Testimony | Budget Taxes and Public Investment

The safety net and the recession

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“Some claim somehow that the recovery package isn’t working by simply pointing to continued job losses. I consider this peculiar, especially from those who favored the policies that actually caused the recession to begin with,” EPI President Lawrence Mishel said in testimony to Congress on October 8, where he proposed a five-part strategy for creating and preserving jobs, and stressed that the causes of today’s high unemployment pre-date President Obama.

“I consider President Obama to be in the situation of having inherited a burning apartment building. He proceeded to gather all the available fire trucks and douse the fires in half the floors. Yet his critics complain that the other floors are still on fire. Even worse, those critics are the ones who started the fire. And they want to withdraw the fire trucks.”

“It should be pointed out that unemployment is certainly higher than was expected at the time of the (presidential) election. This is not due to any policy failure. Rather, this is due to an embarrassing failure of my profession, economists, to assess the future. In the November Blue Chip review of forecasts, the GDP decline over the last half of 2008 and the first quarter of 2009 was expected to be at a 1.5% rate, a mild decline. Yet, we know now that the economy shrank three times as fast, at a 4.9% rate. Correspondingly, the forecasts in November (2008) expected an unemployment rate in the first quarter of 6.9%, but the actual rate was 8.1% with unemployment at 8.5% in March.”

Referring to the six million jobs lost between the start of the recession and March 2009, Mishel said, “This is hardly the fault of the Obama administration.”