Stimulus: projections vs. reality
Earlier this year, the stimulus was pushed through Congress and quickly signed by President Obama in what supporters deemed a necessary step and one which would further recovery. Just as with the current healthcare debate and most spending plans, there were projections created by the government during the debate process. Below is a projection created by the administration’s economic team back in February concerning the affect the stimulus would have on unemployment as opposed to without it:
The maroon dots are the actual unemployment numbers (thank you to innocentbystanders.com for adding those in.) As you can clearly see, the predictions were drastically off. History has shown that government projections are often overly optimistic- social security and medicare being perhaps the most titanic examples. This graph doesn’t tell us what the unemployment number would’ve been had the stimulus not been passed (and we will never know the exact figure), but it is quite clear that the stimulus has not been able to curtail unemployment as expected by Washington economists. It also shows how little grasp many politicians and politically-sided economists actually have of the market.
With unemployment currently over 10%, the argument can be made that the stimulus has in fact not helped the situation. Either way, we are still left with the ~$780 billion tab that came with the legislation and it is clear the government was wrong in its outlook.
The monstrous miscalculation by the Obama administration should really serve as a caution for citizens in that we can not simply take what the government tells us as truth- especially when it comes to projections concerning markets. Government predictions are often wrong, and in some cases distorted due to political reasons (such as trying to push through legislation.) This is why it is important to consider several different sides when it comes to any government legislation, especially massive spending increases such as the stimulus, bailouts, or state-subsidized healthcare.
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