Friday, October 31st, 2014

Amid good jobs report, an old 'promise' resurfaces

President Barack Obama cheered a positive December jobs report, but his administration also had to fend off attacks that they had promised that unemployment wouldn't rise higher than 8 percent.
President Barack Obama cheered a positive December jobs report, but his administration also had to fend off attacks that they had promised that unemployment wouldn't rise higher than 8 percent.

The jobs report released on Jan. 6, 2012, brought good news for the White House. The Bureau of Labor Statistics reported that 200,000 new jobs were created in December, allowing the unemployment rate to drop to 8.5 percent, the lowest it’s been since February 2009, the month after President Barack Obama took office.

For Republicans looking to hold him accountable for a weak economy, spinning the news posed a challenge.

One Republican senator, Kelly Ayotte of New Hampshire, told Chuck Todd of MSNBC’s Daily Rundown that she was "glad that the trend is going in the right direction. But the problem is this, … you think about the stimulus and having to borrow ... close to $800 billion-plus from China and … the administration had promised that it would go below 8 percent."

The under-8 percent "promise" by Obama has long been a talking point for Republicans, but we’ve addressed it in several previous fact checks and found it wanting.

For instance, almost a year ago, we checked a claim by Rep. Michele Bachmann, R-Minn in her Tea Party Express-sponsored rebuttal to Obama's State of the Union address.
   
"The White House promised us that all the spending would keep unemployment under 8 percent. Not only did that plan fail to deliver, but within three months, the national jobless rate spiked to 9.4 percent," Bachmann said.
   
We found that on several occasions as the stimulus was being considered, President Obama warned that if "dramatic action" were not taken, the recession could linger for years, and "the unemployment rate could reach double digits." But we could find no instance of anyone in the administration making a public pledge along the lines of "if we pass the stimulus, we promise unemployment will stay below 8 percent."
   
Rather, the claim has its roots in a Jan. 9, 2009, report called "The Job Impact of the American Recovery and Reinvestment Plan" from Christina Romer, then chairwoman of the president's Council of Economic Advisers, and Jared Bernstein, the vice president's top economic adviser.

The report projected that the stimulus plan proposed by Obama would create 3 million to 4 million jobs by the end of 2010. The report also included a chart predicting unemployment rates with and without the stimulus. Without the stimulus (the baseline), unemployment was projected to hit about 8.5 percent in 2009 and then continue rising to a peak of about 9 percent in 2010. With the stimulus, they predicted the unemployment rate would peak at just under 8 percent in 2009.
   
As we all know now, the unemployment rate went higher. It peaked at just over 10 percent in early 2010 before falling to 8.5 percent in the most recent period.
   
But what we saw from the administration in January 2009 was a projection, not a promise. And it was a projection that came with heavy disclaimers.
   
"It should be understood that all of the estimates presented in this memo are subject to significant margins of error," the report states. "There is the more fundamental uncertainty that comes with any estimate of the effects of a program. Our estimates of economic relationships and rules of thumb are derived from historical experience and so will not apply exactly in any given episode. Furthermore, the uncertainty is surely higher than normal now because the current recession is unusual both in its fundamental causes and its severity."
   
There's also a footnote that goes with the chart that states: "Forecasts of the unemployment rate without the recovery plan vary substantially. Some private forecasters anticipate unemployment rates as high as 11 percent in the absence of action."
   
The administration has acknowledged its projections were wrong.
   
"None of us had a crystal ball back in December and January," said Romer in a July 2, 2009, interview on Fox. "I think almost every private forecaster realized that there were other things going on in the economy. It was worse than we anticipated."
   
Indeed, in January 2009, the nonpartisan Congressional Budget Office projected the unemployment rate would climb to 8.3 percent in 2009 and peak at 9 percent in 2010. By February, the prediction was even higher — 9 percent in 2009 without the stimulus, and 7.7 to 8.5 percent with a stimulus.
   
The implication of Bachmann's comment is that rising unemployment rates prove the stimulus didn't work. Most economists don't agree -- and argue that without the stimulus, unemployment would have been worse -- but it's difficult to empirically prove one way or the other.
   
Bachmann's claim suggests Obama was offering some sort of guarantee the stimulus would keep the unemployment rate below 8 percent. But the administration never characterized it that way and included plenty of disclaimers saying the predictions had "significant margins of error" and a higher degree of uncertainty due to a recession that is "unusual both in its fundamental causes and its severity." In short, it was an economic projection with warnings of a high margin for error, not a take-it-to-the-bank pledge of an upper limit on unemployment.

In each of the three cases, we gave the claim a rating of Mostly False.