The stimulus bill "promised to keep unemployment under 8%."
George Allen on Thursday, February 17th, 2011 in a press release.
George Allen says Barack Obama promised stimulus would keep unemployment below 8 percent
Republican U.S. Senate candidate George Allen doesn’t like President Barack Obama’s economic record or the stimulus bill.
"Two years ago today, President Obama signed into law a $800 billion jobless stimulus bill that promised to keep unemployment under 8 percent," said Allen in a Feb. 17 statement. "Instead the American people have endured 21 consecutive months of 9 percent or higher unemployment, 2.6 million jobs have been lost, and our nation’s debt has hit a record-setting $14 trillion."
On Monday we checked Allen’s claims about unemployment and job losses, rating them True. This piece examines his assertion that the stimulus "promised to keep unemployment under 8 percent."
Allen, a former governor and U.S. senator, is not the only Republican peddling the claim. Rep. Michele Bachmann, R-Minn., and conservative pundit George Will have made similar statements. So did Virginia’s Eric Cantor, now House Majority Leader, back in July 2009.
PolitiFact has ruled that they had their facts wrong. Allen’s are wrong, too.
Obama warned upon taking office that if "dramatic action" were not taken, "the unemployment rate could reach double digits," with the recession lasting years. But neither we, nor our colleagues at PolitiFact’s Washington, D.C. bureau, could find evidence 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."
We asked Allen’s campaign for the source of the candidate’s claim that that it was "promised" the stimulus bill would keep the unemployment rate below 8 percent. Katie Wright, Allen’s director of communications, pointed us to 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. Other Republicans have also cited this as their source for past claims.
Their report projected that the stimulus plan proposed by Obama would create 3 million to 4 million jobs by the end of 2010. The study included a chart predicting unemployment rates with and without the stimulus. Without the stimulus, 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 and was at 9.4 percent in December. It fell to 9.0 percent in January.
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% in the absence of action."
That’s not a promise. It is an estimate and an admission that these predictions may not be accurate. And the administration has acknowledged its projections were wrong.
In a July 2, 2009, interview, Romer said on Fox: "None of us had a crystal ball back in December and January. I think almost every private forecaster realized that there were other things going on in the economy. It was worse than we anticipated."
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.
So, is the fact that unemployment rose, even as the stimulus unfolded, proof that it has failed?
President Barack Obama has said, and many independent economists agree, that the stimulus has created more than a million jobs and kept the unemployment rate from going even higher than it has. In fairness, not every economist agrees with that.
But there is an inherent uncertainty in economic forecasting. And how can you ever prove that if the unemployment rate got to X percent, it would or would not have gotten a point or two higher if not for the stimulus? The implication of Allen's comment is that a rising unemployment rate in 2009 proves the stimulus didn't work. Many 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.
The White House claimed the stimulus would improve the employment picture and applied that to the baseline for projected unemployment going forward. Allen and other Republicans argue Obama was offering some sort of guarantee the stimulus would keep the unemployment rate below 8 percent.
The administration never characterized it that way. True, it’s projections were off, but the report contained 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 guarantee on an upper limit on unemployment.
Allen is recycling a claim that should go to the dump. We rate his statement Barely True.
Editor's note: This statement was rated Barely True when it was published. On July 27, 2011, we changed the name for the rating to Mostly False.