggests that deficits are, always and everywhere, a bad thing. They’re not. Indeed, there’s a good argument that Obama should have run larger deficits over the last few years, and that he needs to be careful not to cut them too quickly over the next few years.

That doesn’t obviate the very real need for more medium and long-term deficit reduction. But just as it would be irresponsible to let deficits continue to rise over the next decade, it would have been irresponsible to let them fall over the last three years. More on that later, however.

© 2012 The Washington Post

http://www.washingtonpost.com/blogs/ezra-klein/post/doing-the-math-on-obamas-deficits-contd/2011/08/25/gIQAzTbzkQ_blog.html [with comments]


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