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Angie Drobnic Holan
By Angie Drobnic Holan January 26, 2009

Obama's numbers on lost income require explanation

President Obama argued forcefully for an economic stimulus bill in his weekly radio and YouTube address on Jan. 24, 2009.

"We begin this year and this administration in the midst of an unprecedented crisis that calls for unprecedented action," Obama said. "Just this week, we saw more people file for unemployment than at any time in the last 26 years, and experts agree that if nothing is done, the unemployment rate could reach double digits. Our economy could fall $1 trillion short of its full capacity, which translates into more than $12,000 in lost income for a family of four."

We've heard lots of big numbers about the recession, but we were especially interested in whether a family of four would lose $12,000 in income.

Let's start with the $1 trillion number. For numbers on the economy, we turned to the Congressional Budget Office, the federal agency charged with providing objective, nonpartisan analysis to Congress.

Its most recent report, issued on Jan. 8, 2009, found that economic output could fall 6.8 percent below its potential. For the roughly $14.2 trillion economy projected for 2009, an unrealized potential of 6.8 percent does come out to about $1 trillion.

Now how does that translate for a family of four? As near as we can tell, Obama took the $1 trillion and divided by 300 million — the number of people who live in the United States. That comes to $3,333 per person. Multiply it by four and you get $13,333, or a conservative $12,000. Now, we can't say for sure that's how Obama arrived at his number for wages. We asked the press office about it and didn't hear back. (In their defense, they have reportedly been having e-mail trouble .) It's certainly possible Obama used a more sophisticated analysis to determine unrealized wages.

But the economists we talked to said no matter how Obama determined the number for a family of four, any average oversimplifies how economic downturns affect the public. Some family members, for example, will see no drop in their wages, or might even get new jobs that increase their income. For other families, it will be much, much worse.

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"It makes it sound like everybody's income goes down by $12,000," said Bob Williams, of the nonpartisan Tax Policy Center. "That's just not true. It never gets spread out like that."

"If Bill Gates walks into a bar, then you can say, on average, everyone in that bar is a millionaire," Williams said. "That doesn't mean there's more than one millionaire in the bar."

Another economist, Russell Roberts of George Mason University, agreed, saying the hardest hit will be the unemployed.

"The average loss of $12,000 is a weird number," Roberts said. "Some families will face tough times. Others much less so."

Roberts, a market-oriented economist who has questioned the effectiveness of the stimulus plan, also pointed out that the $1 trillion number is nothing more than a projection.

"Yes, the economy could underperform by a trillion dollars. Or two. Or three. No one knows," he said.

We recognize his point, but we looked at this statement more to see if Obama was exaggerating his numbers to make a case for the stimulus. Yes, the numbers are in line with a widely accepted nonpartisan source. But in trying to personalize the numbers for families, he takes things a step too far and oversimplifies.

Many viewers and listeners might think most families will lose about $12,000 in income. Realistically, they will probably do much better or much worse than that. For that reason, we rate his statement Half True.

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Obama's numbers on lost income require explanation

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