Obama’s Greatest Gift to the GOP: The Backstory to Karl Rove’s Latest Stimulus Ads

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Karl Rove, former Deputy Chief of Staff and Senior Policy Advisor to U.S. President George W. Bush, walks on the floor at the Republican National Convention on August 28, 2012 in Tampa, Florida.

I’m already weary of debunking Republican talking points about President Obama’s stimulus. Now Karl Rove’s SuperPAC has poured $11 million into an ad rehashing the GOP’s favorite talking point about the stimulus, that it was a failure because a report from Obama’s transition team suggested it would keep unemployment below 8% and drive it down to 5.6%. Here’s the real story behind that misconceived report—and that misleading ad.

As I explain in my book, The New New Deal,  the report originated with Rahm Emanuel, Obama’s first chief of staff, who wanted an official-looking document full of jobs predictions to help him sell the stimulus on Capitol Hill. The economy was losing 800,000 jobs a month and shrinking at a Depression-level -8.9% annual rate, although no one knew it was that awful at the time; back then, the official GDP numbers were a much less scary -3.8%, before unprecedented revisions in the coming months. Anyway, Rahm wanted to show wavering congressmen that emergency action would produce results and create jobs.

The report was assigned to Christina Romer, who would lead Obama’s Council of Economic Advisers, and Jared Bernstein, Vice President Biden’s chief economist. Romer and Bernstein spent most of their time crunching numbers to estimate how much an $800 billion stimulus would increase employment compared to the no-action baseline, calculating the “delta” between what would happen with and without stimulus. They spent less time assessing that no-action baseline, mostly following forecasts from the Fed and two private firms. If anything, their no-action baseline was somewhat more negative than the prevailing economic consensus.

It wasn’t nearly negative enough. Page 4 of the report included the chart that has dogged Obama ever since, the chart that Rove’s American Crossroads replicates in its new ad. The chart suggested that unemployment would peak at 9% without the stimulus, but would remain below 8% with the stimulus. In fact, the jobless rate shot past 8% before the stimulus even kicked into gear, which obviously was no reflection on the stimulus. It was a reflection on the baseline. The economy was in far worse shape than Romer and Bernstein had realized.

The Romer-Bernstein report—just 13 pages, barely half of that text—was cluttered with caveats. “It should be understood that all the estimates presented in this memo are subject to significant margins of error.” And: “The uncertainty is surely higher than normal now because the current recession is unusual both in its fundamental causes and its severity.” But nobody remembers caveats. It even included a humdinger of a footnote about the baseline: “Some private forecasters anticipate unemployment rates as high as 11%.” But nobody reads footnotes.

Before releasing the report, Romer shared it with Obama’s economic team, as well as some academic peers. The only reader who raised concerns about including the unemployment prediction was her husband, another Berkeley macroeconomist. He reminded her that a fellow economist who had muffed an employment forecast based on an overly optimistic baseline once told them ruefully that forecasters should stick to predicting changes in unemployment, not levels of unemployment.

“Oh, for heaven’s sakes,” Romer replied. “If unemployment goes to 10%, we’ll have much bigger problems than this.” She was right about that. But Romer and Bernstein both say that no one inside the White House tried to block or even amend the report. Obama’s political team did exchange emails about the potential damage from the report’s (correct) suggestion that men would get more stimulus jobs than women, but no one seemed worried about putting the rosy employment forecast in writing.

“Rahm loved it,” Bernstein told me. “He said: Do more stuff like that!”

In fact, most analysts believe Romer and Bernstein did a good job with the delta, their prediction of how much the stimulus would improve the economy. The consensus from independent forecasters is that the stimulus added about 2 to 4 percentage points to GDP, the difference between contraction and growth. Romer and Bernstein simply blew the baseline, the economy’s starting point. They worried at the time that they were being too optimistic, but they figured they would have sounded like Chicken Little if they had strayed much further from the consensus of their peers.

“The fact remains that 8% was a conservative forecast at the time,” Bernstein says. “In hindsight, obviously, we just should’ve focused on the delta.”

Which brings me to that American Crossroads “Actually Happened” ad savaging Obama for the inaccurate prediction. Check out the blue line, the Romer-Bernstein forecast for unemployment in the Obama era. And then check out the orange line, the actual trend of unemployment in the Obama era. The pleasant-looking narrator correctly points out that the blue line is a lot lower than the orange line. But they both slope downwards! Karl Rove is pouring $11 million into graphic evidence that the stimulus worked. And it did work; the employment numbers in the second quarter of 2009 were the biggest improvement in 30 years.

Of course, “we got the delta right” is not the kind of slogan you want on a bumper sticker. The Romer-Bernstein report was a political disaster, gifting the Republicans an enduring talking point. But it correctly predicted that the stimulus would point us in the right direction. It just misunderstood how far we had to go to reach our destination. We haven’t gotten where the Obama team had hoped to be, but we’re way better off than we were four years ago, when the economy was in free-fall.

“If I were doing this over again, I’d be more politically astute,” Romer says. “But those were our best estimates at the time. We weren’t trying to puff up confidence or do the reverse. We were trying to do an honest forecast.”

MORE: Special GOP Issue: Party of No

55 comments
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KenKlug
KenKlug

The economy was losing 800,000 jobs a month and shrinking at aDepression-level -8.9% annual rate, although no one knew it was thatawful at the time; back then, the official GDP numbers were a much lessscary -3.8%, before unprecedented revisions in the coming months. 

We all need to thank God Barack Obama  was available and that he accepted the challenge. The republicans were in denial and lost because of it. Thank you Barack!

JorgeJohnson
JorgeJohnson

Rove did good. He wasn't working for Romney. He was working for Team Bush that needed Obama to win to give Jeb any chance of running in 2016.

Incompetencyondisplay
Incompetencyondisplay like.author.displayName 1 Like

"Karl Rove is pouring $11million into graphic evidence that the stimulus worked".

If a 747 flew over the United States, and $800 billion was thrown out in $50's and $100's as it made the journey, that too would stimulate the economy; probably even better than Obama's stimulus package. The fact is, if $800 billion is injected into the economy GDP will increase. That's a no-brainer. Even Romney agreed that a some type of stimulus was necessary. The point is that it was an incredibly inefficient stimulus. nothing more than a band-aid. US debt increased by $6trillion and nothing to show for it! The economy is getting worse!

SAJ2995
SAJ2995

It is hard work shilling for Obama isn't it Grunwald?

Steve0T
Steve0T like.author.displayName 1 Like

 It bet it's harder to shill for the other guy, specially since he has nothing to shill about.

NP042
NP042 like.author.displayName 1 Like

Indeed.  Post after post about how Obama/Democrats/Liberals are bad, but nary a word about what's good about Romney and Ryan.

grkorbel
grkorbel

Sometimes--for a few micrseconds at a time, every two or three weeks--I feel a sense of pity for the left: Oh, the humanity. So angst-ridden, so impoverished of ideas it falls under the spell of a the equivalent of a political second-story man whose can't-pass the-laugh-test rhetoric of turning back the oceans and making the lamb lie down with the lamb casts a hypnotic spell over them from which they have yet to awaken.

English can be such a beautiful language--so rich in its possibilities and the left has reduced its political vernacular to a handful of buzz-w0rds: "liar", "rascist", "bush", "stolen", cheated"… .

The democratic party of 2012 is the most irrationally angry, paranoid, politically ignorant, and hypocrtical I have ever seen. But to be fair I have only been observing the political scene in this country for 50 years.

   

MrObvious
MrObvious

Nothing say knowing about what the opposition is by projecting the very same thing you complain about. Kudos for the circular logic.

anon76returns
anon76returns

Shorter gkorbel:

"Sometimes I feel a sense of pity for the left, then they kick the right's adze in an election, and I get over it."

Paul Dirks
Paul Dirks

English can be such a beautiful language--so rich in its possibilities

And apparently it can be mixed up in a tasty word-salad as well. 

sacredh
sacredh

And yet the majority of Americans prefer us to the republiccans. Only the right could make us look good by comparison.

La_Randy
La_Randy

No projection here, sacredh, move on. ;-)

Steve Cowan
Steve Cowan

Ah, yes, Karl Rove, the man who worked with Dick Cheney to bring us TWO major wars, impoverishing the USA while making Haliburton, et al, a lot of money on no-bid contracts.  Remember, Cheney was on Haliburton's Board and Rove gets paid by who knows????

bob3905
bob3905

Rove looks like a walking heart attack. How is it guys like he and Cheney are still alive?

sacredh
sacredh

Plenty of homeless people. Where do you think Cheney's new heart came from?

kbanginmotown
kbanginmotown

I'd of guessed babies...of homeless people....

Steve Cowan
Steve Cowan

 Rove and Cheney have excellent health plans, paid for by you and me, the citizens of the USA!  If my dad was the same age as Cheney, and needed a new heart, do you think he'd get it?  Not on your life!  It's all in who you know, and what strings you can pull.

f_galton
f_galton

"I’m already weary of debunking Republican talking points about President Obama’s stimulus."

You didn't "debunk" anything. I don't get the sense you actually know anything about economics, which renders you incapable of evaluating the merits of the stimulus.

 

Steve0T
Steve0T

 Haha, you Teabaggers are so bereft of self-awareness, it's beyond ridiculousness.

You think listening to Limbaugh everyday makes you an economist??

f_galton
f_galton

Despite only having an undergraduate degree in economics I've published two papers in peer reviewed journals. I was half way to a finance PhD before dropping out to work at a tech start-up.

paulejb
paulejb

Here's a little help, Grunwald.

http://www.aei-ideas.org/wp-co...

Note the 11.2% unemployment if the labor force participation rate was the same as when Obama took office.

Steve0T
Steve0T

 Taking your statistics into account, the unemployment rate was close to 15% in 2009, y'know when the stimulus started kicking in.

Unlike you, most folks realize that history didn't begin on January 20th, 2009.

Albin
Albin

Given the money at stake and impacts on ordinary Americans, the abject failure to explain where the stimulus went and what good it did ranks with failure to explain Obamacare as the worst communications failures, not only of this administration, but of modern times in America. 

Every stimulus project should have had a bright unavoidable sign on it saying "your Federal Government tax dollars at work" - instead most Americans think it was all flushed down the john to no use, and for that reason Tea Party has effectively stonewalled everything since.  Rove is misleading on substance, but it's a chance Obama stupidly gave him.

La_Randy
La_Randy

In a world that is becoming more integrated with the internet you would have thought that people who wanted to be informed would just google recovery act. The fact that roughly 40% of the stimulus was tax breaks has been lost on the ideologues.

Brandon Waite
Brandon Waite

TONIGHT: OBAMA'S OTHER RACE SPEECH THE ACCENT... THE ANGER... THE ACCUSATIONS... THE SERMON...THE SHOUT OUT TO REV. WRIGHT, WHO IS IN AUDIENCE...FOXNEWS 9 PM ET...'We don't need to build more highways out in the suburbs'...

Chosun1
Chosun1

Grunwald is such a Keynesian/Obama stooge that he totally neglects the real unemployment numbers:  You know, the ones that factor in the number of people so discouraged that they just left the workforce (or even left the country) or are working part time instead of full time?  See, e.g., http://www.cnbc.com/id/4846874....   Of course, such people are bumps in the road to reelection to Obama.  

sacredh
sacredh

The GOP has turned into a bunch of whining hall monitors squealing on the other kids and then getting their @sses kicked everyday as soon as the bell rings.

Curious_Quiche
Curious_Quiche

 I plan to spend Nov. 7 doing absolutely nothing but delivering swirlies and knuckle rubs to weeping Republican children.

formerlyjamesm
formerlyjamesm

To misinterpret assumptions and projections in actual analytical reports is a giant leap in civility and manners for Rove, who used to just make crap up and spread it around, although he will continue that slimy behavior as it occurs to him.

outsider2011
outsider2011

As Mike said: this has already been debunked.

The only chance the GOP has is lying. Constantly. 

MostWonderful
MostWonderful

Politicians have only themselves to blame for the misplaced expectations of the electorate.  For those of you who work in larger organizations, consider just how long it takes for your most well thought out plans to finally generate bottom line results. Now imagine how difficult it is to turn the largest economy in the history of the world.  Yet every 4 years 2 individuals are paraded before us promising they have the secret sause. Its nonsense.

I believe Obama, Treasury, and the Federal Reserve were succesful in averting a disaster of unimaginable proportions in early 2009. With that said people will not typically reward leaders for pain avoided, but will certainly punish for pain endured. I think we can all agree there is no shortage of pain out there.

Romney is promising 12 million new jobs by the end of his first term should he be elected.  When you consider ramp up time needed to get plans in place the number seems overcooked.  Regardless Romney's estimates  most certainly includes those jobs that will be born from policy initiatives spearheaded during Obama's Presidency. Will it be fair if Romney rather than Obama receives credit for creating the jobs in this scenario. No but that's life.

Lastly many of the tools America relied on to reverse previous economic downturns have been rendered largely ineffective. Interest rates are already at all time lows so monetary policy has lost its zip, the national debt is $16T limiting fiscal policy flexibility, and we can't export our way out of of recession with with Asia and Europe also limping along.

We are all in for a long and bumpy ride folks.

shepherdwong
shepherdwong

"...this has already been debunked."

That didn't stop wretched liar Ralph Reed from spewing it on Meet the Press this weekend, as an example of lying by President Obama no less.

[Obama's] words are very eloquent, very flowery, very-- tickle your ears.  But

none of it is true.  He said that unemployment would never go above 8

percent if we passed his stimulus plan.

Nor did it stop wretched idiot David Gregory from retorting that what Obama never said might represent, "broken promises."

http://www.msnbc.msn.com/id/49...

Ivy_B
Ivy_B

Ralph Reed should have been in jail, along with Jack Abramoff.

David Gregory is truly the worst bottom feeder to give him any credibility at all.

AfGuyReturns
AfGuyReturns

And they run the risk of getting a reputation among ALL of the electorate for lying. Constantly.

Perpetual dishonesty is no recipe for trust... even among your supporters. Even if they don't vote for the opposition, sooner or later, they will ask"why?" they are voting for someone whose verbal utterances are worthless.

Someone who lies to the opposition is still a liar. And there's a good chance they will start lying to their allies, too... if the payoff is right.

Oh, who am I kidding? They've already gone down that road... only question is if they consider the "low info" voter an ally or the opposition.

jmac
jmac

Republicans have never been honest on the economy.  Watching C-Span coverage of a Republican strategy session before W. was elected and hearing them openly say they can say anything they want on the economy because Americans don't understand the economy -  just might come back to bite them.  Maybe we're not as stupid as Rove thinks.    

Fatesrider
Fatesrider

Sadly, too many Americans ARE as stupid - or more so - as Rove thinks they are. In the 1990's and early 2000's, they were the far-right part of the GOP voter base.

Today, we call them the tea party.

pollardty
pollardty

They are in the process of rebranding...not in a good way.

charlieromeobravo
charlieromeobravo

If Rove is producing commercials going back to that report he must be pretty desperate.  4 years later they're still talking about it?  Only the wing nuts took the distorted explanation of that report seriously back when it was still fresh.  

jmac
jmac

How desperate is it when they send Cheney out to say Obama needs to be investigated for a "cover-up"?  It's almost beyond comprehension.  Cheney should have been hung for what he did to America as we and the media let him get a way with it - and he and his daughter are still out spewing their garbage.  At least Bush knows to stay low and shut up.  

jmac
jmac

Now Rumsfeld's?  Gee.  Maybe they can bring on Chalabi.  Rumsfeld on Susan Rice:  "I thought it was amazing that someone in her position would go on with that degree of certainty, that fast and that authoritatively and be that wrong."  Where's Colin Powell?  Let's bring the whole lousy gang back and remind the MSM of what they let happen on their watch.  

jmac
jmac

PerryWhite1 - Maureen Dowd is agreeing with Rumsfeld in her Wed column.  Maybe she can put in a call to Judith Miller and remind the NY Times that their credibility tanked right along with W's.  

PerryWhite1
PerryWhite1

 Maybe they can trot out "Curveball" again ...

kbanginmotown
kbanginmotown

Not only does this smell of desperation, Rove's message stands a good chance of backfiring, IMHO.

If you're going to ask the rhetorical question: "Are you better off now than you were 4 years ago?", you'd better be d*mn sure that this is indeed the case.

Rove risks reminding everyone how truly fücked we were 4 years ago with banks collapsing, massive layoffs, and the Detroit 3 close to going under.

Rove is asking a Titanic survivor - cold, wet and shivering - to recall that when Rove and his former boss were at the helm, people were warm and comfy and the band was playing and besides, Obama said we'd only sink halfway when we gave him the helm and got onto our lifeboat...